How is the Singular protocol different from other lending protocols?

At present, there are mainly two types of lending models: peer-to-peer model and peer-to-pool model, but both models have their own problems.

In terms of user experience, Singular Protocol is a typical peer-to-multi-pool platform. Users provide liquidity to the capital pool and borrow from it. However, Singular Protocol is not a pure peer-to-pool or peer-to-peer model. We call it an integrated model that retains the advantages of both peer-to-pool and peer-to-peer.

mechanism introduction

Singular Protocol establishes a pool for each NFT series to isolate risk. Users can choose to provide liquidity to the pool based on their understanding of NFTs. When users provide liquidity, they can customize the amount, funding period, interest rate, and collateral ratio based on their risk estimation. This means that each fund in the pool includes these four parameters. When a user needs to borrow tokens, the Singular Protocol system matches the optimal combination of funds based on these four parameters to complete the loan. Different borrowing amounts will result in different interest rates, with higher borrowing amounts resulting in higher interest rates and lower borrowing amounts resulting in lower interest rates. For liquidity providers, they need to provide the lowest interest rate or the highest collateral ratio within their risk tolerance so that their funds can be borrowed.

matching efficiency

Singular adopts a pool-based approach to aggregate liquidity, so in terms of user experience, it is a purely peer-to-pool experience and can achieve optimal capital matching efficiency. In terms of matching efficiency, it is similar to the traditional peer-to-pool model and superior to the peer-to-peer model.

capital utilization efficiency

Singular Protocol innovatively proposes the concept of fund pairs to achieve peer-to-multi-point lending through fund pairs. Compared with peer-to-pool protocols, the Interest Rate Model of peer-to-pool makes it difficult to have high capital utilization. The higher the capital utilization, the higher the interest rate. Under normal market interest rates, the capital utilization can hardly reach 50%. Singular Protocol's peer-to-multi-point mechanism can significantly increase capital utilization while avoiding the peer-to-pool approach where all liquidity providers enjoy the same capital utilization. It can generate differentiated capital utilization for each liquidity provider. Compared with the peer-to-peer model, Singular Protocol's proposed peer-to-multi-point model lowers the threshold for lending amounts. Singular Protocol's proposed overcollateralization mechanism allows users to over-quote across multiple pools, which can significantly improve capital utilization.

yield

the peer-to-pool model uses the average yield in the pool as the yield for liquidity providers, while the peer-to-peer model allows users to customize the yield. The risk-based dynamic interest rate matching model adopted by Singular Protocol allows users to define yields according to risks. The higher the risk tolerance, the higher the yield. At the same time, Singular Protocol adopts staking to provide liquidity, allowing users to get staking rewards without locking tokens or maintaining staking infrastructure. This ensures that yields can also enjoy the staking yield even when funds are not lent out.

borrowing amount and borrowing interest rate

for peer-to-pool protocols, users' maximum borrowing amount is very limited. The collateralization ratio of most blue-chip projects is less than 50%, and the interest rate is fixed. For peer-to-peer protocols, the borrowing amount and interest rate are fixed. The risk-based dynamic interest rate matching model adopted by Singular Protocol allows users to dynamically generate the optimal matching interest rate according to their capital needs. The higher the borrowing amount, the higher the interest rate. The lower the borrowing amount, the lower the interest rate.

Through this mechanism, Singular Protocol can support many NFTs, have high capital utilization like the peer-to-peer model, and have high matching efficiency like the peer-to-pool model.