A collaboration between decentralized finance (DeFi) developers has brought forth noncustodial liquidity markets on the layer-2 network Base. This new development allows for trustless smart contracts to automatically connect liquidity pools with borrowing strategies.
The team behind this initiative consists of developers from Seashell, RNG Labs, Loreum Labs, as well as advisers and collaborators from Ampleforth, Uniswap, and other projects. They have created the Seamless Protocol, a fork of Aave v3, which enables smart contracts with predetermined borrowing strategies to conduct undercollateralized borrowing on-chain.
The Seamless Protocol’s borrowing strategies can be likened to single-purpose loans, where the liquidity supplier knows exactly how and where the funds will be used, eliminating the risk of misuse by the borrower.
This collaboration marks a significant milestone in DeFi, as it brings noncustodial liquidity markets with undercollateralized borrowing options to the Base network.
What is Base?
Base is a layer-2 network that provides scalability and efficiency to decentralized applications by processing transactions off-chain, reducing fees and congestion on the Ethereum mainnet.
What is the Seamless Protocol?
The Seamless Protocol is a fork of Aave v3 that enables noncustodial liquidity markets on the Base network. It allows smart contracts with predetermined borrowing strategies to conduct undercollateralized borrowing on-chain.
What are borrowing strategies?
Borrowing strategies are like single-purpose loans, where the borrower can only use the liquidity for a specific purpose. They help provide visibility and assurance to liquidity suppliers, ensuring that the funds are used as intended.
How is Seamless different from other borrowing platforms?
Seamless differentiates itself by offering on-chain borrowing strategies that provide full visibility into how the funds are used. This approach eliminates the need for off-chain negotiations and allows for trustless smart contracts to facilitate borrowing.
What other borrowing options are available on the Seamless Protocol?
In addition to undercollateralized borrowing, the Seamless Protocol also supports general purpose loans that follow the usual DeFi lending rules, requiring overcollateralization. These loans can be used for various situations and are governed by the existing DeFi lending protocols.
How does the Seamless Protocol ensure trust and security?
The Seamless Protocol relies on trust in code rather than trust in humans. By using smart contracts on-chain, the protocol ensures transparency and eliminates the need for on-chain reputation scores or identities. This trustless approach is fundamental to the principles of crypto and DeFi.