The Minterest protocol applies sophisticated smart contracts to enable a variety of token assets to be supplied or borrowed by users. The protocol dynamically computes interest rates in real time, based on the proportions of supplied and borrowed assets.
At its core, the Minterest protocol creates token markets with pools of varying token assets. Interest rates are algorithmically determined and managed via the interplay of lender supply and borrowing demand.
Unlike direct P2P lending, suppliers and borrowers of a token asset interact with the protocol’s underlying asset pools, earning and paying dynamic interest based on demand and supply dynamics. This process bears similarities to traditional forex markets, but without requiring a trusted third-party mediator.
Given the decentralised nature of the protocol, each token market contains a public, transparent, and non-violable ledger which records each transaction and its applicable interest rates.
The Minterest protocol stands out from other lending protocols through innovations like its auto-liquidation process. The solvency of under-collateralized borrower positions is managed by the protocol itself, which acts as a liquidator. This ensures the solvency of each underlying asset pool while liquidation fees are captured by the protocol.
To incentivize and reward user participation, the protocol issues a governance token (MNT). MNT token holders may utilise MNT to vote on governance proposals, and so determine future developments of the protocol and its ongoing operational parameters. Long term governance participation is rewarded. MNT voting rights are dynamically weighted, and determined by how long users participate in governance processes.