Using flash loans as a source for good to offer liquidation protection to DeFi borrowers by giving them a simple, friendly, and easy to use UI to monitor their health factor and minimise collateral losses before it's too late. Subscribe to our platform today.
A problem facing DeFi today is that borrowers, debt holders, or users who take loans are at risk of losing their collateral due to liquidations which occur when the health factor of their portfolio drops to below 1. Because of the volatility of crypto markets today this makes it difficult to know in advance when that will occur, only that it is inevitable given the unpredictable nature of crypto markets today. Although this is not a new problem, from the research we have done during this hackathon, this problem still lacks a long term solution. We wish to offer a solution that can support this goal of increasing user adoption into the DeFi ecosystem by mimising risk new users. We do this by making our UI extremely simple, friendly, and straightforward to use so that new users will know exactly what they are getting themselves into. The fact is that liquidators are incentivised to repay undercollateralised positions because of the discounted collateral and bonuses they will earn by doing so. While, flash loans historically has been used as a tool for gain, undermining, and attack, we feel that in the right hands, they could also be used as a force for good by allowing us to repay borrowers outstanding debts and returning collateral to them without making them just another liquidation statistic. We want to be part of the solution. We hope that by using Chainlink Keepers or perhaps more cost effectively running our own Keeper Node to monitor the health factor of DeFi users who subscribe to our platform, their health factors can be regularly monitored and corrective action be taken before it is too late. One of the challenges that has yet to be addressed is the unpredictable nature of network congestion and gas price fluctuations that may sometimes lead to the failure of oracles, keepers, and lending platforms from being able to find liquidity when it is most needed as we have seen with the market crash on March 12, 2020 and how it impacted Maker. That is why we feel that if we are unable to predict when such market events or flash crashes will occur at least there could be mechanism in place to minimise losses for users new and old.
How it's made
This project uses Aave Flash Loans to protect borrower's collateral from liquidations when they drop to dangerous levels. We used Chainlink Keepers to monitor subscribers health factor and triggers our flash loan smart contract when hits predefined threshold levels set by the user. We used Typescript and React to design the frontend and the backend is built in Solidity.