The fundamental problem with cake interest rate is external staking reward is much higher than what current borrowing rate is . Which has caused influx of people to exploit the difference, resulting in no liquidity for the asset.
Also, It is to be assumed people who deposit cake at Venus are doing so mainly to borrow against their asset, instead of capturing APR rewards which are much higher at Pancakeswap(PCS) in first place.
Alternative to the proposed cake-interest model-
- Reduce the hard cap on borrowing cake as soon as possible. Ensuring no more liquidity flows out of the platform to people who are borrowing it simply to stake it at PCS.
2.Instead Venus should leverage it’s position and use the deposited liquidity of cake to farm the cake rewards for the Venus platform, with the help of an in house bot. Just as autofarm, beefy does it.
Benefits:-
- Will solve the liquidity problem of depositors.
- Will generate about 60-70% in profits (Interest from staking-Interest paid out to depositors{20% at the moment}) of the deposited liquidity for the platform. By conservatives estimates it can easily run into multi-million dollars profits in a year!
→ Can be used to buy back XVS and burn.
→ Can be used to solve the bad debt issue.
→ Bots cost(2-5%) can be easily paid out from the profits.
→ Insurance can be bought from the profits to counter any black-swan event.
This is just a primary idea, and an alternative to new cake interest model. It allows for better utilization of asset, alongside with more profits for the platform.
It’s time Venus did something different from other lending platforms, and create a new precedent!