Lending

Lending on CygnusDAO.

Stablecoins are arguably the most important tokens in Defi. Whether we like it or not, they are more stable than any cryptocurrency. They have become an integral part of the ecosystem — in 2021 alone, supply was up 388% to $140 Billion+ with an annual transaction volume $5 Trillion.

Source: https://reimaginedfi.medium.com/lets-talk-about-stablecoins-42f0aa2a7bcb

As DeFi enters the inevitable bear market, these stablecoins become even more so important as users seek refuge from falling markets caught in a downward spiral. However, the interest rates and Deposit APY's found on stablecoins are usually amongst the lowest in DeFi. When looking at liquidity providers, there's usually a big gap between stablecoin returns and returns for liquidity providers. Cygnus seeks to close this gap.

With Cygnus the return for lenders comes from the borrowing interest rates that liquidity providers are willing to pay to borrow their stablecoins. As liquidity providers can leverage and earn a much higher reward (and since the collateral is also constantly earning trading fees + rewards) they would also be willing to borrow stablecoins at a higher rate than if their collateral was locked and not increasing in value.

Since each pool is individualized, lenders benefit from knowing where their loans are going to. For example, some lenders would prefer to earn smaller returns but know that users who borrow from them are collateralized by a sound asset such as WETH or WMATIC. If anything happens on any other pools, they remain unaffected.