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Liquid Lending is Algem's second and most important feature, offering a new concept and service to the entire defi industry.
Algem's liquid lending solution allows users to continue to earn lending or farming rewards and increase their income with ALGM incentives and by using tradable liquid nASTR tokens.
Liquid lending uses the exact mechanisms as liquid staking, but instead of interacting only with Astar's dApp staking, it is directly connected to other dApp protocols across the Astar network. Users can provide and lend their tokens to dApp protocols via Algem and receive liquid nASTR tokens representing their lending position.
Through Algem, ASTR holders can provide or lend their tokens to lending or staking platforms, stablecoin projects, decentralized exchanges, or other defi protocols.
Algem liquid lending is developed around 3 vaults with different durations (100/200/300 days) and ALGM incentives.
The duration corresponds to the user's intention to hold his tokens and to support the protocol. Unlike liquid staking, where users get 100% of the nASTR tokens immediately, in vaults, a portion of the nASTR tokens has a vesting period.
The vaults with a longer duration receive more incentives from ALGM and have the most significant amount of nASTR tokens and the most prolonged vesting period. This is not a lock but simply a representation of the number of days users will receive ALGM incentives and nASTR tokens. Users can unlock the tokens at any time within the rules.
For example, if a user deposits 1000 ASTR in the 100-day vault, he will receive 930 nASTR immediately (the unlocking coefficient for the 100 days vault is 0.93. 0.93×1000 = 930), and 70 nASTR are unlocked linearly. Unvested tokens must be claimed manually.
Before the liquid lending solution is launched, the nASTR vesting coefficient for the vault can be changed for protocol purposes.
For the first iteration of the liquid lending supporting ASTR tokens, Algem allocated 15% of the ALGM supply (15,000,000 ALGM) as incentives for the 3 vaults.
After depositing ASTR tokens in one of the vaults, users will choose a dApp to supply the ASTR they deposited and earn ALGM rewards.
Algem will delegate the deposited token to the desired dApp using its smart contracts. Then, after some time, Algem will start collecting rewards from the dApp for providing the assets. We call them: Partner Rewards.
Partner rewards are distributed to ASTR token providers based on their shares in the vaults and their ALGM voting power. The voting power corresponds to the amount of ALGM tokens they have staked on the dedicated dApp pool.
Over time, the user will continue to receive ALGM rewards from the vault and can reinvest those ALGM back into the pool to earn more partner rewards.