This is a high level overview of the Equilibrium parachain and the functionality behind it.
Equilibrium introduces the first DeFi 2.0 protocol on Polkadot with novel on-chain approach to risk and pricing for asset portfolios. It enables borrowing with minimum collateralization as low as 105% and margin trading with up to 20X leverage.
The innovative design of Equilibrium's bailout mechanism for liquidations that is low friction and does not need auctions allows for the introduction of the first fully on-chain order book based decentralized exchange with high leverage.
Here is what sets Equilibrium apart from other well-known known DeFi protocols:
- 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.
- Most loans in popular money markets (AAVE and Compound) are taken in major stablecoins for new investment opportunities. But users need to switch to other applications as there is no trading functionality on the initial platforms. Equilibrium solves this problem efficiently
- The Equilibrium assets module supports:
The Assets module logic lets Equilibrium introduce a broad line of DeFi products within one blockchain, practically out of the box.
- 1.asset lending.
- 2.fractional reserve system and synthetic asset creation.
- 3.an exchange that lets users engage in leveraged trading.
- 4.portfolio hedging.
- The thought-out design of Polkadot’s consensus and finality mechanisms guarantees the security of the Equilibrium substrate on the blockchain level. Approximately 10 collators manage the Equilibrium parachain with a POA consensus and shared GRANDPA finality and blockchain security provided out of the box by Polkadot.
- Equilibrium achieves cross-chain compatibility by way of Polkadot’s integration of third party bridges to different blockchains. Ecosystem-wide interoperability is further achieved with the help of the Polkadot's XCM protocol.