The ICON DeFi Guide: Part 2— Stable Coins, Borrowing, and the Balanced Network

What’s MakerDAO?

At its most basic level, MakerDAO is a project dedicated to creating another stablecoin that trades at $1, just like USDT and USDC.

What is Balanced?

Now that you know how MakerDAO works, we can move onto breaking down Balanced.

A prototype of the Balanced interface for depositing collateral and borrowing ICON Dollars.

The Balance Token

In order to incentivize certain behaviors on the Balanced protocol, the creators have created the Balance Token (BALN), which users can mine by either providing liquidity on the decentralized exchange (more on that below), or if they meet following borrowing qualifications:

  • Deposit collateral into Balanced
  • Borrow pegged assets from Balanced
  • Be at or above the Target Collateralization Ratio of 500%
Prototype of the Balanced decentralized exchange.
  • 0.00% Transfer Fee — Charged each time a pegged asset minted on Balanced is transferred from one wallet to another. The initial transfer fee will be set at 0%.
  • 0.3% Decentralized Exchange Maker Fee — Charged when executing a trade on the Decentralized Exchange.
  • 1% Origination Fee — Charged each time a borrower mints new pegged assets.
  • 0.50% Redemption Fee — Charged each time a non-borrower claims collateral in exchange for retiring a pegged asset.
  • Adjusting fees
  • Adjusting interest rates
  • Adjusting inflation rates
  • Adjusting inflation allocations
  • Adjusting the Balance Token unstaking period
  • Adjusting Loan to Value (collateral ratio) requirements
  • Adjusting the Balanced governance process
  • Transferring Balance Worker Tokens (BWT)
  • Spending the Balance Tokens held in the DAO fund
  • Adding new pegged assets

Risks

It’s important to note that DeFi is full of potential risk, just as our traditional finance system is. However, if you know the risks associated with a given protocol, you can manage them or avoid them entirely.

Conclusion

Thanks to Balanced, we now have two important tools for the ICON DeFi ecosystem: a stable coin, and a mechanism to borrow money by leveraging our existing capital (the ICX you hold).

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ICONOGRAPHER

ICONOGRAPHER

ICON contributor and analyst, ready to hyperconnect the world. Twitter: @iconographerICX