Yield Credit – the highly anticipated P2P lending dapp that incentivizes borrowing is beginning to turn heads in the DeFi space for its unique product offering and $YLD incentive mechanisms.
The mastermind(s) behind yield is a pseudonymous developer or entity known as Coiner_ and notable supporters/endorsers of Yield include the team at Ampleforth (AMPL).
In early February 2020, Yield launched an incentivized private beta (it went over very well), and has since gone public moving over to the Yield dapp – app.yield.credit in December 2020.
However, Yield’s dapp isn't on mainnet yet but the transition for the eventual mainnet around the corner.
That said, let’s dive into the nitty-gritty details surrounding Yield Credit so we are well prepared and know what to expect when its highly anticipated mainnet finally launches.
What Yield Credit has to Offer
Yield Credit dapp interface
Yield Credit is a fresh take on DeFi lending and borrowing. As such, it has a lot to offer and much of it is different from existing lending platforms such as Aave and Compound.
Let’s get to it:
Peer-to-Peer (P2P) Lending
Yield Credit is a true P2P lending platform that facilitates individualized, peer-to-peer, lending and borrowing, rather than pooled lending and borrowing. So, when you lend out cryptoassets with Yield Credit, they don’t enter a pool of funds with other lenders, they go directly to the borrower.
Fixed Rates
Yield Credit loans are fixed, guaranteed, and immutable. The platform offers guaranteed fixed interest rates starting at 2% and up to 12.5%. Yield can offer guaranteed fixed interest rates because loans are individualized.
When the offer/request that the lender or borrower sets is filled, the specified interest they agreed upon is exactly what will be earned/paid regardless of when the loan is repaid and whatever happens on the platform or the wider crypto market.
Rates DON’T Trend Towards ~0%
Unlike other DeFi lending platforms such as Aave and Compound, Yield Credit’s interest rates don’t trend towards 0% because loans on Yield are individualized with fixed and guaranteed interest rates. Therefore, you no longer have to worry about market dynamics causing the rates on your active loans to trend to ~0%.
Range of Collateral Types
Yield Credit offers a range of collateral types including stablecoins, cryptocurrencies, and elastic supply cryptoassets.
Support for Elastic Tokens as Principal like $AMPL
$AMPL used as Principle (Source)
Yield Credit offers Ampleforth’s elastic supply token $AMPL to be used as the principal (the initial size of a loan/the amount the borrower must repay).
Using an elastic supply currency like $AMPL for lending and borrowing is unique in itself and is paving the way for other elastic assets to be lent and borrowed which is exciting.
Range of Collateral Assets
Yield Credit Collateral Assets (Source)
Yield Credit offers a range of collateral assets including AMPL, tDAI, RFI, tYFI, tWETH, tLINK, tBNT, tUSDC, and tWBTC with more to come.
Borrowing is Incentivized
What sets Yield Credit apart from virtually every other DeFi lending platform out there is that it offers incentives on repaid loans. With Yield, if you successfully manage your loan to term by repaying on time, you can earn up to 350 $YLD .
The Functionality of the $YLD Token
Yield $YLD token logo
The native cryptocurrency of Yield Credit is $YLD – an ERC-20 token serving primarily as a utility token; providing discounts on fees, incentivizing borrowers with $YLD rewards, minting and burning supply, staking, and more.
There’s a lot to unpack here on $YLD, so let’s get to it:
$YLD Token Functionalities:
- Stake $YLD - Receive fee discounts, reduce collateral, and mitigate liquidation
- Yield Farming - $YLD liquidity mining
It's mintable
Yield $YLD does not have a total capped supply and the protocol can mint extra YLD tokens for every successfully repaid loan.
The amount of YLD tokens a borrower can earn from repaying their loan is proportional to the principal requested. This is capped up to 350 $YLD tokens per loan.
A burning mechanism has been implemented to manage or control the inflation of $YLD where 100% of the fees on the platform (and Gardens) are used to buyback $YLD from the open market and burn them, permanently removing them from the supply.
As you can imagine, the constant minting and burning of $YLD has some complex and interesting effects on its total supply. You can track $YLD’s supply and play with various scenarios on how it can be affected by using the YLD Supply Calculator:
$YLD Supply Calculator
Stake $YLD
Users of Yield Credit are charged fees which are then used to buyback and burn $YLD. If a user chooses to stake (lock-up) $YLD they can receive up to a 25% discount on fees (depending on how much $YLD is staked).
Additionally, if a borrower has $YLD staked and is receiving discounts on fees, the $YLD they earn per loan is increased. Also, they are automatically reducing their collateral liquidation ratios.
Therefore, staking $YLD to save on fees essentially gives borrowers one more option if they ever need to save their loans in the event of a market downturn, aside from topping up their collateral.
Yield Farming
Garden.Yield.Credit Interface
While Yield is not a yield farming project, it does offer $YLD liquidity mining to help with the distribution of its token. Starting in late January 2021, there is 50K $YLD from the “do-everything wallet” that’s committed to future “Gardens” – which are yield farms/liquidity mining pools.
This 50K $YLD for yield farming is not newly minted tokens but rather tokens held in the “do-everything wallet” – a wallet that encompasses the team.
For the first month, 10K $YLD from the Garden fund will be allocated for the liquidity mining program — 5K $YLD for each pool. After that, the amount used in the next liquidity mining program will be dependent on the total amount of $YLD minted by borrowers in the Yield dapp that month.
