Topic: Potential Project: Value Analysis of Fixed Rate Lending Protocol Element Finance (Read 44 times)

Project introduction
Element Finance is a decentralized financial protocol that helps users seek high and stable returns in the DeFi market, allowing the principal and interests to be traded at any time without any liquidation risk.

Element Finance separates the principal and interest of users into two separate, transactable tokens, Principal Token and Yield Token. Liquidity pools are also provided for these two tokens, allowing the sale of outstanding principal and variable interests in AMM. Moreover, it enables users’ access to ETH, BTC, USDC, and DAI at discounted prices. Liquidity pools also allow discounted assets to be exchanged with the underlying assets at any time. Additionally, fixed interest income can be obtained by exchanging any major underlying asset.

When staking in the DeFi protocol, the user receives another kind of token that can be redeemed as the initial token, as well as the yields from staking. For example, users can obtain LP when providing liquidity mining. However, the yield is unstable because it is based on real-time changes in market transactions. The user will not be able to determine the final value until the LP is redeemed. Moreover, during staking, the assets are locked. Although assets belong to the user, the user will not be able to use them elsewhere during staking.

Element Finance is essentially designed to address these two issues, stabilize yields and lock-in. It distinguishes the return from the principal and ensures the liquidity of the assets between the principal and yield. At the end of a fixed period (for example, 6 or 12 months), each Principal Token is converted to a percentage of the initial capital, while a Yield Token is converted to the yield earnings generated at the same time.

For example, if a user stakes 1000 USDC on Element Finance and chooses a one-year period, the average annual interest rate is 10%. After that, 1100 USDCs is expected to be available. If you want to trade USDC halfway, you can sell 1000 USDC principal at a discount. There may be someone in the market willing to purchase your 1,000 USDCs at 950 USDCs to get a fixed yield of 5%.

At the same time, yield tokens provide users with great flexibility. Users can sell Principal Tokens and retain Yield Tokens. Alternatively, they can sell Yield Tokens and retain Principal Tokens to advance interest earnings for tomorrow. Of course, both principal and yield can be sold. Users can also stake the principal twice to obtain leveraged yield benefits.

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