Explaining TrustPredict Phase 3: HORIZON — Interest Accumulation on Deposited Assets
repost of an article published in Medium:
https://medium.com/openpredict/explaining-trustpredict-phase-3-horizon-interest-accumulation-on-deposited-assets-454f66bc45ba
Built with simplicity in mind and an intuitive design,TrustPredict continues to evolve in order to equip traders with a powerful range of tools that are available at the touch of a button. Our trading app continues to develop its feature set in order to enable more complex trading activities.
As a recap, TrustPredict SPOT enables any two pre-established counterparties to come together and conduct a P2P trade by minting synthetic assets (synths) that hold two opposing positions on any speculation.
TrustPredict MARGIN expanded upon these features by giving traders the ability to put up their digital assets as collateral for stablecoin loans that can be deployed for trading within the app.
The third version of the app, TrustPredict HORIZON, builds upon the previous versions by making use of the DeFi “Money Lego” concept to allow anyone depositing collateral for SPOT or MARGIN positions to accumulate interest on their deposits. It empowers traders to not miss out on earning opportunities due to having their funds tied up in an escrow-based trade, and to make the most of what DeFi has to offer.
How does HORIZON work?
HORIZON incorporates assets such as Compound’s cTokens which appreciate in value in relation to the underlying asset deposited. Funds held in active positions accrue interest and grow over the time they remain open.
For example, depositing ETH on Compound generates cETH (Compound ETH), and ETH is currently earning 0.2% on Compound and an additional 0.1% in COMP yield farming.
As a result, after a year, cETH will be equal to 0.3% more than actual ETH, even though it will follow ETH’s price. If after one year ETH is worth $1,000, then the cETH you get by depositing to Compound will be worth $1,003.
The ability to gain interest is also well illustrated by other Compound stablecoins such as Compound DAI (cDAI) which will be worth 7% more than actual DAI in a year.
How is it useful?
Having funds tied up in long term trades can result in the lost potential to earn interest on the funds deployed, and HORIZON directly addresses this issue by empowering traders with more options and making the most of multiple opportunities, thus effectively mitigating the opportunity cost of holding their trade positions.
Opportunity cost represents the potential benefits any trader or investor misses out on when opting to pursue one alternative over another. For example, a trader can decide to maintain a stable portfolio or deploy the funds in a series of trades. When choosing the first option, the opportunity cost will be missing out on the potential returns from successful speculations.
With HORIZON, traders are equipped with yet another powerful tool that enables them to make the most of the opportunities the DeFi sector has to offer, and to effectively maximize their earning potential while enjoying a more streamlined trading experience.
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