In a press release released today, CREAM Finance announced new functionality for (and, by proxy, an unofficial relaunch of) Iron Bank, the protocol-to-protocol lending platform designed for flash and sub-lending. guarantee.
CREAM, which founder Leo Cheng describes as ‘the yolo-est Compound’, is a money market designed to hedge ‘underserved’ assets and enable greater capital efficiency for powerful users of decentralized finance (DeFi) , listing assets such as Yearn Vault Tokens and Liquidity Pool Tokens.
“We are adding assets that people want to have, but others may be afraid,” Cheng said.
Iron Bank is, in many ways, an extreme implementation of this philosophy. The protocol, which allows for sub-guaranteed protocol-to-protocol loans, is supposed to serve as the industry’s DeFi equivalent of $ 10 trillion corporate debt, allowing the principle of “corporate credit” to work. between whitelisted protocols.
Some are criticizing the idea conceptually – under-secured loans are still an exotic niche in DeFi – and those critics have won a victory round following the Alpha Homura hack that led to an Iron Bank feat. This despite the Bank of Iron’s low liability in vulnerability and the fact that the Iron Bank continued to operate quietly across several Yearn vaults for months – but not on the scale it is capable of.
Now, with a new feature and Alpha Homura gearing up for a relaunch of its V2, Iron Bank is set to return to the limelight – and it may be about to do so in a major way.
Cheng speaks with a touch of pride about CREAM’s status as a member of “DeFi Voltron” – the set of high-level protocols that “merged” or were “acquired” by the Yearn ecosystem at the end of the year. ‘last year.
What started as an informal conversation about DeFi Maestro Andre Cronje’s involvement in the project quickly turned into a team-level integration between Yearn and CREAM, Cheng says. To this day, the practicalities of integrations / mergers / collaborations between protocols remain largely a mystery to outsiders, and as a recent break with Cover demonstrated, “mergers” are not always set in stone.
In Cheng’s view, at present the various drafts / protocols can be considered the pre-constitutional United States: separate entities at the state level are bound by the Articles of Confederation, and each takes advantage of its own currency.
He hinted that one day there might be a “possibility” that all the tokens under the Yearn banner merge to create a single, unified token.
“I’m not saying that’s where we’re headed, but I think it’s a long-term possibility – I don’t know.
The purpose of CREAM in the Yearn DeFi Voltron machine is to be the all-in-one lending solution, and as Iron Bank proves, lending is a broad spectrum. While Iron Bank may be conceptually difficult to grasp, what it ultimately creates is simple capital efficiency, Cheng says.
“Look at the anatomy of a flash loan,” Cheng says.
A flash loan can interact with multiple protocols at once and trade between multiple assets, but Ethereum “doesn’t really care, and it doesn’t quite see the boundaries with smart contract projects.” They jump between protocols and assets in a flash, thanks to open liquidity.
If this view without borders is taken to its extreme, “any asset of a user on Ethereum, he should be able to take advantage of it to borrow anything elsewhere”, and if liquidity can be obtained through arbitrage via a loan flash, that alone counts as a form of asset – at least in an ideal and capital efficient future.
Iron Bank brings this principle of open liquidity to protocol-to-protocol relationships. Cheng says CREAM plans to work with projects like Saffron Finance, which develop risk-based sliced debt. If users think Iron Bank’s debt is riskier (especially at the higher end of its possible leverage, up to 95x), Saffron has the infrastructure to back it up.
In addition, Cheng says CREAM is working to expand the horizons of liquidity even to other chains.
Capital efficiency squared
If Ethereum doesn’t care about the boundaries between assets and protocols, then why can’t the same liquid efficiency logic apply to all chains compatible with the Ethereum VM? This would allow loans, sub-guaranteed loans, and flash loans across multiple ecosystems, thus boosting liquidity across the space.
“Inter-chain loans. It’s the thing where people stop and say, “Wait, wait, what?” Cheng laughed. “It’s something we’re prototyping right now. It’s not something on the roadmap, blah blah, we’re prototyping it right now.
In its initial form, users could deposit assets on CREAM V1 and unblock a loan on another channel, allowing them to access an alternative ecosystem while keeping their assets on Ethereum. The more exotic types of loans will come later.
The issues of creating ideal and safe capital efficiency in all EMV-enabled chains are significant, but they are currently being resolved, Cheng said. Ultimately, the goal is to allow Yearn vaults to move from chain to channel via a “generalized wrapper,” which could extend the tools available to vault strategists by orders of magnitude.
It is a vision of open liquidity and capital efficiency made possible, in part, by an open development ethic through DeFi Voltron:
“We have so many open channels. If you had opened my telegram … so many working groups. I think this story is underestimated. The whole idea of this merger is so powerful – you can jump into those channels at any time, wonder anything. It allows us to move so fast.