Linear Finance: The Ultimate DeFi Solution For Chinese Traders
- DeFi protocol Linear Finance has expanded into the Chinese market with its new offering.
- The protocol has already achieved significant growth, with over $2 billion in total value locked (TVL) as of February 2022.
- Linear Finance is partnering with Chinese firms and exchanges to provide access to its DeFi products in the region.
- The company is working with Huobi and OKEx, two of the largest cryptocurrency exchanges in China, to provide liquidity and promote the adoption of the protocol.
- Linear Finance’s expansion into China highlights the growing interest and adoption of DeFi products globally, particularly in emerging markets.
Linear Finance is a decentralized finance (DeFi) platform that enables users to trade synthetic assets on the blockchain. It’s gaining popularity in China due to its low fees, fast transaction speeds, and ability to support Chinese users with its native language interface.
History of Linear Finance
Linear Finance was co-founded in 2020 by Kevin Tai and Drey Ng. Tai, who previously worked at Standard Chartered and Credit Suisse, is the CEO of Linear Finance and has completed more than $20 billion in acquisition and divestment deals. Ng, the technical expert behind Linear Finance, has a computer science background from the University of Hong Kong and financial experience from Deutsche Bank. He also worked on blockchain projects for Liquefy, a prominent security token firm in Asia. Although he is no longer with the company, Ng’s contributions helped to establish Linear Finance as a major player in the crypto space.
Linear Finance is a decentralized finance (DeFi) protocol that aims to increase inclusivity and democratize access to investment assets. Its collateralized debt pool enables users to build Linear USD (ℓUSD) and purchase synthetic assets (Liquids) on its exchange, with zero slippage and unlimited liquidity.
Linear’s cross-chain compatibility and extensive financial and technical experience make it a prominent player in the DeFi industry, with its governance token, LINA, offering staking incentives and liquidity mining programs. Linear’s long-term vision is to provide a platform for users to gain exposure to a wide range of assets without slippage and settlement time, acting as a reliable gateway between DeFi and CeFi.
LINA token – Collateral and Governance
Linear Finance’s protocol uses LINA tokens as the base collateral to create Liquids, with a pledge ratio of over 100% to ensure system stability. However, Linear’s approach is different from its competitors as it also accepts a mixture of LINA tokens and other digital assets as collateral, with a threshold size to stabilize the LINA token economy.
Stakers of LINA tokens are incentivized through pro-rata exchange fees and inflationary rewards, which start at 60% and will be reviewed annually by LinearDAO. Linear’s protocol offers a hybrid approach that aims to increase inclusiveness and democratize access to investment assets, including digital and traditional.
The long-term vision is to provide a platform for any user to gain exposure to a wide range of assets without slippage and settlement time, with a focus on cryptocurrencies, commodities, market indices, and thematic exposures.
The Linear Pool plays a crucial role in the Linear protocol by acting as a decentralized counterparty to all Liquids exchanges, generating unlimited liquidity for platform users. When a user creates a Liquid using Buildr, they incur a debt that varies with respect to all the Liquids in the system. For example, if all the Liquids on the platform are synthetic gold (ℓXAU), the price fluctuation of gold is insignificant as the debt value of each ℓXAU holder increases by the same amount as the gold price or vice versa.
The Pledge Ratio, which is initially set at an optimal rate of 500%, determines the ratio of collateral that a user must pledge in order to create a Liquid. The Pledge Ratio is subject to review by the LinearDAO and may be adjusted over time. If a staker’s Pledge Ratio drops below the threshold, they are required to stake more LINA or burn part of their Liquids until the ratio is at least on par with the threshold in order to claim pro-rata platform transaction fees.
Linear will offer token bonuses to users who fully utilize the exchange upon launch to incentivize yield farmers and stabilize the debt pool. Users who counterbalance trades that unbalance the debt pool will also receive additional token rewards.
Finally, while LINA and ℓUSD are ERC-20 tokens, Liquids are EVM compatible and can be deposited in third-party pools such as Balancer, Uniswap, and Curve to facilitate yield stacking.
How to get LINA Tokens
- Get LINA tokens via fiat payment gateway partners
- Staking LINA tokens via Buildr to build “l”USD
- Get Liquids exposure using “l”USD and exchanging among different Liquids via Linear.Exchange
- Claim the transaction split and inflationary reward
- Convert the Liquids exposure back to “l”USD
- Burning the “l”USD to unlock the staked LINA tokens
- Get LINA tokens via fiat payment gateway partners
- Staking LINA tokens via Buildr to build “l”USD
- Depending on net position of a particular Liquid, marketmaker can help stabilize the debt pool by going the other way; example: long position of “l”XAU, marketmaker goes short on XAU
- Linear will incentivize the marketmaker to act by giving extra yield (LINA token) with the inflation reward and transaction split for their efforts in stabilizing the debt pool
Features of Linear Finance
Linear Finance is a decentralized finance (DeFi) platform that aims to enable faster and more efficient transactions for traditional and digital assets. One of its unique features is its use of synthetic assets. Here’s a closer look at some of the platform’s key features:
This decentralized application (DApp) enables the creation of Liquids through the pooling of LINA tokens as collateral. Once the pool surpasses a certain threshold, more Liquids can be created. Linear Buildr also supports LINA staking, which helps create ℓUSD tokens for transactions on the Linear Exchange.
This platform facilitates quick financial transactions, allowing users to buy commodities, cryptocurrencies, and indices in Liquid format using ℓUSD tokens. Trades on the Linear Exchange are executed through smart contracts, supported by a debt pool, and are executed with zero slippage and unlimited liquidity. Linear Exchange’s transaction fee is currently set at 0.25%, but this may change in the future.
This DApp is integrated with Ethereum, Polkadot, and BNB Chain, supporting cross-chain swapping of Liquids, ℓUSD, and LINA. Linear Swap also allows token swaps to be completed via other blockchain formats, keeping gas fees low.
Staking ℓUSD/BUSD LP tokens in the Linear Vault allows users to earn yield gains from the stablecoins’ value inflation and through rewards. The rewards are a portion of the Linear Exchange’s transaction fees, and are only applied when the pledge ratio has been met or exceeded.
The Linear Finance community holds LINA tokens that are either available for use, locked or staked. The community promotes the protocol’s long-term health and growth and is responsible for driving protocol changes. Any community member can submit proposals for improvements, which go through a preliminary review, formal review, and voting process overseen by the Linear Council. The Council is composed of four members nominated and voted for by the Linear Finance DAO community two weeks before the end of each epoch.
Pros and Cons
Linear Finance offers several benefits that make it an attractive platform for completing financial transactions.
|Low Transaction Fees||Linear Finance is known for its low transaction fees, which are much lower compared to traditional financial institutions. This makes it an affordable option for users to transact on the platform.|
|Transparency||The platform is designed to be transparent, providing users with complete visibility of their transactions. Users can track their transactions and holdings on the blockchain network, ensuring that there is no discrepancy.|
|Speed||Linear Finance facilitates speedy financial transactions that can be executed within seconds. This is due to the platform’s use of smart contracts, which enable transactions to be processed quickly and efficiently.|
|Liquidity||Linear Finance offers unlimited liquidity, allowing users to buy and sell digital assets quickly and easily. This makes it an ideal platform for traders looking to take advantage of market fluctuations.|
|Cross-Chain Compatibility||Linear Finance is compatible with multiple blockchain networks, including Ethereum, Polkadot, and Binance Smart Chain. This allows users to seamlessly transfer assets across different networks, making it more flexible and convenient for users.|
|Community-Driven Governance||The platform’s governance is community-driven, with Linear DAO members being able to initiate and drive protocol changes. This ensures that the platform is constantly evolving and improving to meet the needs of its users.|
These benefits have made Linear Finance popular among users, particularly in China, where there is a growing interest in decentralized finance (DeFi) platforms.
A High Pledge Ratio
While Linear Finance is an impressive DeFi platform with numerous benefits, there are a few downsides that users should be aware of before joining the platform. Here are some of the drawbacks:
To participate in Linear Finance and access its features, users are currently required to meet a high pledge ratio of 465% on the Linear Builder DApp.
This requirement must also be maintained to receive staking rewards through the Linear Vault. While users can contribute more tokens to meet this requirement, it may be a barrier for some investors. However, the good news is that this requirement is expected to be reduced to 450% through governance action in the near future, which may make the platform more accessible to a wider range of users.
Work in Developing
Linear Finance entered the DeFi space in 2020 after securing $1.8 million in seed funding. Despite being a relative newcomer, it has already garnered a significant amount of attention and is being utilized by users from various parts of the world. However, the platform is continuously evolving, and various aspects of it are still under development.
For instance, as mentioned previously, the pledge ratio is anticipated to be lowered in the future, which could potentially increase engagement on the platform. Additionally, the integration of Linear Finance with other blockchain networks is an ongoing process that could improve the user experience once it is completed. As these and other upgrades are finalized, Linear Finance may become an even more attractive DeFi platform.
Why is Linear Finance popular in China?
Linear Finance has gained popularity in China due to its innovative approach to decentralized finance (DeFi) and its ability to support both traditional and digital assets. Additionally, Linear Finance’s co-founder Drey Ng has a strong background in blockchain projects in Asia, having worked at Liquefy, a major security token company in the region.
This experience has likely contributed to the platform’s appeal and success in China, where there is a growing interest in blockchain and cryptocurrencies. The platform’s ability to support cross-chain swapping and its low transaction fees are also likely contributing factors to its popularity in the region.
Linear Finance has several unique features that set it apart from other DeFi platforms, such as its focus on synthetic assets, fast transaction speeds, and low fees. Additionally, it has already gained a solid following and is being used by people around the world.
Furthermore, the platform’s developers are actively working to improve and evolve it, such as by reducing the pledge ratio and enhancing functionality with other blockchain networks. These efforts indicate that the team behind Linear Finance is committed to long-term success and growth.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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