Lending is a key element of DeFi, where crypto users lock assets like ETH into decentralized lending protocols to borrow stablecoins, which can be used to purchase more ETH. This leveraged strategy is effective in a rising market. However, not all lending protocols are equal; some have unique architectures to reduce lending risks.

Lending in Action

A healthy collateral-to-borrowing ratio is essential for maximizing DeFi lending benefits. Millions use lending protocols and engage in “looping” by redepositing borrowed funds, but this requires constant monitoring to avoid under-collateralization.

Alternative solutions offer lending without risking total liquidation of positions. Liquidation is necessary to prevent under-collateralization and penalize risky behavior. Cross-chain lending protocol Nolus claims to address this challenge by enabling leveraged lending with partial liquidations. If a position becomes under-collateralized, only part of the assets is forfeited.

Nolus’ DeFi Lease product allows borrowers to obtain up to 150% financing on their capital, accessing leveraged assets through approved strategies. Borrowers lock a down payment in fiat, stablecoins, or digital assets and receive 150% of that amount in stablecoins to purchase desired digital assets. This offers a 3x borrowing ratio compared to other crypto lenders. The down payment and loan are locked as collateral, reducing margin call risk by 40% compared to other lenders.

Nolus enhances capital efficiency by avoiding over-collateralization, resulting in lower liquidation rates. Its partial liquidation engine protects against volatility and full collateral loss while maintaining a healthy loan-to-value ratio.

Since its launch in June 2023, Nolus has processed over $50 million in transactions, with a current TVL of $5 million from around 10,000 users.

Destressing DeFi

DeFi is meant to provide financial freedom, allowing individuals to control their finances, interact with any protocol, choose products and services, and select their risk level.

Users can leverage to the maximum or adopt more conservative strategies without risking everything. While some users will always pursue high leverage and returns, Nolus offers a way to mitigate the risks of leveraged lending without capping potential yields, providing a balanced approach for DeFi users.