Crypto Interest News Blog

The most interesting news in the crypto interest earning space.

How liquidators keep DeFi going

Those who are interested in the DeFi crypto lending markets know how they work in general: a borrower can borrow cryptocurrencies by adding collateral as a security. If the value of the crypto collateral decreases below the defined threshold and the borrower doesn't top up, the collateral is liquidated to pay the lender.

But who is responsible for the liquidation?

The DeFi lending markets offer functions to execute the liquidations, but they don't liquidate themselves. At this point the liquidators come into play.

Liquidators are bots which check for loans which can be liquidated. If they find one, they pay back the lenders loan and get in return access to the collateral. On top they receive the liquidation fee which the lending market requests from the borrower. In case of Compound this is 5% of the value of the collateral. Over the lifetime of the different lending markets, liquidators already earned about $5 million.

Although liquidators are working behind the scenes and are little known, they are doing a very important job to keep the DeFi crypto lending markets solvent.

To dive in into more detail, you can read this very interesting Medium posting.
Plant trees with your earned interest

The DeFi space is very creative when it comes to new ideas what can be done with the earned crypto interest.

Some months ago the no-loss lottery PoolTogether was launched. All participants lock some DAI in the PoolTogether pool for a period of time. The earned interest is then payed to one participant, all others get just back their pooled DAI.

On 14th of January a more altruistic dApp was launched: with rTrees you can use your earned crypto interest for planting trees. The interest is earned on the DAI which you lock up in rTrees.

rTrees is based on rDAI. rDAI is a DAI wrapper which earns interest on DeFi lending markets and redirects the earned crypto interest to a defined Ethereum address. In the case of rTrees the beneficiary is, which plants trees based on the donated amount.
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