Key takeaways
- Xend Finance targets credit unions and cooperatives with over 2.2 trillion dollars in global assets by providing access to stable currency yields and DeFi rewards.
- The platform aggregates multiple lending protocols including Compound, Aave, and Curve to automatically route funds to the highest-yielding opportunities for users.
- Xend is building on Binance Smart Chain to address Ethereum's high transaction fees and network congestion, making DeFi accessible to financially underserved populations.
- Credit unions and cooperatives in developing economies like Nigeria operate informally and lack institutional financial support, creating an underserved market for blockchain solutions.
- The protocol passes all interest earnings directly to users without taking a cut, allowing yields to grow without platform-imposed limits or restrictions.
Serving the financially underserved
Ashton Addison: What is Xend Finance, and what problem is it solving?▶ 00:22
Ugo Aronu: Xend Finance is a DeFi platform for cooperatives and credit unions. It lets them earn interest in stable currencies, and earn XEND tokens as rewards when they save or perform operations on the protocol. We aggregate different lending protocols to give these groups very high yields. Our audience is people who are not crypto savvy, and may not even understand it, but who need the value it offers. They are financially underserved and live in unstable economies. Many have faced multiple devaluations, like where I come from in Nigeria. These are people who need their assets protected.
Ashton: Why did you choose cooperatives and credit unions as your starting point?▶ 02:03
Ugo: I'm part of a credit union myself, and so are my mom and a lot of people I know in Nigeria. It's a market that a lot of blockchain and crypto projects have never really focused on. People come together in these unions to save, to take loans, to start projects, to support their families and to pay their kids' school fees. But most of them get little support from financial institutions, and many aren't even registered. If they keep operating like that, they will phase out with time. This is why DeFi exists: to take people where they are and give them access to a global money market without banks or any middleman.
You can't expect them to spend $30 to process a $10 transaction.
Chasing yield while keeping fees low
Ashton: Which lending protocols do you aggregate, and how do you move funds between them?▶ 05:21
Ugo: There are several lending protocols on Ethereum, such as Compound, dYdX and mStable. We look at all of them, find the one with the best APY, and move funds from the current one to it, so our users get the best payouts. To avoid reinventing the wheel, we leverage Yearn Finance, which already does this for some of these protocols. For the protocols it doesn't support, users can switch between them themselves. Over time we're adding partnerships with more protocols that offer good APY, so users are always getting a good yield. We don't skim off some of the interest and keep it. Everything is open, and whatever it earns goes back to the users.
Ashton: Ethereum fees make small transactions impractical. Why are you building on Binance Smart Chain?▶ 07:18
Ugo: We're building on Binance Smart Chain, and our testnet is live there. We built the first version of our system on Ethereum, but Ethereum has problems like very high fees and network congestion that delay transactions. So we're building version two on Binance Smart Chain. It has cross-chain functionality, so it's interoperable across multiple blockchains. Fees are extremely low, and transactions are fast and secure. That serves the people we're targeting in Africa, Southeast Asia and other regions, who have very small amounts of money. You can't expect them to spend $30 to process a $10 transaction. Because of that interoperability, it also connects seamlessly with the Ethereum blockchain.
The XEND token and the road ahead
Ashton: What does the XEND token do, and does it make the ecosystem sustainable?▶ 10:54
Ugo: The first function is governance. Because the system is decentralized, people can make proposals and vote on actions or parameter changes, and the contracts that implement those changes are put in place. Second, people can stake or lock up tokens to earn more tokens in future. Third is rewards. Instead of giving tokens away for free, we encourage people to perform operations on the protocol and earn tokens. We have multiple savings strategies, for example, and when you keep funds locked on the protocol for a certain period, you earn a fraction of tokens. How it works is in the light paper, and the code will be open source so people can read it. We're here for the long run, and we want people to be here for the long run too.
Ashton: What are the next steps for Xend Finance, and what is on the roadmap for the first half of 2021?▶ 13:37
Ugo: Our roadmap has the TGE in Q1 2021. We're also building an SDK, with a test version due in the first or second week of March. It will let traditional applications plug in without worrying about the complexity of the blockchain. We intend to capture up to ten percent of the credit union market in the next five to ten years. It's a long-term play. We also just announced an ambassador program, so that people represent us in different regions of the world. We received thousands of applications in less than two days.
take people where they are and give them access to a global money market without banks or any middleman.
This interview has been edited for length and clarity. Recorded February 2021.
