NEW YORK, US - Media OutReach - 12 May 2023 - USDToch provides a lending solution for DeFi 2.0. Building on the existing enhanced capital utilization enabled by over-collateralized lending, it further enhances the investment returns on the staking side. It also plans to introduce traditional assets into the DeFi lending system in the form of RWA soon. Lending is one of the oldest economic activities in human society. Ancient loans took the form of pawnshops where loans were granted against collateral deemed valuable. Early forms of credit arose when resource owners lent production materials to laborers with an expectation of repayment in goods. If the borrower failed to repay, their family could be enslaved. Today, credit is essential to businesses and the entire economy as it allows economic units to raise operational capital without diluting equity. This leverage effect leads to increased investment, capital expenditure, and consumption, and eventually rapid economic growth. In TradFi, credit is typically divided into secured and unsecured credit. A mortgage is a secured loan since the loan is secured by property. Credit cards are an unsecured loan, or can be thought of as collateralized by the creditworthiness of the borrower. Credit creation results in balance sheet expansion. In DeFi, most existing lending protocols are based on over-collateralization. They are similar to pawnshop lending, and do not involve credit creation. Over-collateralized loans offer many trading and hedging strategies for the financial sector. However, their use cases are limited in other businesses because only asset owners can borrow, and the poor cannot increase their leverage. Even for asset owners, there are more efficient ways to leverage than participating in DeFi lending. For example, a person with $10 million in crypto assets may be able to borrow $20 million from a CeFi institution that undergoes KYC and credit checks (although with the collapse of FTX, the world's top three CeFi lending platforms are all struggling). Essentially, the "core DeFi principle" of permissionless blocks the growth of the DeFi lending market. The logic of DeFi lending DeFi over-collateralized lending is essentially a way to increase capital utilization. For example, if user holds an ETH (worth $2000), he/she is bullish on its subsequent market and don't want to sell it, and want to gain from the potential market, then DeFi over-collateralized lending is a good option, the user can stake this ETH to a lending protocol and get 1400 USDT (based on the staking ratio of 0.7) for other investments for further profit. At some point in the future (supposing without triggering liquidation), user can redeem it. Of course, many lending protocols also support staking stablecoins, lending crypto assets such as ETH at the staking rate. Over-collateralization prevents borrowers from defaulting while the excess also provides insurance space for the platform to resist market fluctuations. In the current DeFi lending system, howevers, investors do not hold the initiative. For example, when user stakes ETH to a lending protocol, it usually does not generate considerable profits (although many lending protocols provide small incentives). Alternatively, the lending protocol may use these user-pledged assets for other "farming" activities, and the profits are usually not distributed to the pledger. Leverage Smart players usually prefer to use lending platforms to engage in circular lending with leverage to gain higher profits. Suppose the user currently holds an ETH worth $2000 and stake it to borrow 1400 USDT based on a 0.7 loan-to-value ratio. The investor then uses the 1400 USDT to purchase 0.7 ETH from another DEX and continues to borrow on the same platform. At this point, the investor will have a total of 1.7 ETH (two ETHs staked on the platform), and the debt owed to the platform is 2380 USDT. When ETH rises from $2000 to $4000, the investor will have a total of $6800 worth of ETH. Then, the investor can redeem the second staked 0.7 ETH and trade it into USDT (get 2800 USDT), and take out 1400 USDT to redeem the first staked 1 ETH. The investor will then have a total of 1 ETH + 1400 USDT, and the extra USDT is the profit earned through revolving lending. This means that the investor only uses $2000 of capital to leverage $3400, and when the investor engages in multiple lending transactions, their cumulative staked assets and debt increase simultaneously, as shown below: Users see that when an investor borrows and repays for the third time, their cumulative staking assets increase from 1 ETH to 2.19 ETH while its debt increases from 1400 USDT to 3,066 USDT accordingly. Following this trend, the investor can continuously increase their leverage through repeated cycles. Therefore, the main factor determining the profitability of this investor at this point is the price of ETH (since their debt is calculated based on the value of USDT and remains...