With Sablier’s money streaming technology, Mainframe hopes to start tokenized debt markets that are similar to digital bonds.
Mainframe may have bought Sablier for this reason. Sablier was built on Ethereum blockchain to make financial transactions faster.
Getting crypto loans with small collateral
One thing about cryptocurrency loans is that it revolves around speculation, expenses, and circulation of money. Many issuers require much higher collaterals for the amount being borrowed but a lot of borrowers still don’t know much about this.
The announcement said:
“Crypto-backed loans often require collateralization rations of 150% or higher, and borrowers don’t fully actualize their spending power. With Mainframe’s novel Guarantor Pools providing protection for collateral vaults, collateralization ratios can be much lower without increasing risk to the system.”
With Mainframe, borrowers can be without debts soon so that they can buy items with their money. To borrow, one would have to deposit collateral and mint tokens while lenders buy them at a discount so that at the right time, they can resell it at a higher amount.
Borrowers can choose their guarantors from fellow Mainframe users. The guarantors contribute assets so that something reasonable is submitted as collateral. They are rewarded by the system with the capacity to buy the collateral at a reduced price assuming the borrower cannot supply the collateral in the long run.
Mainframe has put this structure in place so that a similar “Black Thursday” that happened at MakerDAO’s does not repeat itself.
The CEO of Mainframe, Doug Leonard stated this:
“Think of debt markets like the lifeblood of an economy; you want to keep that blood pumping and flowing.” He added: “Debt obligations create temporary clots and overcollateralization restricts efficient monetary flow. Mainframe allows lenders and borrowers to shift capital out of stagnant wallets and increases circulation. Ultimately, this leads to a healthier DeFi space.”