This is a high level overview of the Equilibrium parachain and the functionality behind it.
Equilibrium's Substrate will become a Polkadot parachain that hosts a multi-purpose money market protocol, letting users to lend and borrow stablecoins and crypto assets, as well as protect system debt and earn fees in return.
The design of Equilibrium's protocol and Polkadot's underlying technology allow for the creation of the first leveraged, interoperable decentralized exchange.
Equilibrium uses novel approaches to on-chain pricing (interest rate calculation) and risk calculations (determination of overall system health), which sets Equilibrium apart from other well-known known DeFi projects in several ways:
There are no arbitrary governance-set interest rates. They are determined by a borrower’s portfolio, borrower debt, overall system liquidity, and the market's risks and dynamics.
There are no arbitrarily set LTV requirements. The system makes sure every position remains solvent at a 100% collateralization ratio.
There are no arbitrarily set liquidation penalties, and no hidden fees when borrowers default on their loan.
There are always two sides to the system, by design: lenders and bailsmen are the liquidity providers on one side, and borrowers live on the other side, paying fees to lenders and bailsmen.
The Equilibrium assets module supports:
fractional reserve system and synthetic asset creation.
an exchange that lets users engage in leveraged trading.
The Assets module logic lets Equilibrium introduce a broad line of DeFi products within one blockchain, practically out of the box.
The thought-out design of Polkadot’s consensus and finality mechanisms guarantees the security of the Equilibrium substrate on the blockchain level. Approximately 20 validators manage the Equilibrium parachain with a NPoS consensus and GRANDPA finality.
Equilibrium achieves cross-chain compatibility by way of Polkadot’s integration of third party bridges to different blockchains. We are working closely with several prominent Polkadot bridges to the ETH and BTC blockchains to bridge liquidity into Equilibrium.