Mainframe, a blockchain company that launched in 2018 as a decentralized communication platform, today announced its relaunch as Mainframe Lending Protocol, following its acquisition of Sablier, a protocol for real-time finance on the Ethereum blockchain. Mainframe plans to integrate Sablier’s money streaming technology into a fixed-rate lending protocol and create tokenized debt markets to further the evolution of decentralized finance (DeFi). Paul Razvan Berg, the founder of Sablier, will join Mainframe as the head of development.
Cryptocurrency loans can create a healthy cycle of speculation, spending and monetary circulation. However, borrowers have limited exposure in today’s overcollateralized systems. Crypto-backed loans often require collateralization rations of 150% or higher, and borrowers don’t fully actualize their spending power. With Mainframe’s novel Guarantor Pools providing protection for collateral vaults, collateralization ratios can be much lower without increasing risk to the system.
Mainframe proposes a novel zero-coupon bond system that allows borrowers to quickly offload debt for increased purchase power. Borrowers deposit collateral and mint tokens, representing a debt obligation. Lenders purchase the tokenized debt obligation, typically at a discount, and redeem them for face value at maturity. Individuals can also interact with the protocol as Guarantors, allowing them to pool assets to protect the system from becoming undercollateralized. Guarantors earn income from fees and purchase collateral at a discount when borrowers fail to satisfy the collateral requirement. Mainframe’s system design makes the protocol impervious to liquidation failures similar to what MakerDAO experienced on March 12 and 13 that resulted in protocol losses of 5.67 million DAI. Overall, the system creates greater incentives to stimulate the flow of funds and achieve greater capital efficiency.
“Think of debt markets like the lifeblood of an economy; you want to keep that blood pumping and flowing,” said Doug Leonard, CEO of Mainframe. “Debt obligations create temporary clots and overcollateralization restricts efficient monetary flow. Mainframe allows lenders and borrowers to shift capital out of stagnant wallets and increases circulation. Ultimately, this leads to a healthier DeFi space.”
The Sablier money streaming protocol will be used in the governance, staking and rewards portions of the Mainframe Lending Protocol.
“Mainframe has a collaborative vision that joins the best aspects of several DeFi technologies,” said Berg. “I’m excited to join the Mainframe team, add Sablier resources to the project and build those lending and borrowing instruments that are in high demand.”
Mainframe’s pivot follows other notable DeFi projects who have undergone major transitions including Synthetix (formerly Havven), which transitioned from a stablecoin project to a protocol for trading synthetic assets on Ethereum. The initial infrastructure borrows heavily from the Yield Protocol white paper, Maker and Compound Protocols, and also leverages parts of Hayden Adams’ Uniswap Protocol v2.
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The Mainframe Lending Protocol allows anyone to create fungible on-chain debt obligations economically similar to zero-coupon bonds. The tokenized debt obligations are backed by a surplus of collateral that are escrowed into audited and publicly viewable Ethereum smart contracts. A novel system of incentives including penalties, discounts and arbitrage opportunity protect the protocol from under-collateralization. Compatibility with other DeFi primitives enable participants to earn income from multiple DeFi protocols at once. Mainframe tokens align the incentives of each stakeholder, balances the participation of ecosystem members, and provides certain desirable benefits within the system.