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0xKrillin (Tranquil Finance): Permissionless Money Market

Tranquil FinanceΒ is an algorithmic money market protocol on the Harmony ONE blockchain. It allows users to supply and borrow assets, while receiving or paying interest in a completely permissionless and decentralized way. Borrowing and lending interest is set based on market demand, and loans are over-collateralized to ensure solvency.

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You can think of a money market (aka. Lending Protocol) as a bank, where users can deposit assets to earn interest. Borrowers can also deposit collateral and borrow against their collateral. Tranquil Finance, forked from Compound Protocol to adapt to Harmony ONE, is a permissionless and non-custodial since funds are stored and lending decisions are processed entirely on open source smart contracts.

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In DeFi, borrowers can use money markets for:

  • Leveraged Long positions (ex. Borrow USDC, buy ONE, sell ONE at higher price to repay borrow)
  • Short positions (ex. Borrow ONE, sell ONE, buy back ONE at lower price to repay borrow)
  • Borrow against assets to pay for living expenses without having to sell (Ex. Borrow USDC with BTC collateral. Use borrowed USDC for living expenses).
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The main smart contracts are tqToken, Comptroller and Oracle. Tranquil deploys a tqToken contract for each supported market (ex. tqONE, tqETH, tqUDSC). These contracts stores the actual funds deposited returning tqToken receipt tokens to depositors based on an exchange rate. The exchange rate will gradually increases from accrued interest. Depositers can redeem their tqToken to get their deposited funds back (with accrued interest).The Comptroller contract approves borrow requests by verifying the borrower has sufficient collateral and borrowing power. The Comptroller calls the Price Oracle contract to find the price in USD for all assets deposited by the borrower and computes a borrow limit based on each asset’s collateral rate.

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Price Oracles are needed to compute the market price in USD for deposited assets, so the Comptroller can approve or reject borrow requests. Oracle design is tricky and must be robust against flashloan attacks or other types of manipulation. Recently, CREAM, another lending protocol, suffered an exploit due to poor Oracle design and xSushi was delisted as an asset on AAVE for a similar issue.For more information on Tranquil Finance’s price oracle design, see our docs.

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Tranquil Finance applied and was granted a Harmony launch grant on Oct 1, 2021. We have successfully launched Tranquil Finance on mainnet on Oct 31, 2021 and have seen strong adoption with 37M in TVL. A launch summary can be found on our grants proposal page.

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We have completed our near term (2021 Q4) roadmap ahead of schedule. We are now working on Mid-term roadmap projects including our staking derivative Tranquil stONE. We believe in progressive decentralization and we’re also working to move ownership and decision using DAO governance. For more information on our roadmap, see our docs.