A collaborative effort between decentralized finance (DeFi) developers has introduced a non-custodial liquidity market on the second-layer network Base. This initiative is set to enable trustless smart contracts that can automatically connect liquidity pools with lending strategies.
The project involves developers from Seashell, RNG Labs, and Loreum Labs, along with advisors and collaborators from prominent projects like Ampleforth and Uniswap. Together, they have created the Seamless Protocol, which is essentially a fork of Aave v3. This protocol allows smart contracts with predefined borrowing strategies to perform undercollateralized borrowing directly on-chain.
In simple terms, a borrowing strategy can be compared to a specialized loan, such as a home loan or a car loan, where the provider knows precisely how the liquidity will be used, and the borrower cannot use it for other purposes. Undercollateralized borrowing is not a new concept in the crypto space, with platforms like Maple Finance offering this service to institutional and accredited investors. However, the process typically involves a combination of off-chain and on-chain steps, requiring users to negotiate terms with the platform before the loan is issued on-chain.
Seamless aims to streamline this process by connecting borrowing strategies directly on-chain through smart contracts, providing full transparency to liquidity providers about how funds are being utilized. While the protocol does offer universal loans that can be used for various purposes, they are subject to standard DeFi lending rules, which necessitate over-collateralization.
Seamless believes that its solution aligns well with the principles of DeFi, emphasizing trust in code rather than human intermediaries. This approach appears to offer more efficiency compared to on-chain reputation scores or identity systems, ultimately bringing DeFi back to its core principle of relying on smart contracts for trustless operations.
