Blockchain firm Mainframe has acquired Sablier, an Ethereum-based protocol for real-time finance.
Mainframe plans to integrate Sablier’s money streaming technology into a fixed-rate lending protocol and create tokenized debt markets akin to digital bonds.
Crypto loans with lower collateralization
Per the announcement, “cryptocurrency loans can create a healthy cycle of speculation, spending and monetary circulation.” Still, borrowers reportedly have low exposure in the current overcollateralized systems:
“Crypto-backed loans often require collateralization rations of 150% or higher, and borrowers don’t fully actualize their spending power. With Mainframe’s novel Guarantor Pools providing protection for collateral vaults, collateralization ratios can be much lower without increasing risk to the system.”
Mainframe’s system reportedly “allows borrowers to quickly offload debt for increased purchase power.” The ecosystem’s borrowers deposit collateral and mint tokens, while the lenders purchase the tokenized debt obligations — generally at a discount — to redeem them for face value at maturity.
Users can also act as guarantors in the protocol, by pooling assets to protect the system from becoming undercollateralized and earn from fees and purchase collateral at a discount when borrowers fail to provide the collateral.
According to Mainframe, this system should prevent events like MakerDAO’s “Black Thursday.”
Mainframe CEO Doug Leonard said, “Think of debt markets like the lifeblood of an economy; you want to keep that blood pumping and flowing. […] Debt obligations create temporary clots and overcollateralization restricts efficient monetary flow. Mainframe allows lenders and borrowers to shift capital out of stagnant wallets and increases circulation. Ultimately, this leads to a healthier DeFi space.”