Fringe Finance Review 2023: Seamless Integration of All Altcoins Into the DeFi Ecosystem!
With a wide variety of services ranging from borrowing, lending, and staking to yield farming and insurance, the decentralized finance market offers a permissionless, democratic, and accessible alternative to traditional finance solutions.
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Still, most DeFi protocols are centered around most established cryptocurrencies with large market capitalizations, with minimal support for smaller, less-known altcoins. Although about $50 billion is locked up in these assets, their holders have limited opportunities to deploy their capital to the decentralized finance ecosystem.
Fringe Finance Summary
|Native Token||FRIN Token|
|Supported Fiat Currencies||USD|
|Minimum Deposit||No Minimum Deposit|
|Customer Support||Social Channels|
Today, we will review Fringe Finance: an upcoming DeFi protocol that aims to solve the challenges of low-cap altcoin holders by offering them a compound solution of borrowing, lending, and savings. However, read our Fringe Finance review further to know more about it.
What is Fringe Finance?
Founded in 2020 as Bonded Finance, Fringe Finance is a DeFi lending protocol that enables holders to use less-known and small-cap altcoins as collateral to borrow whitelisted stablecoins.
While this allows altcoin holders to put their digital asset holdings to work in the DeFi space, lenders can leverage Fringe to generate passive income by lending their stablecoins to borrowers.
Market participants can also earn crypto on Fringe Finance via temporary opportunities for yield farmers and by staking lender tokens (fTokens), liquidity provider tokens, and the native FRIN token. At the same time, lesser-known altcoin projects can leverage Fringe Finance to list their tokens on the platform, increasing their liquidity and availability within the DeFi sector.
Digital assets with lower market capitalizations generally involve increased risks, which are mostly related to high volatility, limited liquidity, and a lack of extensive history. Fringe Finance has a whitelisting process to filter out low-quality and dubious coins, and the lending crypto platform’s Reserve Factor mechanism minimizes the risks of borrower defaults and liquidation flaws for lenders.
Moreover, the project regularly audits its platform and smart contracts through independent auditing firms to ensure the safety of its users.
When Will Fringe Finance Launch?
Fringe Finance platform is already launched but before in May, the project initiated the progressive deployment of the Primary Lending Platform’s component to the Ethereum mainnet. Recently, after completing two independent audits and resolving all related essential issues, the team has released the final smart contracts for its flagship lending facility.
Fringe’s v1 will introduce the project’s Primary Lending Platform – a flagship solution that offers to borrow against altcoin collateral and lending for whitelisted stablecoins. Farmers will get access to additional earning opportunities within a temporary yield farming program designed to raise awareness, attract liquidity, and expand the project’s user base.
Additional facilities, such as the USB Stablecoin Platform and the $FRIN Staking and Rewards Platform, will be released at a later date. Features like cross-chain collateralization, fixed-interest loans, a decentralized UI, DeFi insurance, and community governance via the Fringe Finance DAO will also be included in future protocol upgrades.
How Does Fringe Finance Work?
Let’s dive a bit deeper into the project’s most important facilities to understand how Fringe Finance works, starting with the Primary Lending Platform.
Primary Lending Platform
On the Primary Lending Platform, lenders deposit whitelisted stablecoins. In exchange, the platform mints a proportional amount of fTokens and assigns it to the lenders.
Lenders can redeem their fTokens at any time (or optionally sell them on the open market) to receive their original deposit along with interest generated via stablecoin lending during the period.
Lines of Credit and PIXT Tokens
Stablecoin borrowers deposit their altcoins as collateral into the Fringe Finance platform. After this, the facility will mint Primary Index Tokens (PIXT) for the borrower.
As a non-transferable token pegged to $1, PIXT represents the borrowing capacity of the user (in USD) arising from his deposited collateral. The maximum amount a user can borrow is calculated by multiplying the value of the collateral by its loan-to-value ratio or LVR (also called LTV).
Borrowers can utilize their PIXT to take out loans in whitelisted stablecoins held in the Primary Capital Pool. Upon repayment of any loan amount, the protocol will return the proportional amount of PIXT tokens to borrowers, which they can use to redeem their deposited collateral (after redemption, the platform burns the borrowers’ PIXT).
If the value of borrowers’ collateral falls below the Liquidation Threshold, it will trigger a liquidation event. When that happens, liquidators will step in to repay the loan and receive the position’s collateral assets and a liquid fee in exchange.
Managing Risks and Coin Whitelisting
To manage risks efficiently, Fringe Finance leverages external oracles to determine the risk profile of each collateral asset and assign it a tier (between Tier 0 and Tier 2), which will influence its LVR. Higher levels generally include safer and more established coins (e.g., wBTC, ETH), while lower ranks involve riskier and less-known altcoins.
To whitelist cryptocurrencies on the Primary Lending Platform, projects must submit an application to the Fringe Admin that will accept or reject it. Upon approval, the Admin will assign a Tier for the token and configure it for inclusion on the Fringe Finance platform.
In the future, the project will completely decentralize the governance process with a DAO community governed by $FRIN stakers. When that occurs, the Admin actor will be replaced by DAO members responsible for whitelisting tokens.
USB Stablecoin Platform
The USB Stablecoin Platform will be powered by the decentralized, USD-pegged, and crypto asset-backed $USB stablecoin. Collateral on the USB Stablecoin Platform will work similarly to the Primary Lending Platform. Here, users deposit altcoin collateral into a USB Collateral Safe they own. In exchange, the facility will mint USB Index Tokens (UIXT) representing the minter’s Line of Credit (LOC) on the USB Stablecoin Platform.
Like the Primary Lending Platform, the USB Stablecoin Platform will use its set of external oracles to assign a risk tier for the minters’ assets and, thus, determine their LOC. However, while the prior facility whitelisted only Tier 0, Tier 1, and Tier 2 instruments for stablecoin loans, the minters can use instruments categorized between Tier 0 and Tier 4 to access a Line of Credit in $USB on the latter platform.
Based on their LOC, minters can lock their UIXT to mint USB stablecoins to access extra capital. Upon repayment, the platform automatically burns the minter’s $USB and unlocks his UIXT based on the amount repaid.
Paid out to $USB stakers, the USB Stablecoin Platform charges a stability fee for the minters, representing the cost to mint and hold $USB, to maintain the USD peg of the cryptocurrency. Liquidations can also occur here, with liquidators repaying the $USB on minters’ behalf in exchange for a Liquidation Fee and the minter’s collateral assets.
What Solutions Do Fringe Finance Offer?
After the v1’s mainnet launch, the project will gradually introduce new features, facilities, and components to expand its ecosystem.
In the future, crypto users will be able to access the following core solutions at Fringe Finance:-
Primary Lending Platform
Fringe’s flagship facility will be released as part of its v1 platform, where lenders earn interest by lending whitelisted stablecoins to borrowers who take a loan against their altcoin collateral.
USB Stablecoin Platform
After the launch of Fringe’s USB Stablecoin Platform, minters will be able to deposit altcoins and use them to mint the decentralized USB stablecoin. Simultaneously, holders will be able to leverage this facility to earn interest by staking $USB. In terms of design, $USB resembles Compound Finance’s DAI stablecoin with some key differences.
Both assets operate in a decentralized manner, follow USD’s price, and are fully backed via crypto collateral held in smart contracts. On the other hand, while MakerDAO only supports a little more than 20 whitelisted digital assets for DAI, users can utilize a larger variety of cryptocurrencies as collateral to mint $USB on the USB Stablecoin Platform. Also, Fringe Finance will distribute platform fees as rewards for $FRIN stakers.
FRIN Staking and Rewards Platform
Users will be able to stake $FRIN and earn a share of the fees collected by the Fringe Finance Platform. Rewards will be distributed in proportion to the user’s contribution to the FRIN Staking Pool.
Yield Farming Program
A limited-time campaign to help kickstart Fringe Finance’s adoption via yield farming incentives, where the project will pay FRIN tokens as farming rewards to lenders for staking fTokens. fTokens are ERC-20 tokens representing lenders’ deposited stablecoin holdings, entitling holders to an increasing quantity of the underlying asset (as interest is accrued over time). At the same time, $USB stakers can receive $FRIN in addition to earning interest on their lent stablecoins.
Fringe Finance will offer insurance features for borrowers, enabling them to protect their collateral against asset volatility. As a result, they will be able to access a higher loan-to-value ratio (LVR) to minimize losses due to potential liquidation.
Who Are the Main Participants in Fringe Finance’s Ecosystem?
Based on the project’s whitepaper, we have listed the main participants and their roles in Fringe Finance’s upcoming DeFi lending ecosystem below:-
|Lender||Institutional investors, high-net-worth individuals, and retail crypto investors can access more attractive interest rates than in Traditional Finance by lending out whitelisted stablecoins on the Primary Lending Platform.|
|Borrower/Minter||Holders of smaller-cap altcoins can put their coins to work by using them as collateral to borrow stablecoins on the Primary Lending Platform or mint $USB on the USB Stablecoin Platform.|
|Altcoin Project||Enjoying the same benefits as borrowers, altcoin projects can deploy their Treasuries to Fringe. By borrowing stablecoins, they can use their loans to cover project expenditures or invest in new initiatives without selling their tokens.|
|Staker||Crypto holders can stake the native FRIN token to earn a portion of the platform’s fees as rewards and participate in community governance via the Fringe DAO. Users can also stake fTokens and $USB to accumulate yield farming rewards and receive interest on their digital assets.|
|Liquidator||Liquidators help keep Fringe financially stable by liquidating all positions below minimum collateralization levels. Upon repaying borrowers’ debt, liquidators receive a share of the liquidated collateral assets at a generous discount, which they can sell on the open market for a profit.|
What Should I Know About the FRIN Token?
$FRIN is Fringe Finance’s native cryptocurrency that powers its DeFi lending ecosystem. In addition to investing in the project, users can leverage the token to access the following benefits:-
- Staking $FRIN to receive native coin rewards.
- Participating in community governance and voting on DAO proposals by staking $FRIN.
- Earning yield farming rewards in $FRIN by staking fTokens and $USB (in addition to $USB interest rewards).
How Can Users Earn on Fringe Finance?
Fringe Finance offers users a wide variety of opportunities to generate revenue on the platform. Ecosystem participants leverage the lending protocol to earn:-
- A variable APY by depositing stablecoins to the Primary Lending Platform (the project will also introduce fixed APYs in the future).
- $FRIN rewards for staking the FRIN token.
- $USB rewards for staking the USB stablecoin.
- Limited-time $FRIN yield farming rewards for staking fTokens and $USB.
- Liquidators receive the collateral of borrowers and a liquidator fee after successful liquidation and the repayment of the loan.
Fringe Finance Review: Pros and Cons
As we have explored the essentials of Fringe Finance, it’s time to see the advantages and disadvantages of the DeFi lending platform.
|Fringe solves an important market pain point by enabling the collateralization of smaller-cap altcoins for DeFi loans.||The platform is still under development, with many of its features scheduled for release months after the Fringe V1 launch.|
|Market participants have numerous opportunities to earn via lending, staking, liquidation, and yield farming.||The project has passionate followers, but the Fringe community is rather small, with much room to grow.|
|The Reserve Pool minimizes the risks of borrower default and liquidation errors to safeguard lenders.||While there are proper safeguards for lenders, borrowers face increased risks of liquidation due to the high volatility of small-cap altcoins (until the project releases its insurance solution).|
|The Primary Lending Platform has undergone multiple rounds of audits by prominent third-party auditor firms.|
|Fringe Finance has struck numerous partnerships with leading digital asset projects and received $2.25 million VC funding.|
What Fees Will Fringe Finance Be Charging?
As the project is still under development, its creators have yet to release the actual extent of fees they are planning to charge on the platform.
That said, the project will impose small, percentage-based fees in the case of the following events:-
- Primary Capital Pool deposits and withdrawals.
- Primary Capital Pool borrowing and loan repayment.
- Interest fees for lending and borrowing on the Primary Lending Platform.
- $USB minting and repayment.
- Stability fee on open minter positions.
- USB Staking Pool deposits and withdrawals.
- $USB staking interest withdrawals.
In addition to the above, liquidation will involve a stablecoin-based cost. Each approved token project has to negotiate a custom fee with the Fringe Finance DAO (or the Platform Admin before the transition to community governance) to list its altcoin.
While fees are paid in borrowed stablecoins on the Primary Lending Platform, $USB is used to cover platform costs on the USB Stablecoin Platform.
How Secure Is Fringe Finance?
After reviewing the platform and the project’s documentation, it is safe to conclude that Fringe Finance considers the security of its users its top priority.
To safeguard ecosystem participants and ensure that the platform remains resilient against external threats, the project regularly audits its smart contracts by prominent third-party auditor firms.
On March 10, the project shared an update with its community regarding the progress of audits. In partnership with the CyberUnit and HashEx auditing firms, the experts have completed two independent audits on the Primary Lending Platform. They identified a number of mistakes the Fringe team has since fixed and resubmitted to the two firms for review (you can find the audits’ results here). At the same time, the project’s developers reworked some of the Primary Lending Platform’s components to enhance its stability and security.
With all essential issues settled, the project initiated the progressive deployment of its smart contracts and other components of the Primary Lending Platform to the Ethereum mainnet.
Additional Security Measures
Besides the thorough security audits, Fringe Finance will offer additional measures to safeguard its users and their funds. The Reserve Pool is one of the key highlights here.
Funded via a percentage-based fee imposed on borrowers’ interest payments for each token supported by the platform, the Reserve Pool is designed to protect lenders against borrower defaults and liquidation malfunction. This fee is determined by the Reserve Factor, a parameter that controls how much of the interest for a specific asset is routed to its Reserve Pool.
In the future, Fringe will roll out its decentralized insurance solution in partnership with Union Finance, empowering borrowers with the ability to protect their positions against their altcoin collateral’s volatility. As a result, while they can leverage the solution to minimize the chances of getting liquidated, borrowers will be able to access more capital via stablecoin loans by insuring their digital assets.
What Can You Tell About Fringe Finance’s Investors & Partnerships?
In addition to HashEx, CyberUnit, and Union Finance, Fringe Finance has struck partnerships with prominent firms within the DeFi and broader cryptocurrency spaces. Some of the key highlights include:-
- Origin Protocol
- Glitch Finance
Furthermore, Fringe Finance raised $2.25 million in October 2020 via a sold-out private sale round led by the VC firm Black Edge Capital and the crypto fund Spark Digital Capital.
Fringe Finance Review: The Verdict
Fringe Finance is a unique DeFi lending project with a solid concept and the potential to provide crypto users tremendous value by solving a crucial pain point of the decentralized finance sector. By allowing the usage of lower-cap altcoins as collateral on the platform, the owners of such digital assets can enter the DeFi space, access extra capital, and put their coins to work instead of simply leaving them untouched inside their wallets.
At the same time, lenders, stakers, liquidators, and farmers can choose from a wide variety of earning opportunities within the Fringe ecosystem to generate a passive income.
While Fringe Finance has partnered with a large number of crypto projects, its creators have put the key focus on platform security and stability via the Reserve Factor mechanism, regular audits by independent firms, and the future release of the DeFi insurance facility.
The first release of the non-custodial Primary Lending Platform was started on the Ethereum Mainnet for public access on June 24th, at 11:00 PM GMT. Now lenders may deposit $USDC to the Primary Lending Platform to earn interest, while borrowers may deposit their whitelisted tokens as collateral to take out $USDC loans.