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When it comes to the question what is Hipo, answers are given below. Each answer explains this question from a different standpoint. I believe there is an answer to satisfy you.
- As service, Hipo is a fixed rate protocol which enables loan with fixed rate and standardized duration.
- As asset allocation platform, Investors could earn fixed income on Hipo.
- As financial facility, Hipo is a decentralized bond protocol. In financial field, bond is facility of great importance. Hipo is the very protocol where to issue bonds and trade bonds.
- As participant of DeFi ecosystem, Hipo is an infrastructure. Why? Loan is a fundamental function of financial system. Various financial services are derivation of loan, while fixed rate loan enables these financial services and holds the risk in control.
Once you have used or noticed DiFi protocols which providing loan, such as AAVE, Compound, you have already known that loan is significant application on DeFi. However, loans supported by these protocols are mainly variable loans. That is to say, taken a loan on these protocols, the overall interest payments isn’t clear at the beginning of the transaction. Because the interest rate is fluctuating periodically.
You can imagine such a scenario: If you take a short term loan on these protocols, such as 3days or 5days, variable interest rates doesn’t affect that much. While take loans on these protocols for medium or long term refinancing, variable rate could bring about serious problems even causes investment failure due to the increasing of interest rate. Even if no lose in investment, you could miss arbitrage opportunity because cost of investment can not be calculated accurately.
Having done deep research on loan protocols such as AAVE, Compound, you may say that they also provide stable rate loan. Sure, they do provide stable rate loan. While it’s worth noting that, typically, this stable rate is adjustment based on variable rate at a large scale. For instance, variable rate is 5%, stable rate could be 17%. Apparently, this kind of stable rate isn’t market-oriented. It results from artificial setting. More over, this could decrease capital utilization and twist the price.
The core problem Hipo wants to solve is to build a decentralized protocol which enables loan with fixed rate on DeFi ecosystem. At the same time, this rate is achieved automatically through market trading rather than artificial setting. Of course, except for fixed rate loan, there are more utilization scenarios for Hipo. However, I still recognize fixed rate loan for real as significant infrastructure on DeFi.
- Fixed interest rate and fixed income. Interest is fixed once your borrowing or lending is completed. You could reinvest with a predictable amount of loan or expect to get fixed income as planned schedule.
- Appropriate interest rate. Interest is formed through AMM. Interest is the margin between bond face value and bond price at issuance.
- Yield farming with LPs Tokens. You could pledge ETH/USDC, ETH/DAI, USDT/ETH and borrow corresponding currency like ETH, USDC, DAI or USDT. You could either reinvest and leverage your passive yields or inject liquidity to other protocols to dig profits.
- Clear time period. There are 6 term lengths to choose from 5 days, 10 days, 15 days, 30 days, 45 days and 60 days.
Behind the scenes, INT Token is a media used in trading to calculate the price of interest under certain market condition. It doesn’t have value outside Hipo and couldn’t be withdrawn. Each Interest Token signifies one share of bond should trade.
Well, how does INT Token work in bond trading process?
- If you were to purchase bond, that is to say, you are a lender. Hipo would mint INT Tokens and give them to you. And then you sell INT Tokens on the bond trading market.
- If you were to sell bond, which means you are a borrower. At the point of trading, you need to purchase INT Token with the same amount of the shares of bond.