Lends x Club Dinero AMA Recap

A recap of the Ask Me Anything(AMA) session between Lends Protocol and the Club Dinero community led by Steven Toast and KantGPT

Steven Toast: So, let’s start with an overview of what Lends is, what could you tell our community about what lends is in a short overview?

Lends Protocol: Lends is Thorchain’s Flagship Lending App, we offer an all-in-one decentralized financial platform that includes lending, borrowing, swapping, saving and, in the future, peer-to-peer order books.

Steven Toast: That’s awesome, Thorchain has gone through some big growth in the last several months and a big part of it was the introduction of lending, which Lends is pioneering the way. What is it about Thorchain lending that is different from what I could do on existing ethereum lending platforms for example?

Lends Protocol: The key innovations of Thorchain’s lending are:

• 0% interest rates — Borrowing is free, with no accumulating interest costs
• No liquidations — Loans can be held indefinitely without margin calls
• Overcollateralization model — More collateral locked than debt issued improves system stability
• Debt is paid by burning RUNE — Aligns network incentives and attracts additional collateral
• No repayment deadlines — Borrowers can hold loans as long as desired

In contrast to platforms like Aave or Compound, Lends offers a simpler, more flexible, and less risky borrowing experience through its unique tokenomic design. This aims to boost TVL and collateralization ratio for greater network security.

Steven Toast: These are all incredible features honestly. And naturally, it incorporates native Bitcoin into the lending possibilities too right?

Lends Protocol: Yes, that’s correct. THORFi Lending incorporates native Bitcoin into the borrowing options. Users can also supply BTC as collateral, which gets swapped to RUNE automatically to provide backing for the loan. Then borrowers can take out a loan in Bitcoin specifically. This allows users to go long on BTC without needing to sell their current holdings. Borrowing BTC rather than stablecoins enables leverage for another Bitcoin position.

Steven Toast: How is it even possible to have 0% borrowing fees, and to have no liquidations? Can you explain these mechanisms?

Lends Protocol: Lends can offer 0% interest rates and no liquidations through an innovative model based on over-collateralization and burning of assets rather than interest accrual. Here is how it works:

• 0% Interest Rates — Instead of charging interest on loans, the difference in dollar value between the collateral deposited and the stablecoins borrowed is burned. This “interest” is paid through the deflation of RUNE, aligning network incentives.
• Overcollateralization — Loans are overcollateralized, meaning more collateral value is locked than debt issued. Over time, the collateralization ratio increases as debt gets paid down by burning RUNE. This makes the system more secure.
• No Liquidations — Since collateral ratios only improve over time, there is no risk of positions being undercollateralized. Hence, no liquidations are required. Users can hold loans indefinitely without margin calls.
• Burning Mechanism — When debt is repaid by users, an equivalent dollar value of RUNE is burnt. This debt repayment reduces supply, while the collateral still backs the reduced debt. Thus the collateralization ratio increases over time.

The mechanism of over-collateralization and burning makes it viable to offer 0% rates and no liquidations. Aligning network incentives also encourages stability and growth of the ecosystem.

Steven Toast: And that’s going to end up burning massive amounts of $RUNE isn’t it?

Lends Protocol: Yes, you’re right. The lending mechanism in THORFi is designed to burn significant amounts of RUNE over time. Here is why:

1. All debt repayments burn an equal dollar value of RUNE. As loans get repaid, the debt goes down while the collateral remains, improving the collateralization ratio. This burn directly reduces RUNE supply.
2. Opening and closing loans also incur slip-based fees that burn RUNE. More lending activity leads to more burn.
3. Higher collateralization attracts more capital into the system. This increases pool liquidity, swap volume, and fees generated — of which a large portion is used to buy back and burn RUNE.
4. Attracting external collateral like BTC and ETH requires swapping it to RUNE, burning RUNE in the process. More lending collateral leads to more burn.

So in effect, the lending system has been architected to align network incentives around burning RUNE. This has a deflationary effect on the token supply. Lending utilizes every mechanism — debt repayments, swap fees, buybacks etc. — to burn massive amounts of RUNE.

Steven Toast: How long has the platform been live and available to use? Do you have promising metrics of usage?

Lends Protocol: Lending has been live since late last year. On the Bitcoin lending pool, there is currently $4.83 million in outstanding debt backed by 433 worth of BTC collateral — indicating healthy over-collateralization. Similarly, on the Ethereum lending market, $1.3 million debt issued so far with 1.86K ETH coins locked as collateral

Steven Toast: So the product is live and functioning properly and already you’ve got usage to report about. What comes next for Lends? Do you have any further features being built which will be added to the platform? Or is this close to the final version of what will exist?

Lends Protocol: We have a comprehensive roadmap ahead of us, which is primarily focused on delivering value and innovation to our users.

• First and foremost, we are revamping our platform with a new interface designed for an enhanced user experience. This update is designed to make our services more intuitive and accessible so that everyone, from beginners to experts in DeFi, can effectively use our offerings.
• Next, we focus on liquidity. We understand that robust liquidity is the primary backbone of any successful DeFi protocol, including THORChain. Soon you will have the ability to add liquidity to the THORChain network through our protocol, ensuring that our platform remains fluid, efficient and ready to meet the needs of our users.
• Another exciting milestone on our roadmap is the upcoming IDO (Initial DEX Offering). This is an important step for us as it will not only raise funds to support our initiatives but also increase our visibility in the market and expand our community of supporters. We are diligently preparing for a smooth and successful launch.
• Finally, one of our most anticipated updates is the launch of our P2P (peer-to-peer) lending module. This is where we begin to innovate in the DeFi lending space. Our P2P lending module enables direct lending between users and offers greater flexibility, competitive rates and a transparent, secure environment for borrowing and lending. This is where TradFi (Traditional FInance) meets DeFi innovation, and we can’t wait for our users to experience it.

Steven Toast: I’m not sure there exists a p2p lending model in the entire space currently, am I right?

Lends Protocol: There are some P2P lending models, but they do not use order books so it limits price discovery, introduces shared risk and creates inefficient spreads.

Steven Toast: Many of us who already followed you for many months will have seen the anticipation that’s been brewing for the LENDS launch. Just about every KOL of good repute is excited about it too. What can you tell us about timelines concerning the token launch? And is there anything else you want to share about the token besides the expected launch date?

Lends Protocol: Yes of course. As for IDO details, most people have seen that we are going to launch at Ape Terminal, so I would keep an eye on all their social channels for more information. We are also waiting for more information to announce an official date, so keep our social channels in your notifications so you don’t miss anything about our upcoming IDO. The price will be set at $0.025, with an FDV of $12.5m — I believe the max allocation is $1k per user and they are using a lottery system, but I would double confirm on the Ape Terminal site itself. In terms of Airdrops, we have some things in mind but we are not 100% sure about the legality of this yet so we still need to consult with our legal team before announcing this.

Steven Toast: That’s a very fair FDV for an IDO as anticipated as Lends. Shows you care about all the tiers of investors and not just the big ones. Is it possible for any of our community to participate in the IDO at Ape Terminal? What are the requirements?

Lends Protocol: All information about participation can be found here at https://launch.apeterminal.io/faq

Steven Toast: You mentioned something about an airdrop, would that be something you think will be like a points system for usage of the platform? Or are you thinking more of airdrop to users of competitors etc..? Or what do you have in mind for that? I’m sure our community would like to jump on that when it’s available

Lends Protocol: In terms of Airdrops, we have some things in mind but we are not 100% sure about the legality of this yet so we still need to consult with our legal team before announcing this.

**I think we will now unmute the channel to give community folks a chance to throw out any questions they may have had which weren’t answered, and we’ll give it a few minutes if there’s nothing we can finish the AMA.**

Dragon Mother (Community member): So the difference between the collateralization and the loan is burned? So when the user repays the loan does the full collateral get returned or just the value of the borrowed amount?

Lends Protocol: Good question! When a user repays their loan on THORFi Lending, only the dollar value equivalent of the borrowed amount gets returned as collateral. The remaining collateral stays locked.

For example:

• The user deposits $1000 worth of BTC as collateral and takes out a $500 loan in stablecoins based on a 50% collateralization ratio. To repay, the user pays back $500 in coins. This burns $500 worth of RUNE from the ecosystem and only $500 worth of BTC collateral gets unlocked and returned to the user. The other $500 in BTC remains locked as collateral

So over time as loans get repaid, the dollar value of collateral remains constant while debt decreases. This improves the collateralization ratio — thereby increasing over-collateralization and system security. The locked collateral is an incentive for borrowers to repay their loans so they can redeem their entire deposits. It is also the reason why lenders face minimal default risk due to high CR.

Dragon Mother (Community Member): Ok thanks, so hence no payback date. I could keep the loan indefinitely and over time say I bought/borrowed ETH, the % collateralization would be reducing as ETH moons… even over years. if I have that right?

Lends Protocol: Correct 🙂 So you could borrow ETH today, hold it for years as collateral value locks in USD terms, and repay only whenever you want to take profits without any stress or forced timelines.

D (Community Member): What happens with loan defaults? If people don’t pay back their debts?

Lends Protocol: Loans may default, but the collateral covering them retains significant value to absorb losses. Assets like BTC and ETH can be easily liquidated by the protocol to make lenders whole without any losses. Borrowing power is also throttled to prevent overleveraging.

Marko (Community Member): Is the whole team Doxxed?

Lends Protocol: The lends team is not doxxed, just as Thorchain’s team is not doxxed

Dragon mother (Community Member): So the key here is that liquidation spirals cannot be started right?

Lends Protocol: Absolutely, you have highlighted the most important benefit — THORFi Lending is structurally immune to liquidation spirals and catastrophic crashes. This sets it apart from traditional lending protocols. Since loans have no liquidations or margin calls to begin with, there is no concept of a “liquidation cascade”. Even if assets drop 50–60% in a bear market, undercollateralized borrowers do not get liquidated. Thus massive, correlated liquidations will not happen even in extreme black swan events. Without this systemic vulnerability, the lending protocol remains resilient in all market conditions rather than blowing up. Also, the constant burning of RUNE in debt repayments improves collateralization ratios over time. So black swans can’t propagate further through undercollateralized loans. By removing liquidations and improving CRs organically, THORFi structurally breaks the mechanisms that lead to liquidation spirals. This prevents cascading crashes no matter how severe the external shocks

KantGPT: Perhaps you can tell something about your Roadmap highlighting integration with Arbitrum mainnet. It promises faster transactions etc. Can you highlight the user benefits and the positive implications for overall transaction efficiency? And are you considering other ecosystems?

Lends Protocol: We don’t want to fragment liquidity too much in the beginning, we can always add more ecosystems/chains later, Arbitrum has a very big DeFi user base and very low tx fees which are ideal for order books.

HP(Community member): Is there any benefit to joining the waiting list for the token launch when the launch itself will be an IDO at Ape Terminal?

Lends Protocol: We have a surprise for that, but we can’t tell too much about that right now.

D (Community Member): Only question left — Wen Moon

Lends Protocol: Soon!

Steven Toast: Thank you for your time, I see we are almost going on for an hour already

Lends Protocol: Likewise!!! Thanks, Club Dinero, for the invitation, it was a pleasure and we look forward to the launch