BarnBridge — an idea and document, originally conceived in Q2 2019. At that time, MakerDAO was starting to gather basic awareness and capture the imagination of what is now known as DeFi, or the decentralized financial community. More than a year later, with 60 percent of global debt accounting for less than 1 percent and more than $ 15 trillion of global debt, capital continues to move into riskier yield streams. This is not a coincidence or a trend. Historically speaking, since biblical times, circulating capital has chased returns with relatively equal risk.
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Description of the BarnBridge
Profitable products in decentralized markets, that yield higher APYs, are currently crypto-secured loans. Instead of selling crypto for fiat, borrowers bet on digital assets and receive digital assets in return. Although these loans were mostly short-term loans to traders, the system proved to be effective and ripe for expansion. Such efficiency will inevitably attract more valuable and long-term loans to decentralized ledgers.
Several things separate from other platforms:
| 1. | This efficiency is ensured by the ability of smart contracts to hold digital collateral until both parties to the transaction fulfill their obligations algorithmically. |
| 2. | Reducing the number of storage, settlement and escrow operations of time-consuming and expensive activities within the legacy system to algorithmic activities leads to a decrease in the rent, charged to the labor force for performing these activities. |
| 3. | It is this efficiency, coupled with the perception of higher risk, that accounts for the higher returns in decentralized systems. |
As the risk in DeFi converges to the levels of risk, perceived in TradFi by the nature of the lending, the effectiveness of smart contracts will continue to offer higher returns on decentralized systems than traditional centralized systems.
You can create derivatives from any type of market fluctuation to hedge different risks. Examples include, but are not limited to, interest rate sensitivities, fluctuations in the underlying market price, fluctuations in forecasted market ratios, fluctuations in mortgage default rates, fluctuations in commodity prices and a seemingly infinite number of market fluctuations to hedge a particular position.
What else should you know?
The developers plan to create the first cross-platform derivatives protocol for any fluctuations. To begin with, they will focus on sensitivity to yield and market price. It is going to introduce a much wider range of hedges against fluctuations in the decentralized ecosystem. Barnbridge strives to be platform and asset agnostic.
You can reduce the risk of digital assets and the sensitivity to returns on digital assets by breaking them down into virtually endless, discrete, dollar-denominated chunks or tranches and building derivatives around those tranches. BarnBridge aims to flatten the risk curve and offer tiered risk management to both DeFi investors and traders, creating more efficient debt and yield derivatives.
Additional information
The site has a White Paper. With its help, you can familiarize yourself in more detail with the features of the project and get answers to a number of questions.
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