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Parallel Finance Overview
Parallel Finance is a DeFi super DApp protocol on Polkadot Ecosystem with the mission to bring decentralized finance to 1 billion people. We are committed to building a decentralized future that empowers the community, by increasing DeFi accessibility, capital efficiency, and security.
Parallel Finance launched 7 DeFi products with more features planned in the pipeline. The products offered by our DeFi super DApp protocol include: Liquid staking, AMM, decentralized money market, liquid crowdloan, stream protocol (DAO tooling), wallet, and yield farming functions. Parallel Finance runs a composable ecosystem that allows users to stay liquid with derivative tokens that are equivalent to the relaychain asset - DOT and KSM at an approximate 1:1 ratio, compound their yield across the different products, and increase users’ capital efficiency.
Our DeFi super app is a one-stop-shop that spans the DeFi spectrum, and the DeFi products within the platform are complementary. Our users can leverage derivative assets generated from one product to earn additional yields through the money market protocol. The platform is launched on the Polkadot and Kusama networks.
- 1.The DeFi niche of the blockchain industry is marred by low capital efficiency and fragmentation, with market capital shared between apps and chains. Projects have high TVL but low utilization rates - a helpful way to understand at a high level how efficient an entire system is. In a system with a low utilization rate, capital just sits there, doing nothing. As such, there is a need to create a system that solves the problem to ensure capital efficiency by taking into account leverage and the yield on utilization. We started building on Polkadot to improve the staking and parachain crowdloan experience:
- The Polkadot ecosystem currently benefits from staking rewards, and while these rewards are very generous, there are currently limited ways 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 to optimize their staking rewards and prevent slashing.
- 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 exist 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 require users to give up their staking rewards for the duration of the parachain lease.
- 2.DeFi is fundamentally focused on providing universal access to revolutionary financial technology to anyone. However, the user interface and experience are deterring widespread adoption. The current DeFi models expose users to tremendous risk if they do not understand what is happening under the hood of each protocol or how to navigate a user interface (UI) that is constantly changing in real-time. We aim to fix this by creating products that are secure, highly usable and functional, so that general users, DeFi veterans, and institutional investors can easily navigate through our platform.
- 1.DeFi Super DApps Suite: Parallel Finance is building the biggest Dapp protocol in the Polkadot ecosystem. The protocol features a suite of composable DeFi applications that allow users to streamline their capital, have higher capital efficiency, and amplify their yield. The products include liquid staking, AMM, decentralized money market, liquid crowdloan, stream protocol (DAO tooling), wallet, and yield farming. In addition, there are more work-in-progress developments across different blockchain networks to create a low-entry barrier to decentralized finance. The suite was built with security and user experience in mind, to allow users to access DeFi products effortlessly. We aim to build strong network effects that will attract millions of users over the next decade.
- 2.Multichain Super Wallet: To ensure DeFi accessibility, Parallel Finance is currently working on a non-custodial multichain wallet. This product serves as an entry point for users to help them firstly secure their assets, and then manage and grow them using Parallel Finance DeFi solutions. Users can create and manage their private keys, send and receive funds, and sign transactions on any DApp in a decentralized fashion.Parallel Finance possesses world-class security, greatly minimizing the risk of wallet hack and compromise. Our products have been audited by top-tier security firms in the industry, including Trail of Bits, Halborn, SlowMist, Secfault, and others. We also leverage the shared security of the greater Polkadot/ Kusama ecosystem, the security of Rust, and Parity’s battle-tested Substrate framework. For further wallet security assurance, wallets are encrypted with passwords set by users.
- 3.Liquid Staking: Unlike the conventional method of staking that requires users to lock up their funds for a particular period of time when they stake, Parallel Finance offers a unique and efficient form of staking referred to as liquid staking. This staking method does not require users to lock their tokens or maintain staking infrastructures to earn rewards. Rather, once a user stakes their asset, e.g DOT, they receive a minted derivative version of it - sDOT, that helps them stay liquid and can be utilized in the composable DApps suite. Apart from the staking rewards that the user earns, this derivative token can also be utilized the same way the user will use the staked asset - lend it to the Money Market to earn additional rewards and supply it as collateral to borrow another asset which can also be staked to multiply their yield.
- Algorithmic Staking: In the best interest of our users, we use algorithmically selected validators with the most reliable nodes recommended by the relaychain (Kusama network) to minimize slash risk. Parallel's staking system uses algorithm 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.
- 4.Liquid Crowdloan: 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. When users participate in parachain crowdloans through Parallel, they will receive a derivative token cDOT or cKSM. In return, this allows them to redeem the DOT or KSM they have locked in the selected parachain after the lease period. During the lease period, these derivative tokens allow the users to stay liquid while their coins are locked. They can be used the same way as staking derivative tokens, sDOT or sKSM, to compound yield through our money market protocol.
- 5.Money Market: Money markets are at the core of DeFi’s attempt to revolutionize traditional finance by revamping how conventional lending and borrowing are done. Parallel Finance goes the extra mile to include yield farming functionality in its Money Market protocol apart from its primary lending and borrowing features. The product allows users to put their idle assets to work — enabling them to borrow money by supplying collateral to the market and allowing others to deposit (lend) their assets to earn yield and compound their rewards.The Money Market is interoperable with other products in our DApp suite, allowing users to utilize their assets across all of them as they see fit. This help to increase their leverage and the utilization rate of their assets.
- 6.AMM: Parallel Finance Features a dynamic Automated Market Maker (AMM) or Swap. The product was created to allow users to carry out non-custodial and autonomous trading. This autonomous trading mechanism removes the need for centralized third parties like exchanges, trading platforms, and financial entities and allows users to trade assets without relying on any of these intermediaries. The AMM operates without the need to create an account or go through any KYC procedure. Rather, a user only needs to connect his wallet, select the tokens and the exchange direction and the AMM instantly executes the transaction and sends the corresponding token to his wallet.The AMM features an automated liquidity protocol that is controlled by a “constant product” formula similar to Uniswap V2 which allows anyone to provide liquidity and contribute an equivalent value of the underlying token — DOT/KSM.
- 7.Stream: This is the asset management protocol of Parallel Finance. The product is created to open a fairer and more transparent ecosystem for decentralized projects and organizations to manage their treasury and achieve their fund management goals. It is commonly used for payroll or vesting shares and it allows users to send automated payments to their recipients based on scheduled dates and times.
Last modified 3mo ago