MEXC Global Research: SOL’s Ecosystem Lending Protocol, Apricot Lend
Apricot Finance is a DeFi platform in the Solana ecosystem which provides users over-collateralized loan services. Apricot Lend was launched its collateralized lending protocol with low liquidation penalty and high predictivity. It has a 2-hour liquidation guarantee, Apricot Rescue that provides guarantees for borrowers to liquidize their positions within a short period of time.
Apricot Lend is Apricot platform’s collateralized lending protocol, which aims to maximize users’ lending ability, and at the same time, it minimizes liquidity penalty and uncertainties. In addition, Apricot also plans to launch a series of rich DeFi related products such as order book for fixed rate loans, low to uncollateralized loans, templates based on high-frequency operations, etc. to meet the needs of a wide range of users.
Comparison to other lending protocols
Compared to Compound and AAVE built on Ethereum, along with the rapid growth of the Total Value Locked of DeFi and the increase in number of investors, Apricot believes that the natural limitations of Ethereum will result in the gradual inability of some services and functions to maintain the operation of the projects and meet the needs of the long-term development of the project.
Apricot Finance is currently developing “Asset-backed Securitization” and “high-frequency trading” products that would only require one public chain to ensure stable, efficient and fast block confirmation. The existing services and functions of Ethereum can no longer meet these needs. For example, poor performance that will result in high service fees and the transaction time delays, so when the fluctuation is huge and some positions cannot be cleared in time, the investors will suffer from loss. This difference between the underlying public chain is the main difference between Apricot and other lending protocols.
According to official information, Apricot Finance currently plans to support the collaterals such as BTC, ETH, SOL, USDC and USDT.
Comparison of different DeFi Lending Platforms (Picture is sourced from Odaily/Chain Research Institute)
Collateral and Liquidation
Investors on the platform would need to borrow assets from the platform with 110% — 120% over-collateralized loans to repay the principal and interest at any time.
When the Collateral Ratio of investors is lower than 110%, the external third-party arbitrager can intervene to purchase the collateral assets in the liquidation account at a discount of 1%, benefiting from Solana’s lower service fee. The arbitrager can liquidate the bad debt assets of any ratio.
When the investor’s collateral ratio is lower than 103% or the bad debt is still not liquidated after 2 hours, Apricot Rescue will step in to buy the collateral at a discount of 1% — 5%. Apricot Rescue will deal with the collaterals in two ways: First, arbitrage the collateral in Serum (DEX) or other trading platforms. Secondly, the collateral is subject to traditional financial Asset-Backed Security (ABS), and the bad debt handling token COT is issued. Investors can buy COT tokens at the market price and apply them to redeem stablecoin on the platform after the lock-up period.
The minimum mortgage rate of the loan is 110% — 120%, the liquidation threshold is 103% — 110%, and the liquidation penalty is 1%
Bad Debt Management
When arbitragers cannot handle the bad debts on the platform in time, the Apricot Finance platform will first fulfill a two-hour liquidation process, then purchase these assets at a discount, and issue COT bad debt handling tokens with these assets as the underlying assets. This process is similar to ABS (Asset-backed Securitization) applied in traditional finance.
2-hour liquidation guarantee “Apricot Rescue”: When the liquidation threshold of user assets is lower than 103% or the third-party arbitrager fails to complete the liquidation within two hours, Apricot will start automatic liquidation and start the liquidating asset protection mechanism at the same time. These assets will be used as underlying assets to issue bad debt handling tokens to fulfill the two-hour liquidation guarantee commitment.
Asset-Backed Security (ABS): Based on the assets owned by the project and guaranteed by the expected income that the project assets can bring, it is a project financing method to raise funds by issuing bonds.
The platform will comprehensively consider the cumulative number of bad debts and the overall market situation to determine the issue time. Then, investors can invest in the bad debts recovered by the platform by purchasing COT and share the rising income. At the same time, investors holding COT will have a greater voting weight when participating in community governance as a reward by helping the community deal with bad debts effectively.
Referring to the past experience of Compound and other platforms, assuming that the collateral price suddenly falls, COT, as a representative of bad debt management assets, will bring a huge increase. On the other hand, if the market judges it as a short-term correction, COT may rise due to arbitrage space.
At the same time, if the COT issuing Committee believes that the market situation is a short-term setback, it will issue COT to share the short-term risk of the platform. On the contrary, if it is determined that the overall market correction cycle is long-term, COT will not be issued immediately to protect the rights and interests of investors.
Considering the particularity of COT as bad debt handling token, the platform will establish a COT asset pool that is separated from other asset pools to ensure that in extreme cases, the change of COT value will not have a systematic impact on the platform. Therefore, the Apricot Finance platform prefers to cash out the recovered collaterals in the secondary market liquidation.
Genblock Capital, NGC Venteres, DFG, CryptoJ Capital, Coninsights Ventures, Double Peak Group, Chris McCann (Seed round investors of Solana and FTX), etc. (The above are seed round investment institutions, and the private sales round will be announced in the near future)
Tokenomics model: Details to be announced
Native Tokens: APR: A total of 1 billion tokens
Bad debt tokens management: More COT details will be announced
APR’s Practical Value：
Participate in community governance
To incentivize users
Holders may obtain tokens via air-drop or receive a reduction in trading fees
Apricot Len’s testnet was launched on June 23
Apricot Lend will officially launch their mainnetw at Q3 to provide higher frequency and automated DeFi functions.