Liquidation risk free DOT loans using your cDOT assets as collateral in Parallel Finance

almost 2 years ago (Edited)

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Now it's possible to avail DOT loans that are free from the risks of liquidation in Parallel Finance

cDOT assets finds more capital efficient utility in Parallel Finance

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Wondering what's this diamond mark besides the cDOT assets, then read on!!

Parallel Finance, a Defi Hub whose mission is to provide all necessary Web 3 financial services for users in one platform has introduced a innovative Money Market lend, borrow option providing a way for its users to avail liquidation free loans!!

Parallel Finance, aspires to be a protocol that brings capital efficient DEFI to its users, meaning the protocol aims to be a DEFI platform which will offer avenues for users to find best possible yields, loans and lucrative APY rewards out of their crypto assets/collateral etc.

So, keeping that agenda in mind now Parallel Finance offers users a way for users to get most out of their cDOT, that is liquid crowdloaned DOT which users received in return for contributing to Polakadot’s Parachain crowdloans using Parallel finance’s Crowdloan Module.

More on cDOT and Parallel Finance’s crowdloan Module is explained in this article

Parallel Finance expands its utility with Defi functions having initiated in the platform

##cDOT has now found another added use case in Parallel Finance

With cDOT, the liquidity of the user’s contributed crowdloaned DOT is utilised in Parallel Finance DEFI, with cDOT holders able to earn LP rewards and yields providing liquidity to various cDOT swap pairs and lending their cDOT and LP rewards from their various DOT-cDOT pairs(LP DOT-cDOT assets) in Money Market and earning further yields with Parallel Finance’s Yield Money Market functions which you can read about here.

More rewards for LP providers with the Yield Money Market functions of Parallel Finance

You can read more about the value addition Parallel Finance offers through the protocol’s cDOT asset offering in this article.

Value added Web 3 financial services of Parallel Finance make it a DEFI Super App

Now, cDOT has found another interesting use case in Parallel Finance as the asset can be used to avail liquidation free loans!!

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From Parallel Finance's Tweeter

This is made possible with Parallel Finance finding an innovative way to make it possible for it’s users to avail liquidation free loans.

Zero liquidation risk free DOT loans against user’s cDOT collateral in Parallel Finance

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From Parallel Finance's Tweeter

Let us now understand how Parallel Finance makes availing Liquidation free loans for users possible using their cDOT asset.

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From Parallel Finance's Tweeter

Note, that only assets against which a diamond symbol is marked are eligible to be used as collateral for availing Liquidation free loans in Parallel Finance.

So, all cDOT and LP-DOT/cDOT assets can be used as collateral to avail liquidation risk free loans in DOT.

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All the cDOT assets with a diamond mark beside them are eligible to collateral to avail DOT liquidation free loans in
Parallel Finance's Money Market.

This is because cDOT is a derivative of DOT that’s locked until the lease period of the parachain (which is secured through crowdloaned DOT lend by users) finishes. After this, as the locked DOT is unlocked and released, users get their cDOT redeemed for DOT.

So, cDOT will always equal the value of DOT, as at the end of the parachain lease period, all contributed cDOT gets redeemed for DOT.

Therefore, the user’s cDOT collateral value will equal their availed DOT loan value. The availed DOT loan value will always correlate with the value of deposited cDOT collateral, so there is no risk of liquidation when availing DOT loan using cDOT as collateral. Cool is it not?? !!

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From Parallel Finance's Tweeter

So, if the value of a user’s cDOT collateral reduces tomorrow, the user’s availed DOT loan would also reduce in the same proportion as the user’s deposited cDOT collateral. So, there is no liquidation risk and DOT loans availed through cDOT collateral are liquidation free loans.

This amounts to getting DOT which can be used in DEFI even outside Parallel Finance

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From Parallel Finance's Tweeter

Availing risk free DOT loans against cDOT collateral is a cool way to get DOT for the received cDOT and use it in any Defi protocol even outside of Parallel Finance. As now with the XCM feature activated, Polkadot Parachains are able to interact with each other, making parachain to parachain token transfers possible.

Disclaimer - : This is no financial advice. Please Do your research before making investments understanding the prevalent risks in the undertaken investments.

Enter the Parallel Finance App here - https://app.parallel.fi/

Know about Parallel Finance-
Website - https://parallel.fi/index.html
Twitter - https://twitter.com/ParallelFi
Discort - https://discord.gg/DeyEntFT
White paper - https://parallelfi.gitbook.io/parallel-finance/polkadot-network/white-paper

This article was first published by this author on her medium channel here - https://medium.com/@kikctikcy

Thankyou for reading!!

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5 comments

@gangstalking -18

almost 2 years ago

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