Looking for decentralized finance (DeFi) apps that will suit your needs can be fairly difficult sometimes. After all, it isn’t just the project that you look at, but also the system they are built. Most DeFi protocols on bigger chains like Ethereum struggle to sustain adoption because of high gas fees and long transaction processing times. Oxygen, a new prime brokerage platform on DeFi, intends to find a way around it.
Oxygen can be identified as a lending and exchange platform. It distinguishes itself from most other DeFi projects by being built on top of Solana, one of the fastest, most reliable, and secure blockchains that exist in the space. Oxygen also enjoys the support of a team of experts from Alameda Research (the company behind FTX exchange) and the Serum Ecosystem.
Background
Oxygen is a project built to support millions of people in terms of creating alternatives to traditional financing schemes. And in establishing a protocol that can surpass the problems faced by Ethereum, having it developed on top of the Solana blockchain is a welcome development.
As of yet, Oxygen is still in the Alpha version. This means that it still hasn’t been audited, however, the team is continuously working on developing it to roll-out its full functionality soon.
What is Oxygen?
Oxygen is a decentralized, non-custodial, prime brokerage protocol built on top of the Solana network and powered by Serum. The protocol’s main service offerings include lending and borrowing services, fund transfers, and token exchanges, among others.
Since it is built on Solana, it can process transactions faster than other blockchain platforms. Oxygen benefits from the capacity of Solana to settle 50,000 transactions per second for only $0.0001 in gas fees.
In order to execute credit services, Oxygen will also be using Serum’s decentralized exchange (DEX) and an on-chain order book to help match borrow and lending orders as well as conduct its risk management functions. Furthermore, the liquidity that users can enjoy on the protocol can enable them to perform derivatives market-making, leveraged trading, and over-the-counter trading, among others.
Users can interact with the protocol through three main channels: the Oxygen Wallet, API, and smart contracts on Solana Network.
How to use the Oxygen Platform
The process is fairly simple. For interested borrowers and lenders, they only have to create their own pools on the platform, deposit their digital assets in them, and designate which of their assets could be supplied for loans. The platform automatically connects lenders and borrowers.
Lenders earn more assets in return from the interest rate of the money that they supplied for loans. For borrowers, they can access loans after collateralizing a portion of their assets. Then, they will be matched to the lenders depending on the crypto that they want to borrow.
However a user wants to take advantage of their loan is up to them. They can use it to do cryptocurrency trading, hedging, leveraging, or simply transferring assets.
Its model is not entirely different from many other platforms that match lenders and borrowers. In fact, it contains almost every element present in similar protocols, such as collateralization, asset pools, and risk management models, among others.
Oxygen uses Serum DEX prices to determine the value of the assets on the platform. Then, these assets are priced depending on the average of the best bids and asks on the orderbook. On the Beta release of the protocol, they plan on incorporating the broader market in determining market prices for cryptocurrencies.
And again, since it is built on top of the Solana network, Oxygen promises faster transaction settlement times and cheaper gas fees in comparison with Ethereum-based platforms.
Features of Oxygen
Pools
Pools of assets function as the collateral of any particular user who wishes to lend or borrow additional digital assets from somebody.
Matching Engine
Serum powers the matching engine of the Oxygen protocol. It follows an on-chain orderbook and is fully-decentralized.
Risk Management System
The protocol has a system to ensure the safety of the assets held by users without compromising the profit-making opportunity of lenders in the platform.
Close-out Management System
In the meantime, the liquidation of loans is performed by third-party validators. Fortunately, as soon as the Beta version is released, they can already take advantage of the liquidation mechanism based on the Serum DEX.
Liquidity
The supply to facilitate borrowing and lending, as well as the price of assets, are affected by the whole market situation at the time a transaction is called. But overall, the platform is fully market-driven.
Use Cases
Oxygen’s blockchain-based credit services can be efficiently utilized by its users to generate profit or leverage. Here are some of the features of the platform that you can take advantage of:
Lending Cryptocurrency
Anyone can earn additional funds from lending their assets to the protocol’s supply. Lenders have the ability to dictate the terms of their loans and how much they want to earn from it without the need for any middleman to facilitate such transactions.
When assets are supplied to borrowers that have been matched to lenders, they begin earning their ‘yield.’ Should lenders decide to take their funds back, they can just easily do so by turning their ‘yield’ off. They can get their funds back as soon as the lending contract backing the transaction expires.
Now, the good thing about the platform is that even if you’ve already supplied your funds to borrowers, you can still collateralize them to borrow other cryptocurrencies.
Borrowing Cryptocurrency
Similar to how lending works, you also have to put your assets to your pool to begin borrowing from the protocol. The amount that users are allowed to borrow depends on the value of their pool. It follows the calculation below:
Initial Loan-To-Value for the pool (%) * Value of the pool (USDc)
OXY Tokens
OXY is Oxygen’s native, utility token. OXY can be used to pay for transaction fees on the platform, gain voting rights for community-based governance, and earn discounts on transaction fees. OXY holders also receive a 100% distribution of the accumulated protocol fees.
Protocol governance through OXY token holders is yet to be implemented. It will come as soon as the developments on the Serum and Solana side is finalized.
Protocol and Network Fees
There is a success fee of 15% charged to the lender of an asset. This portion depends on the yield generated by the lender. Borrowers are also charged a 15% market-clearing rate for the loans they make.
If you have OXY tokens, the fees you incur in your transactions within the platform can be reduced.
Conclusion
While DeFi has brought new developments in the way we provide financial services today, a lot of challenges still have to be conquered. When we talk about DeFi projects, what we often hear about are those that are Ethereum-based. The problem with those platforms, however, is that they are limited by the capacity of the Ethereum network. Issues on gas fees and transaction speed is becoming a more apparent concern. If we plan on expanding DeFi, these are the things we have to resolve.
The Oxygen project saw this need. Coming up with a composable protocol that anyone can develop and build on is already good news for continuous innovation. With Oxygen, users can now conveniently participate in the cryptocurrency lending market without having to pay high gas fees.
