Defrost finance is a protocol that allows participants to leverage LP tokens from other Avalanche cross chain dapps to generate it's native stable coin $H2O
What is the goal and motivation behind Defrost?
Defrost goal is to expand liquidity in the Avalanche ecosystem through $H2O by allowing users to leverage ideal LP tokens to generate $H2O. Also borrowers can retain their yield bearing capabilities of being able to unlock the capital to put to further use. The collateral is redeemable at any time and it continuously compounding stability free is charged to borrow.
DeFi protocols have developed into an asset class worth tens of billions of dollars. A big part of these assets is stablecoins secured by centralized currencies, such as USDT and USDC. Decentralized stable coins such as DAI only account for a small part of the total supply of stable coins. This means that most stable coins are centralized. There are great needs and potential for decentralized stablecoins natively born in DeFi.
Defrost Finance is solving the problem of stablecoin on Avalanche ecosystem by generating its H2O stablecoin from collateralized LP Tokens both on Avalanche and through decentralized cross-chain bridges. We aim to release a large number of native stablecoins on Avalanche, which should help to defrost the frozen liquidity and feed the demand for expanding the DeFi ecosystem on the chain.
What are H2O and MELT?
$H2O is a fully decentralised stablecoin and soft pegged to the dollars and circulating $H2O is generated from participants depositing LP tokens into the defrost. The stability access the monetary tool for the stability of $H2O. Decreasing the stability fee results in a lower cost of borrowing which can incentivise the creation of more $H2O and vice versa.
Traditionally the holders of H2O can lock their tokens into the saving pool and earn interest based on the savings rate in addition to $H2O .
Defrost other native token is $MELT. It's the governance token of defrost finance. $MELT holders can vote on the different parameters such as stability, fees, savings rate, minimum collateral rate and much more.
$MELT is the final safety note to the dapps of the protocol and is backed from market and burned. When defrost results reserved exceeded rushhold and sold when the protocol Dex exceded the rushhold.
What is the Stability Fee?
Stability Fee behaves like the borrowing interest of H2O. They also act as a risk parameter designed to address the inherent risk in generating H2O against collateral in Defrost Vaults.
The Stability Fee for each Vault type can be different and changes as a result of the decisions of MELT token holders who govern the protocol. Stability Fee is calculated and can be only paid in H2O.
Tokenomics :-
The token has the total supply of 100M out of which 85% is distributed to the liquidity providers. In addition it can be staked to earn a portion of stability fees and liquidation penalties from the protocol.
And finally why you should use Defrost Finance
The Defrost protocol generates highly liquid stable assets as H2O, by using idle, less liquid assets, like the liquidity provider tokens, which normally exists as locked capital that can't be put to further use. You can use the protocol to stake your LP Token, using them as collateral to mint H2O, and then repay your loan in the future. In this way, you do not need to cash out your LP tokens to obtain liquidity.
By defrosting LP tokens into a liquid asset as H2O, Defrost protocol gives users automatic leverage, by staking the LP tokens in contracts, rather than selling them. H2O is used in the same manner as any other cryptocurrency: It can be freely sent to others, used as payments for other assets and services, be held as a hedge against market volatility, and more.