Getting Started

Introduction

Parallel Finance is a Decentralized Money Market Protocol that offers lending, staking, and borrowing in the Polkadot ecosystem. Depositors can lend and stake simultaneously to earn double yield on their staked coins, and borrowers can collateralize to borrow. We refer to this feature as "leverage staking," because users can lever up agains their staking collateral to increase their yield overall. In addition, when a user's DOT and KSM are staked through Parallel, a reputation-determining algorithm is applied which maximizes staking yield on behalf of the user. In the future, projects and individual users will also be able to source their auction loans through Parallel's interface--a feature we call "auction loans." This feature will give users the ability to stay liquid while their DOT/KSM is locked in parachains, an it will give projects direct access to the liquidity they need to win parachain auctions.

Problems and Solutions

Problems:

  1. 1.
    The Polkadot ecosystem currently benefits from staking rewards, and while these rewards are very generous, there is currently no way for users to leverage their staking with lending and borrowing. This leaves users with a great deal of dormant capital, and it leaves the circulating supply at large with little utility. In addition, when DOT and KSM tokens are staked with validator nodes by users directly, the user is required to spend a significant amount of time and attention moving their coins from node to node to optimize their staking rewards and prevent slashing.
  2. 2.
    The parachain infrastructure of Polkadot and Kusama is the beating heart of interoperability, as well as the largest reservoir and primary use case of DOT and KSM. In its current state, for a project to participate in a parachain auction, they would need to acquire seed investments, or crowdfund loans, usually in exchange for a pro-rata portion of the project’s native tokens. The bare bones of the parachain infrastructure exists to execute parachain auctions, but they do not accommodate more nuanced economic parameters for individual projects. Without lending and borrowing solutions, this model would be cost preventative for projects to launch on their own parachain. An additional problem for individual users is that parachain auctions requires users to give up their staking rewards for the duration of the parachain lease.
Solutions:
  1. 1.
    Leverage Staking: Users who participate in Polkadot's network validation to earn rewards can also lend their staked tokens in our liquidity pool, thereby earning double yield, or in other words, high-interest yields. Users can continue to add leverage as they desire, to fit their risk profile, and they should always remain cautious of the risk of being liquidated.
  2. 2.
    Algorithmic Staking: Parallel's staking system uses a formula to determine the reputation of DOT or KSM nodes, and staking to the most promising nodes on the users behalf. While governance may have some say in the total nodes that are available, the selection will ultimately be up to the algorithm.
  3. 3.
    Auction Loans: Parallel will extend its borrowing interface to parachain auctions, offering competitive rates for projects who want to source parachain loans directly, and for users who are seeking incentives through crowdloans.
  4. 4.
    Parashares: When users use Parallel to participate in crowdloans, they will receive a token in return that entitles them to the redemption of the DOT or KSM they have locked in the selected parachain. These "shares" can be borrowed or lent, allowing users to stay liquid while their coins are locked.
Last modified 4mo ago