In a press launch as we speak, C.R.E.A.M. Finance introduced a brand new characteristic for (and, by proxy, an unofficial relaunch of) Iron Bank, the protocol-to-protocol lending platform designed for flash and undercollateralized loans.
C.R.E.A.M., which founder Leo Cheng describes as “the yolo-est Compound fork,” is a cash market designed to cowl belongings which are “underserved” and permit for higher capital efficiency for decentralized finance energy customers, itemizing belongings corresponding to Yearn vault tokens and liquidity pool tokens.
“We’re adding assets that people want to have but others may be scared of,” mentioned Cheng.
Iron Bank is, in some ways, an excessive implementation of that ethos. The protocol, which permits for undercollateralized protocol-to-protocol lending, is supposed to function DeFi’s equal of the $10-trillion company debt trade, permitting the precept of “corporate credit” to perform between whitelisted protocols.
Some critique the thought conceptually — undercollateralized lending remains to be an unique area of interest in DeFi — and people critics took a victory lap within the wake of the Alpha Homora hack that led to an exploit of Iron Bank. This regardless of Iron Bank bearing little accountability for the vulnerability, and the truth that the Iron Bank has quietly continued to perform throughout a number of Yearn vaults for months — although not almost on the scale to which it’s succesful.
Now, with a brand new characteristic launch and Alpha Homora gearing up for a relaunch of its V2, Iron Bank is able to reenter the highlight — and it might be poised to take action in a significant method.
Cheng speaks with a contact of satisfaction about C.R.E.A.M.’s standing as a member of “DeFi Voltron” — the physique of high-profile protocols that “merged” with or had been “acquired” by the Yearn.finance ecosystem on the finish of final 12 months.
What began as an informal dialog about getting DeFi maestro Andre Cronje concerned within the venture shortly turned a team-level integration between Yearn and C.R.E.A.M., mentioned Cheng. To this present day, the practicalities of the integrations/mergers/collaborations between the protocols largely stay a thriller to outsiders, and as a latest rupture with Cowl has demonstrated, the “mergers” usually are not at all times etched in stone.
In Cheng’s view, proper now, the varied tasks/protocols may be regarded as the pre-Constitutional United States: Separate state-level entities are linked by means of the Articles of Confederation, and every leverages its personal foreign money.
He hinted that sooner or later it is likely to be a “possibility” that every one tokens beneath the Yearn banner merge to create a single, unified token.
“I’m not saying that’s where we’re headed, but I think it’s a possibility in the long run — I don’t know.”
C.R.E.A.M’s goal within the Yearn DeFi Voltron machine is to be the one-stop all-things-lending answer, and because the Iron Bank proves, lending is a large umbrella. Whereas Iron Bank may be troublesome to know conceptually, in the end what it creates is straightforward capital efficiency, mentioned Cheng.
“Look at the anatomy of a flash loan,” mentioned Cheng.
A flash mortgage would possibly work together with a number of protocols directly and commerce between a number of belongings, however Ethereum “doesn’t quite care, and it doesn’t quite see the borders with the smart contract projects.” They soar between protocols and belongings in a “flash,” enabled by open liquidity.
If this borderless imaginative and prescient is taken to its excessive, “any asset a user has on Ethereum, they should be able to leverage it to borrow anything else anywhere else,” and if liquidity may be achieved by means of an arbitrage commerce by way of a flash mortgage, that alone counts as a type of asset — a minimum of in a super, capital-efficient future.
Iron Bank brings this precept of open liquidity to protocol-to-protocol relationships. Cheng mentioned that C.R.E.A.M. is trying into working with tasks, corresponding to Saffron Finance, that are creating risk-based tranched debt. If customers assume that Iron Bank debt is riskier (particularly on the higher finish of its potential leverage, as much as 95x), Saffron has the infrastructure to help that.
What’s extra, Cheng mentioned that C.R.E.A.M is working to develop the horizons of liquidity even to different chains.
Capital efficiency squared
If Ethereum doesn’t care in regards to the borders between belongings and protocols, then why can’t the identical liquid efficiency logic apply to all Ethereum Digital Machine-compatible chains? This may enable for loans, undercollateralized loans and flash loans throughout a number of ecosystems, bolstering liquidity throughout the house.
“Cross-chain lending. That’s the thing where people stop and say, ‘wait, hold on, what?’” Cheng laughed. “That’s something we’re prototyping right now. It’s not something on the roadmap, blah blah, we’re prototyping it right now.”
In its early kind, customers would be capable of deposit belongings on C.R.E.A.M.’s V1 and unlock a mortgage on one other chain, permitting them to entry an alternate ecosystem whereas sustaining their belongings on Ethereum. The extra unique lending varieties will come later.
The issues in creating preferrred, secure capital efficiency throughout all EMV-compatible chains are vital, however they’re at present being labored by means of, mentioned Cheng. Ultimately, the objective is to allow Yearn vaults to go cross-chain by way of a “generalized wrapper,” which might develop the instruments accessible to vault strategists by orders of magnitude.
It’s a imaginative and prescient of open liquidity and capital efficiency enabled, partially, resulting from an open developmental ethos throughout the DeFi Voltron:
“We have so many channels open. If you had my Telegram open… so many working groups. I think that story is underplayed. The whole idea of this merger, it’s so powerful — we can hop in these channels at any time, ask each other anything. It’s letting us move so quickly.”