MELD - Melding DeFi And Banking On Cardano
MELD is the first DeFi, non-custodial, banking protocol.
Often, the problem with putting your money into cryptocurrency is when you need to spend money. We can dream about a future where we pay for the house mortgage or student loans in crypto but the fact is, we’re just not quite there yet. We still need that fiat in the bank for most of our practical needs but we also don’t want to have to cash in our crypto assets just yet and miss out on potential profit.
The problems with converting crypto into spendable currency are plenty. Not only do you lose your trading position in the first place, but secondly, you’re bound to incur taxes from having that cash on hand as ‘income’. And then there’s the hassle of going through the lengthy process of credit checks and bank transfers as well as paying exorbitant fees.
MELD proposes a quick and convenient solution for this dilemma. Instead of converting your crypto assets into cold cash, MELD’s non-custodial liquidity protocol allows users to take out a loan using their crypto as collateral. On MELD’s DeFi app, you get to unlock the value of your cryptocurrency but still retain its ownership and profit potential and even earn annual percentage yields.
Innovating the crypto loan model
MELD’s solution is the first of its kind that really put some thought into how to address the problems plaguing the traditional banking system and current existing crypto loan platforms. Taking out a loan from a bank is a widely known tedious affair, requiring the person borrowing money to have an acceptable credit score in the first place, and then having to research lender options and interest rates before even applying for a loan. And after all the necessary paperwork has been met, one then has to cross fingers hoping that the loan would be approved and that one hasn’t fallen for one of those predatory schemes that are next to impossible to pay back.
Current crypto loan platforms are not any better, being centralized entities that require crypto holders to turn in their private keys—violating that basic hallowed principle: “It’s not yours if you don’t hold the keys”. Centralized platforms also lack transparency, often making protocol changes as they will and leaving borrowers high and dry.
On MELD however, loans are instant and borderless. There is no need for credit scores or background checks to be evaluated to determine how much you can borrow. Users are automatically guaranteed to be able to borrow capital which they can put up twice the collateral for—it’s that simple. And since the whole process takes place on a decentralized blockchain, transactions are also safe from changing laws and bank policies or unexpected fees.
The MELD business model provides every party in the lending transaction constant opportunities for generating profit through interests, yields or staking rewards.
The MELD community brings lenders and borrowers together through a transparent and trustless protocol using smart contracts. Lenders profit from the interest rates which are paid monthly, while borrowers can continue maintaining their long positions on their collateralized cryptocurrency.
But the profit potential does not end there. The collateralized assets are then pooled together and staked in community-managed vaults where they generate yield, with 40 percent going back to the MELD stakers and the rest used for operations and development. The idea really is for the entire community “to earn all the time”, regardless of whether you’re lending, borrowing, staking or holding.
Once the smart contracts execute a loan, the amount borrowed can be automatically transferred to your bank account anywhere in the world. Once the loan is repaid, the collateralized assets are returned and since they were never exchanged directly for fiat in the first place, no tax conditions are triggered.
MELD Products and Services
The specific details on MELD’s line of financial products are as follows:
Crypto-backed loan - loans are issued at a loan to value (LTV) ratio of 50 percent. Should the collateral value fall above 50 percent, borrowers will be notified of a margin call to increase the amount of collateral and bring back the LTV to 50 percent. An empowering feature for borrowers is the LTV trigger at 85 percent, wherein the collateral is automatically liquidated into stable coins equivalent to the fiat loan, terminating the contract. The balance however, is returned to the customer who also gets to keep the borrowed fiat.
Genius loan - MELD also offers “self-repaying” loans, with part of the yield on the collateral going towards paying the principal itself. So even if the borrower only manages to pay off the monthly interest, the yield on the staking pools can be expected to pay off the principal in time. Current estimates put this self-paying rate as being able to return a principal of $100,000 in as little as three years depending on market conditions.
MELD debit card with crypto-backed line of credit (CBLC) - the MELD debit card can be used anywhere that accepts a VISA/Mastercard allowing users to conveniently use their cryptocurrencies for regular purchases. The CBCL feature ensures that purchases automatically set the line of credit based on the value of the collateralized cryptocurrency.
MELDapp - available in iOS, Android and Chrome extensions, the MELDapp is a friendly and convenient user interface for facilitating MELD transactions.
MELDed assets - other assets from other blockchains like Ethereum or Bitcoin or any ERC20 or BEP20 token can be “wrapped” so that they can be used on the Cardano blockchain. BTC will become mBTC and ETH will become mETH once they are loaded onto the platform.
Cardano and the HUGE ISPO pool
Building on the Cardano (ADA) blockchain comes with huge gains for MELD and its community; not only does Cardano guarantee more efficient transactions rates with drastically reduced fees (by as much as 99%) as compared to Ethereum, but the use of “Modular Money” allows for a very open protocol compatible across the wide range of DeFi products, promising larger adoption and easier market integration.
But the network itself allowed for another huge never-before seen innovation when it came to fundraising and building up the community.
The MELD Initial Stakepool Offering (ISPO) which closed on October 27 incentivized users to stake their ADA into MELD. So instead of users earning ADA for staking ADA, the rewards went instead into funding development for MELD, while the users will get airdropped MELD tokens upon launch. All in all, an unbelievably whopping 620 million ADA went into the ISPO or over 1.3 BILLION dollars worth of funding! Among the dozens of crypto projects being launched at any given time, MELD is turning heads with THAT MUCH of resources and liquidity immediately available right off the bat.
The MELD token is used for protocol governance, incentivization, fees reductions and protocol insurance. There is a fixed supply of 4 billion MELD tokens initially distributed as follows:
Foundation (5%) 200,000,000
Partnerships (7.5%) 300,000,000
Liquidity Rewards (20%) 800,000,000
ISPO (20%) 800,000,000
Private Sale (30%) 1,200,000,000
Team (17.5%) 700,000,000
MELD is centered on its protocol unlike other projects which are seemingly focused purely on platform user experience. From its inception, it’s clear the protocol was streamlined to give maximum profit for all parties involved, as well as to prevent any participant from having an unfair advantage over others in the debt market.
But the thinking behind MELD goes way bigger and further into the future of the whole DeFi scenario and banking in general, aiming to financially empower ordinary people and not just major financial institutions and the super rich who comprise the 3 percent currently profiting from financial services. By making loans simple, convenient and accessible, MELD is a big step in DeFi’s push to level the global financial playing field.
And it’s not just the 100 million active cryptocurrency users in the world that would find MELD’s services useful in managing and utilizing their assets. Fintech firms, pension funds, hedge funds, and institutional investors are increasingly in need of other sources of liquidity and more convenient platforms over traditional financial systems that have proven to be unhealthy, rigid, and often just beyond the reach of those who need it the most.
MELD is off to a really huge start, proving there’s massive community support for decentralized projects with the right ideas in mind.