Blockchain enthusiasts and institutional investors are focusing on the open finance (also known as decentralized finance or "defi") platform running on the Ethereum blockchain. In view of the historic new low interest rates, compared with traditional investment products, open-end financial applications have the potential to provide higher yields. These open financial platforms provide financial products and services through smart contracts and blockchain technology, and endow them with emerging characteristics such as transparency, decentralization and disintermediation.
The development of decentralized finance has created a diversified financial ecosystem built directly on the blockchain, which is transparent and verifiable, with the help of cryptocurrency and pre-defined codes called smart contracts. These platforms are redefining the structure of money markets without the need for central institutions or third-party decision makers. In today's traditional world, even if the user provides collateral (such as a house or a car), the user needs to provide credibility, demonstrable income, and other factors to enable the lender to make a decision. Traditional lenders cannot mortgage digital assets and cryptocurrency, nor can they receive loans or provide them to lenders and banks to earn interest rates.
Mermaid is not the first agreement on the blockchain to help bridge the gap between traditional financial loans and decentralized agreements. There are agreements to do this by locking billions of dollars in assets. However, these protocols are mainly based on Ethereum, which has become expensive and slow, and has caused pain points in the user experience. These agreements also lack support for higher market value assets such as reborn and Leyte.
Current agreements are also very centralized, such as the "compound" agreement, in which equity holders and private equity funds seem to be able to control the majority of decisions without other control mechanisms. Their distribution plan does not amount to decentralization. In addition, more than $1 billion of Ethereum has been locked into makerdao contracts, which earn no value but bring costs to those foundry assets.
Finally, in the current scenario, if users want to use their assets to cast stable currency, they must remove it from the money market agreement and lock it in a smart contract that will not benefit from the underlying assets as collateral.
Mermaid protocol ("Mermaid") is an algorithm based money market system, which aims to introduce a complete lending system based on decentralized finance into coin security intelligent chain. Mermaid allows users to take advantage of their cryptocurrency by providing collateral to the network, which can be borrowed by mortgaging cryptocurrency. This creates a secure lending environment in which the lender receives an annual compound interest rate (apy) paid by block and the borrower pays interest on the borrowed cryptocurrency. These rates are set by the agreement in the yield curve, where the rate is automatically adjusted according to the demand of a specific market (such as bitcoin).
The difference between Mermaid and other money market agreements is that it can use the collateral provided to the market to borrow other assets, and it can also create a synthetic stable currency to protect the agreement through the position of excess collateral. These synthetic stable currencies are not supported by a basket of fiat currencies, but by a basket of cryptocurrencies.
The purpose of mermaid protocol is to implement a complete algorithmic money market protocol in coin security intelligent chain. The design of the protocol is based on compound and markerdao architecture and branches, and synchronized to the mermaid platform, so as to integrate the advantages of the two systems.
Mermaid uses coin security intelligent chain to conduct fast and low-cost transactions, while accessing encapsulated tokens and deep network of liquidity.
Mermaid protocol aims to provide a decentralized and secure trading platform for platform users to obtain loans, earn interest and forge synthetic stable currency. The protocol runs completely on the coin security intelligent chain, which eliminates the current congestion, lack of cross chain compatible assets and high transaction fees on the Ethereum blockchain. Together, these standards provide an extensible solution in the money market that will be fully controlled by the community through its governance token mer.