Parallel Finance: decentralized money market protocol for Polkadot

Parallel Finance explained

Parallel finance is a decentralized money market protocol that allows you to lend, stake and borrow in the Polkadot ecosystem. Let’s take a closer look at the key features of Parallel finance as well as some important characteristics.

Easy-to-use interface

In a very intuitive and easy-to-use interface, you can lend and stake your DOT and KSM tokens and at the same time earn double the interest yield and use your assets as collateral for borrowing as well. All of these functions literally with one click!

Automated validator selection

When you stake your DOT tokens in polkadot.js wallet, you need to go through the manual selection of up to 16 validators from a list of hundreds. When doing so, you need to watch their reputation and if they are not oversubscribed. But it’s not a one-off process, every once in a time you need to re-check those, otherwise, your staking rewards might be decreased.

Parallel as an institutional-grade DeFi parachain

Parallel Finance will become the money market protocol on Polkadot by enabling all the necessary implementations. That involves lending and borrowing assets, liquid staking, margin staking and auction loans.

Liquid staking

There is a serious competition issue between lending and staking. By staking your assets, you are securing the network such as Polkadot or Kusama and you receive a staking reward in return. But what if the reward is lower than the possible gain from lending the tokens in the lending protocol? Will you sacrify the network security for more gains? Well…many pragmatic people will do so because it’s more profitable.

Staking-lending dilemma, source

Leverage staking

You can double or triple your interest yields using leverage staking/margin staking.

Leverage staking
Leverage staking, source

Parallel Insurance Pool

Parallel also provides insurance in case something bad happens — such as a selected validator is slashed (together with your stake) or when your funds might be liquidated when the price of the collateral asset falls below the liquidation limit.

Insured staking

Dynamic AMM curve

The Interest Rate Curve in Parallel uses an advanced formula to calculate the borrow interest rate depending on utilization.

Dynamic AMM curve
Parallel’s interest rate curve, source

Auction loan

One of the upcoming features is called auction loan. With this solution, individual users will be able to source their auction loans through Parallel Finance’s interface. We have already seen this feature in the form of SALP from the Bifrost that gives users the ability to stay liquid while their KSM/DOT are locked in the crowdloan for the time of the lease period.

Auction loan, source

Cross-chain wallet

Another upcoming application of Parallel will be their cross-chain wallet that will simplify the access of users fund across all the parachains and other bridged networks (like Ethereum).

Canary network: Heiko Finance

Tokens

Parallel Finance will have its own governance token PARA, while Heiko will use HKO. There is not yet information about PARA, but HKO will have a total supply of 1,000,000,000 where 2% of it will be used as a reward for crowdloan participants.

Team

Parallel has a strong team of developers that comes mostly from Stanford University. CEO of Parallel Finance is Yubo Ruan, who is also a founder of 8 Decimal Capital.

Partners

In Parallel Finance project, there are involved top-tier investors such as Pantera Capital, Polychain Capital or Alameda Research. That is a superb list of supporters in our opinion. Besides that, Parallel Finance received a grant from the Web3 Foundation, which is a sign of solid development as well.

Conclusion

Parallel Finance and its canary Heiko will be definitely become an important player in the DeFi ecosystem on both Polkadot and Kusama because a lending protocol is still a missing in this ecosystem.

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Polkadotters | Kusama & Polkadot validators

Polkadotters | Kusama & Polkadot validators

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Czech bloggers & community builders. We are validators of Polkadot, Kusama, Darwinia, Crab, Bifrost, HydraDX, StaFi, Centrifuge under the name: POLKADOTTERS