Intro
Benqi is a suite of decentralized finance protocols consisting of a liquidity market, liquid staking and Ignite, a validator bootstrapping protocol, all built on the high-speed Avalanche network.
The protocols provide crypto users with lending, borrowing, or earning interest with their crypto assets, staking their AVAX tokens and using them within DeFi applications as well as equipping builders with affordable access to AVAX to bootstrap Avalanche validators.
In this article, we will find out what Benqi is, how it works, what are the latest updates and partnerships of the project, what are the tokenomics of QI, its native token, and learn more about Benqi’s plans for 2024.
Benqi Lending: The Essentials
- TVL: $731M (Rank #32)
- TVL Ranking by Lending: #8
- Blockchain: Avalanche
- Token: QI
- Auditors: Halborn, Audits
- Documentation
BENQI is a hub of decentralized finance protocols running on Avalanche. It includes the BENQI Markets, BENQI Liquid Staking and Ignite.
Source: Benqi Website
BENQI Markets
It empowers users to lend, borrow, and earn interest with their crypto assets instantly. Users provide liquidity to the protocol to gain yield, and borrowers can borrow in an over-collateralized manner.
It is non-custodial, and allows DeFi users to:
- Deposit and withdraw liquidity from a shared liquidity market;
- Borrow from a liquidity market using their supplied assets as collateral;
- Get a transparent view of interest rates 24/7 based on the asset's market supply and demand.
BENQI Liquid Staking
This is an Avalanche liquid staking opportunity to tokenize staked AVAX. Tokenized AVAX gives users the ability to use, swap or collateralize the yield-bearing asset across multiple DeFi applications.
It is a profitable staking solution that allows Avalanche users to:
- Transfer their locked up AVAX staked in validators in securing the Avalanche network;
- Gain some extra utility on their asset by using it in DeFi market by trading or utilizing it as collateral;
- Stake their AVAX on the Avalanche Contract Chain (C-Chain) without cross-chain transfers or server hosting.
BENQI Liquid Staking (BLS) runs on Avalanche network and tokenizes staked AVAX allowing users to use it in various dApps: automated market makers (AMMs), lending and borrowing protocols, yield aggregators, etc.
BLS enables users with a seamless solution to stake AVAX on the Avalanche C-Chain* skipping rather tiring cross-chain transfers to get started. All that a user needs is an EVM-compatible wallet and some AVAX to get started.
Why Liquid Staking?
Avalanche is a Proof-of-Stake (POS) network that provides an opportunity to earn rewards for users staking the AVAX token on validator nodes to secure the network. This runs on the Avalanche Platform Chain (P-Chain) which locks up the AVAX token for a particular period, so you can’t use your assets in DeFi.
Liquid Staking makes it possible to use your capital with more efficiency within the Avalanche network. When you tokenize the staked AVAX into sAVAX (BENQI Staked AVAX), you can use those assets in DeFi protocols while earning passive returns for securing the Avalanche network. The sAVAX asset can be used in various strategies to build up your wealth.
Source: BENQI Docs
Profits of Staking AVAX on BLS
There is a suite of benefits when staking AVAX on Benqi:
- No long lock-up periods;
- No fees when depositing and withdrawing from BLS;
- Only you control your sAVAX asset and accounts;
- Smooth staking AVAX process and instant earning without executing cross-chain transfers to the Avalanche P-Chain*;
- Get extra utility for your asset to use it in various scenarios in DeFi space.
Ignite
This protocol bootstraps Avalanche validators and Subnets — designed for everyone, ranging from institutions to individual developers and Web3 natives.
Ignite provides a much cheaper way for launching Avalanche validators. It removes the economic barriers that might limit developers and builders from launching their innovative platforms in Web3 space.
Source: Benqi Docs
It is permissionless to use and allows builders and users to:
- Launch Avalanche validators with minimal capital required;
- Launch blockchains through Subnets to initiate new ideas in DeFi.
There are two validation options – Pay As You Go (PAYG) and Stake.
Pay As You Go (PAYG)
- Minimum stake: 0 AVAX
- Minimum fee: 4 AVAX/week
The PAYG is a rental model that drastically cuts off the required capital to launch an Avalanche validator.The whole process could be break into the following steps:
- pay in USDC, AVAX or QI (if you pay in QI, there is a 5% discount.);
- input your NodeID;
- set your staking duration;
- Ignite provides all the AVAX that you need to launch a validator.
The fee schedule per validator is as follows:
Staking Duration (weeks) | Fee (AVAX) |
2 | 8 |
4 | 15 |
8 | 28 |
12 | 40 |
Stake
- Stake formula: 500 AVAX to 1800 AVAX + 10% borrowed AVAX in QI
- Minimum stake: 500 AVAX + 150 AVAX worth of QI Fee: $0
The Stake validation demands for a mix of AVAX and QI collateral to start. Pay attention, that you don’t have any fees to use it.
The minimum amount to start staking is 500 AVAX + 150 AVAX worth of QI. You get staking rewards proportionally to your AVAX stake.
At the end of the staking period, users can claim their AVAX + QI stake and network rewards + delegation fees.
Check out Ignite app to deploy your Avalanche validator in a few steps.
Qi coin: Use Cases & Tokenomics
BENQI ecosystem is fueled by the Qi Coin, its native cryptocurrency.
Qi Coin has a crucial role in multiple aspects of the platform:
- Transaction Fees: Qi Coin is used as a payment method for all transactions within the BENQI Ignite ecosystem.
- Staking/Locking Initiatives: Locking Qi Coin on third party protocols allows users to earn rewards passively. It works as a passive income source for holders, and strengthens the network’s flexibility.
- Delegations Governance: Qi Coin holders have decision-making power within the BENQI ecosystem. They can stake QI, called veQi, to vote to receive additional AVAX rewards if they run an Avalanche validator.
QI Tokenomics
The total QI supply is 7,200,000,000 tokens. The token distribution model ensures that market participants who actively use the Benqi platform receive QI tokens.
Source: Benqi Docs
How Benqi Lending Works
To start using the protocol, an investor provides their asset that is supported by the protocol. Users earn interest depending on the asset's market borrowing demand.
Plus, the deposited assets may be used as collateral that allows the user to borrow other assets. Interest earned by depositing assets redeems the accumulated interest rates from borrowing.
There will be more token pools added as the platform evolves. After the protocol's governance transition into a Decentralized Autonomous Organization (DAO), additional pools will be accepted according to community votes and proposals using the QI governance token.
Issuers will be given tokenized yield-bearing tokens (qiTokens) which will be necessary to withdraw supplied assets from the BENQI Liquidity Market when required.
qiTokens can be transferred and traded as any other crypto-asset on Avalanche.
Depositing assets
- Go to the 'Markets' tab and click on 'Supply';
- Choose the asset type from the variety displayed in the 'Supply' dashboard;
- Type the necessary amount to deposit and click 'Deposit';
- When the transaction is confirmed, the deposit is recorded and it starts earning interest upon the deposited assets;
- qiTokens will be deposited into your wallet to reflect the asset you've issued into the protocol.
Users can deposit any amount of assets, as there are no restrictions on the amount. The first asset deposit requires an approval transaction.
Earning
Depositors will receive continuous earnings (interest) on their assets that algorithmically adjusts based on market conditions. Each asset has its own market of supply and demand with its corresponding APY (Annual Percentage Yield) which changes over time.
The qiToken is a representation of the user's asset balance supplied to the BENQI protocol. It is received in the wallet for supplying assets to the protocol and functions to accrue value relative to the original asset through the token's interest rate.
qiTokens minted will be based on the underlying asset supplied to the protocol (e.g: qiAVAX, qiLINK, qiWBTC, etc). They are convertible into an increasing amount of its original asset, even while the number of qiTokens in the wallet remains the same.
Benqi: Risks
Smart Contracts Risks
The protocol is engaged with various smart contracts, all of which imposes some risks. This includes known and unknown risks that could result in the failure or vulnerability of the smart contracts ending up with assets being locked or lost forever.
Liquidation Risks
Assets that are supplied or borrowed on the protocol could fluctuate in value due to the systemic risks of the issuing platforms or market volatility, including the loss of peg of certain pegged assets. This could result in the liquidation or closing of a user's position.
Risk Assessment
BENQI collaborates with Chaos Labs on the risk assessment and management of assets for the BENQI Liquidity Market (BLM) to boost their users’ capital efficiency in a smart and safe manner. The BENQI Chaos Labs Dashboard shows risk monitoring done on BENQI Liquidity Market.
Audits
BENQI is continuously going through security audits for the protocol. Unfortunately, security audits can’t remove all possible risks. You can always check up the audits BENQI has currently had by visiting official docs.
Final Thoughts
Benqi gives users a seamless experience in issuing and borrowing crypto assets having a rather transparent borrowing limit dashboard and a health factor indicator with warning on borrowed positions that are close to liquidation.
Benqi is definitely one the best money market platforms to gain interest on your crypto assets on the Avalanche network with higher interest rates from ongoing token emissions.
*Avalanche C-Chain: The Avalanche Contract Chain is the default blockchain on Avalanche that enables the creation of all Ethereum-compatible smart contracts.
*Avalanche P-Chain: The Avalanche Platform Chain is the metadata blockchain on Avalanche that coordinates validators, keeping track of active subnets and in charge of creation of new subnets.
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Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.