Interview with Yubo Ruan: Parallel will bring 1 billion people to DeFi

Hello Yubo, first of all, congratulations on the high level of utilization of Parallel Finance in the Polkadot auctions. Also, we would like to point out that both Heiko and Parallel have won parachain slots on both Kusama and Polkadot, where Parallel succeeded in the first batch of auctions with 11,75 mil. DOT locked!

Do you see crowdloans themselves as a success for Parallel and Heiko? Were there any surprises or did it go as you expected?

The Polkadot crowdloans have been very exciting, to say the least! It was quite exciting to watch Moonbeam and Acala battle for the first auction slot. We also had a lot of fun working with all of the teams to enable their users to add incentives on Parallel’s Auction Loan platform.

Now let’s get to your actual product. Parallel Finance is frequently described as a decentralized money market protocol, what does it actually mean?

Users can deposit their assets to Parallel Finance via our platform. When you provide liquidity on Parallel, in return, you will receive some interest from the borrowers of the assets. Suppliers can also choose to collateralize their assets for borrowing other currencies.

This is useful when the price of a certain currency fluctuates significantly and you want to borrow another currency for hedging. This also solves the liquidity issues for assets. These assets all have different Collateral Rates which reflect the stability of their price. The more stable the currency’s price, the higher the collateral rate. Stable coins like USDT will have a higher Collateral Rate for the example given its function is to provide a stable price.

Additionally, the interest rate in Parallel Finance is dynamically determined by the supply and demand of our platform. Therefore, the borrow and supply interest rates could vary from block to block.

Can you describe Parallel’s main features?

Parallel’s main features include AMM with a predictive yield curve, stability pools, insured staking, margin staking, and a more user-friendly Polkadot crowdloan platform called Auction Loan.

How does the automated validator selection in insured staking work? Is it selecting validators based on their yield performance only or are you going to take into account other criteria like decentralization?

There are a few dimensions to choosing validators in Heiko’s protocol. They are in order of priority, from high to low as follows:

1. The reputation of the node operator
2. The validator should trigger payout regularly
3. Single operator with more validators has a higher probability to be slashed if downtime happened
4. The commission rate and nomination volume of the validator
5. The downtime and luckiness which wraps era points on Kusama network and slash records in the past (which maximizes returns)
6. The amount should not be controlled by one account, nor one active nomination
7. Less than 200 DOT will be dropped (it is acceptable on Kusama since there are enough validators on the Kusama network)

Can you tell us more about the Dynamic AMM Curve?

Parallel focuses on composability and precision at every level. One of our most important innovations is a more efficient curve for interest-bearing tokens like xDOT, xpDOT, cTokens, and the like. This curve uses the future value of interest-bearing tokens, which lowers slippage to as low as 0.

Dynamic AAM curve in Parallel

Your goal is to bring DeFi to 1 billion users. Do you think this is realistic to achieve in this decade? How does Parallel help to fulfill this mission?

Parallel is already on its journey to achieve this massive goal by deploying on Kusama and Polkadot blockchains first. By building on Polkadot we are enabling ourselves to adapt to more blockchains in the future, which will allow us to reach more users in DeFi and crypto as a whole. The final step in our plan to a billion users will be to add CeFi solutions connected to our DeFi platform that will help us reach traditional fintech users and create products that are easy to understand and use for the non-crypto native.

There are some exchanges and centralized platforms that also offer lending services to crypto users. Why should anyone choose Parallel Finance or some other decentralized solution?

Parallel’s decentralized focus ensures users that trust in the product and team aren’t necessary. Parallel’s users hold their own keys to their assets and can take them to another product or platform or store them in cold storage at any time.

Easy-to-use lending/borrowing in Parallel

Is there some rivalry between centralized and decentralized solutions, or do they focus on different types of clients? What are the advantages of decentralized solutions? Can you offer higher interest rates?

Both product types have their own unique value as decentralized solutions are often harder for less technical users to navigate and use to their full potential. On the other hand, centralized alternatives often requires KYC and sometimes cannot be used for cross-border transactions. Decentralized solutions have the potential to create incredible centralized products that can also appeal to more traditional users that may not be comfortable operating fully on their own.

The Canary network of Parallel called Heiko already won a parachain slot on Kusama. What is the relationship between Heiko and Parallel? Is Heiko just a canary network or are there going to be more differences between the two?

Heiko is a canary network that we will use to test new features on Kusama first before its stabilized and transferred to the Polkadot network. Kusama has a 10x cheaper fee structure and the governance process is 4x faster for voting periods than Polkadot. Making it viable for faster testing before deploying on Polkadot.

You won the 4th parachain slot on Polkadot. Was the success in the first batch of auctions your goal from the very beginning as one of the most funded projects in the ecosystem?

We did set our sights on winning one of the first slots as we want to begin offering DeFi products to Polkadot users right away.

Over 15% of the locked DOT went through your application, which is only slightly less than through the biggest crypto exchange Binance (25%)! Users that went through Parallel will be rewarded with extra PARA tokens, so this is probably the biggest incentive to do so. How do you feel seeing those numbers and ratios? Why do you think you are that successful in attracting contributions via your platform?

We are thrilled with the results of Parallel’s Auction Loan product! The feedback we have received from other crowdloan projects has been overwhelmingly positive and we have already begun to support Round 2 Parachain auction participants to ensure their users have an incredible crowdloan experience. We are seeing success with crowdloans because Auction Loan enables crowdloan projects to offer additional incentives, a streamlined UI experience, and even things like referral bonuses. Our Auction Loan product has essentially become a crowdloan-as-a-service sort of product for all Dot parachain auction projects.

How is the Auction Loan module for the contributions implemented? Is it a custodial or non-custodial solution? Is it going to change when Parallel Finance secures its slot?

Currently, Auction Loan is a custodial solution, we do plan to fully transition to a non-custodial solution as soon as our Parallel parachain is live. We plan to launch a Substrate pallet that enables a user to have full control of their assets and then we will migrate the existing multi-sig ownership to our parachain account and it will be fully decentralized. We will carefully make this transition once our parachain is fully live.

Parachain team onboarding process will also be automated via the Substrate pallet being enabled. This means any team will be able to list their crowdloan campaign on Auction Loan without interacting with Parallel. They will be able to customize their reward rules and make them completely permissionless.

Bonus rewards for the crowdloan participants have given some extra popularity to Parallel Finance. But we also think this is an interesting way to distribute PARA tokens to your supporters. Was this also your intention, to use Auction Loans as a token distribution model for the community?

Yes, we saw an opportunity to use PARA tokens as an added incentive and also to distribute them in correlation with the increase of TVL on our platform. Users who receive PARA are also receiving cDOT and any rewards from other projects they may have contributed to, all of this enables the user to be fully prepared to use our platform once it is live.

Thanks for the interview and good luck with launching both Heiko and Parallel Finance!

Parallel Finance: decentralized money market protocol for Polkadot

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