I mentioned Benqi in a previous post, where I referred to earning its QI token through the Binance Launchpool, and promised to come back with a fuller update on this DeFi dApp, which is precisely what I’m doing today. Although I will summarise how it works, this post isn’t intended to be a how-to guide, rather it’s a summary of what the dApp is and my thoughts on it.
What is Benqi?
Benqi is a DeFi dApp running on the Avalanche blockchain that allows users to lend or stake their existing digital assets to earn income or borrow against these in an over-collateralised manner. Benqi aims to provide an easy-to-use and highly scalable liquidity market with low fees for users, which is hardly new but worth stating, all the same. All funds deposited or borrowed are administered through the use of smart contracts.
As with a lot of new DeFi dApps, Benqi sees a big opportunity in the on-going congestion and sky-high gas fees on Ethereum, which hosts by far the largest number of DeFi dApps, along with the largest user base, which presents a major impediment to those with relatively small sums to trade or invest. Since I currently avoid using Ethereum based dApps myself for this very reason, I can do nothing other than agree with this view.
Initial liquidity pools available cover AVAX, WETH, WBTC, LINK, USDT and DAI. These will be added to over time and, as governance transitions to a DAO, these additions will be decided upon by the community through the use of proposals and votes, utilising Benqi’s QI token.
How it Works
It works in much the same way as any other similar dApp. Connect your wallet (several options, including Metamask and Coinbase), deposit your chosen asset(s), then stake or lend if you are looking to earn. When you are ready to withdraw, just go back into the dApp and hit the withdrawal button for the relevant asset.
When you make a deposit you are issued with matching QiTokens, for example QiDAI, which are deposited into your wallet. At the time of writing, I couldn’t find any way of earning from these but since they are liquid digital assets in their own right I would expect over time there will be opportunities to earn from them. Bear in mind thought you will need them to reclaim your original deposit in Benqi.
When you want to borrow, off you go to the relevant screen, select the asset(s) to borrow against and how much, then hit that button. Interest rates vary depending on the collateral and repayment periods are open-ended. If you’ve deposited several different types of assets then you have the option to borrow against a mix of these.
It’s worth noting that where a user engages in both earning and borrowing, any interest earned by depositing funds is offset against the interest charged for borrowing, which is a nice touch.
Tokenomics and DAO
The protocol will initially be governed by the founding team, and will eventually transition to a Decentralized Autonomous Organization (DAO). As part of the DAO, holders of the QI token will be able to initiate proposals and vote on issues that will steer the direction of the protocol.
The total supply of QI will be 7,200,000,000 tokens.
• 45% of the tokens will be distributed through the Liquidity Mining program.
• 25% allocated to a token sale.
• 15% to the treasury.
• 10% to the team. fully unlocked over four years, with quarterly unlocks, and a 12 month cliff after public listing
• 5% for exchange liquidity.
I find it good to see the slow release of the team’s stake as this ensures they have skin the game for the longer term and provides a good degree of confidence they aren’t going to disappear overnight with our hard-earned cash.
Avalanche
Part of the appeal with Benqi lies in the Avalanche blockchain on which it is built. Avalanche pitches itself as the fastest smart contracts platform in the blockchain industry and sees DeFi as a key market that its fast, high throughput and low-cost platform is well suited to. Some of the other dApps built on Avalanche include ChainLink, TheGraph and Copper.
As a platform of platforms that allows others to build their own blockchain using its underlying consensus, Avalanche is much like both Cosmos and Polkadot/Kusama. Given the warm, comfy glow that I feel towards Cosmos and Polkadot, this is bound to ensure that Avalanche attracts my attention and I will be taking a closer look at it in the future.
Avalanche is growing very quickly and attracting an ever larger community, the significance of which for Benqi is obvious; it means a growing prospective user base, which is very good for business.
An Opportunity for My Portfolio?
This looks to me like a good quality project built on a blockchain that has the potential to grow its user base hugely. I like the fact the team behind Benqi are tied in longer-term and that there is no huge allocation of tokens to a massive and ongoing marketing campaign, something that eats up tokens on many other projects.
Whether or not Benqi will win out against the growing ranks of competition in the DeFi space, I think is impossible to say at present, not least of all because this is such a dynamic environment with new entrants appearing almost daily. However, since the overall market is growing it should make it pretty straightforward for them to earn a living in the shorter term.
Things I will be looking for from Benqi in the future include:
• How well they grow their user base
• How effectively they develop their offering, with the addition of new liquidity pools and user features
• Their ability to avoid being hacked
• The growth of their community and its levels of engagement
• The growth of Avalanche
In the meantime, I’ve been happy to acquire a small holding of QI tokens for my more speculative portfolio.
Until next time…
Renaissance Man
Earnathon – get paid to learn about crypto
The Usual Disclaimer
Please don’t take any of the above as financial or investment advice. It is intended to be nothing other than a little entertainment and information sharing. Always, but always, do your own research before committing your money to anything.