Defrost Finance — a decentralized protocol that allows you to use liquidity pool (LP) tokens and other tokens from various Avalanche and internet protocols as collateral to create H2O, a soft peg stablecoin.
How does Defrost Finance work?
Defrost Finance helps users to improve capital efficiency with assets, locked in pools or vaults. DefrostFinance allows users to provide liquidity to generate additional income from features such as farming, borrowing, staking, swap and bridge support for ease of trading.
Defrost Finance is issuing H2O, which is backed by existing collateral with a soft peg of $1.00. H2O can be minted by depositing collateral such as liquidity provider tokens from AMM (automated market maker), dexes (decentralized exchanges), lending and other DeFi protocols.
Other features:
| 1. | The project provides for the creation of a stablecoin that is not backed by US dollars and at the same time releases more liquidity through liquidity provider tokens (LP tokens). |
| 2. |
LP tokens, collected from different chains and protocols, can be used as collateral for H2O mining. Mining and burning are fully controlled by smart contracts. |
Vaults are classified by the type of collateral, used to create H2O. Users create H2O by generating it against their own collateral and burn H2O upon redemption of the generated H2O balance. The H2O generation process takes place entirely on-chain, allowing anyone to check the amount of circulating H2O and the provision, supporting it.
Storage owners must pay a stability fee, such as interest on a loan, for the generated H2O. The rate is expressed as an annual interest rate, which is charged annually in practice.
More about tokens
H2O — a stablecoin or leverage tool that can be minted by staking various LP tokens or other pool tokens in a vault that will always be overcollateralized. It is softly pegged to the US dollar at a ratio of 1:1. LP tokens or pool tokens with high liquidity and market value can be used as collateral for issuing H2O.
MELT — a Defrost utility token with a fair launch model. MELT can be used for rewards, fees, insurance and voting rights in the protocol. It will be distributed under a fair launch model. The majority of MELT tokens will be distributed to H2O providers and holders.