Harmony, a sharding protocol with a reliable Ethereum bridge, announced that OIN Finance, a decentralized stablecoin issuance and trading platform, will be deployed on Harmony to create a ONE-backed or ONE-denominated stablecoin.
A ONE-backed stablecoin is a significant achievement for Harmony as it aids in the growth of the DeFi ecosystem; and helps establish an important DeFi primitive that can be used in all other DeFi protocols.
The Harmony DeFi Lego Stack
One goal of Decentralized Finance, or DeFi, is to mimic the centralized financial world to some extent. In that world, the scope of financial services includes:
- Borrow / lend (fixed APR, APR with variable interest)
- Savings accounts with APR
- Derivative markets
- Synthetic assets
These are just a fewe of the financial services that can be expected from any financial system. In addition, it can become much more advanced and complicated.
The basics of any DeFi system are usually referred to as “DeFi Primitives” – these are a bit like the base layer of a Lego set, on which to build the structure. An important Defi primitive is the stablecoin. And now Harmony has one collateral or “backed by” the ONE token.
Stablecoins that many have heard of include USDT, USDC, DAI, and others. Harmony is actively working with established stablecoin issuers to support Harmony natively.
A ONE-backed stablecoin is unique because, unlike other stablecoins supported by the VIX (Benchmark Protocol MARK), the cost of a production unit for PoW miners (Meter MTR) and others.
With OIN Finance, the stablecoin on Harmony is backed by ONE.
What is OINDAO?
The product to be built on Harmony is OINDAO, a decentralized stablecoin issuing platform previously launched on Ethereum.
While Makerdred only allows regular assets to be used as collateral to issue DAI, OINDAO allows projects to issue fire-labeled stablecoins backed by their own tokens. With planned off-ramps and use cases such as swapping for other mainstream stablecoins, adding leverage, hedging, lending, and a plethora of ecosystem-specific utilities, the possibilities are endless with OINDAO.
MakerDAO and other DeFi platforms such as Compound also act as gatekeepers in choosing which projects to select to be part of their pools, creating a large barrier to entry for most projects. OIN is able to solve this problem and build a larger DeFi ecosystem, focused on inclusion and unauthorized engagement.
OIN’s vision is to provide DeFi functionality to all crypto projects, large and small. Users will be able to unlock the liquidity of their favorite assets while ‘HODL’ them. They will also be able to use the stablecoins for ecosystem-specific utilities; as leverage to buy more tokens, or even exchange them for other stablecoins such as USDC and DAI.
What does this mean for the Harmony community?
- Hedging against volatility – A stablecoin provides an excellent method of parking money or using it as a base currency while trading. A ONE-backed stablecoin acts as the base currency in the ONE ecosystem, helping the ONE community hedge against volatility.
- Encourage regular adoption – The ONE-backed stablecoin will encourage mainstream adoption of ONE ecosystem projects. Most blockchain projects have the vision of changing something in the real world. ONE-backed stablecoins create an additional layer of abstraction for regular users, who can interact with ONE-backed stablecoins in the same way as fiat – without worrying about the underlying volatility of the crypto asset.
- A SHORTAGE DRIVING – With more ecosystem-specific utilities behind a ONE-backed stablecoin, more ONE-backed stablecoins can be minted. The increasing amount of locked-down liquidity reduces ONE’s circulating supply, creating a closed value loop for ONE’s token economy.
- Unlock and streamline value on ONE protocol – OINDAO’s smart contract supports multi-coin farming for up to 20 different tokens. This support provides synergy between tokens on or bridged to ONE protocol. Users who deploy ONE can grow 20 different project tokens in the ONE ecosystem.
“OINDAO and Harmony are aligned with another important point: our vision of the future is a world of many thriving communities. In that world, each chain has its own ecosystem and strengths and weaknesses. Harmony wants to be a meaningful actor and add value to users in all chains. But the way to get there is to create a chain that excels in interoperability. Starting with Ethereum and gradually expanding to other popular ecosystems, OIN is on track to build a larger DeFi ecosystem and become a one-stop shop for interchain stablecoin issuance, trading and implementation. “
– The Harmony team