Decentralized Financial Protocols (DeFi) are gaining ground in the cryptocurrency sector, with a total value of well over $ 271 billion, according to DefiLlama. One of the exceptionally popular categories of DeFi services is decentralized borrowing and lending, where users can pledge their cryptocurrency as collateral and receive stablecoin loans (or vice versa) to pay for daily expenses while investment continues to grow.

The total cost is determined in DeFi. Source: DefiLlama
Such protocols usually charge the difference or difference between the interest rates on deposits and loans as a service fee. But there are protocols like Minterest that aim to distribute the vast majority, if not all, of the profits to users. Earlier this month, Minterest launched Moonbeam, an Ethereum parachain-compatible smart contract on the Polkadot network. In an exclusive interview with Cointelegraph, Minterest CEO Josh Rogers elaborated on the goals of creating a user-centric DeFi platform.

Cointelegraph: Your institution claims to be the world’s first lending protocol that captures 100% of the costs of interest, express loans and settlement fees, which are then passed on to users. Interested in expanding this?

Josh Rogers: Traditionally, when you look at models, when you look at value, you notice that there are different stakeholders. So you look at the lending protocols that the owners / developers make money on. You have external liquidators who act as a third party who requires a liquidation fee. And one thing to pay special attention to is the fees for express loans, which can somehow be [inappropriate] for society. But it is important to know that the protocol for collecting commissions and valuable income goes to all these different parties. Minterest’s intention is that we will get all the commission income in the chain, in the protocol, and then distribute it to the user community in a way that we felt was much bigger and more inclusive. One of the highlights of automatic filtering is that the fee revenue for the protocol it captures is much more important than anything else, because the fee revenue is usually lost from the protocol.

CT: So what are some of the expected revenues from transferring these revenues to the users?

John R: Well, I do not know the answer [laughs]. It is very difficult for me to predict this. But when you think of this particular type of headline, if you look at some of the values ​​captured in the sectors, they are measured in hundreds of millions of dollars. But interestingly enough, when you look at lending protocols, there is no correlation between liquidity supply, lending activity and token price. Therefore, the value of the token is not related to the performance of the protocols.

We do this when we get all the commission income. The protocol goes on the market and Minterest buys back tokens and distributes them to users. Now it’s not up to me to speak, and the reservation is that I do not try to make predictions. But if you use prime, if the protocols generate $ 100 million in fees, something we should probably do when borrowing is between $ 3 and $ 7 billion, it means that the protocol spends $ 8 million per month on its token. The protocol issues 820,000 tokens per month as part of its liquidity position. So if you spend $ 8 million a month and the token price is $ 10, the protocol can store all the tokens it sends back, which is unrealistic. If the protocol is $ 8 million per month, what is the price of the token? The answer is over $ 10. Now, at a price of $ 40 per token, it buys out 50% of the token supply. At $ 80, 10% is redeemed, which probably sounds more realistic.

The answer to that question is somewhere out there, and maybe more. The purpose and important reason for the protocol as a whole is that it can compete with others when it comes to APY. The higher the price of the token, the higher the internal APY that borrowers and lenders actually have. This means that it can attract more liquidity, surpass competitors and gain more stability and relevance.

CT: Why did you choose Moonbeam, especially to launch your own protocol?

John R: Well, there are a few basic things. First, the question is why Polkadot is the first and why Polkadot is so much bigger than Solana or other Algorands. There are some very strong points in Polkadot that we really like. Minterest was originally built on Substrate – it was built to host its own parades. But what really happened is time.