Adding a Reserve Asset
Bend enables users to deposit and borrow digital currencies through the pooling of funds. Depositors receive protocol-issued bTokens, which gather deposits and the interest generated. Each loan is secured by NFT collateral acting as a risk mitigation tool against default. As the means of exchange, currencies are central in Bend’s non-custodial lending operations.Given the specificities of Bend’s evaluation model, the selection of currencies has been performed with the following constraints:
- 1.Each additional currency will slightly increase the gas cost of the borrow and repay actions permanently. The currency must be included in the smart contract, adding complexity and thus costs.
- 2.A centralized currency accepted as collateral exposes the protocol to its centralization risk. The single point of failure risks of underlying currencies flow into Bend Protocol.
- 3.Currencies only enabled for depositing and borrowing (not usable as collaterals) present lower risk for the protocol.
When adding a currency to the protocol, significant controls are required to ensure the currency will add more value than risk. Only currencies with a worthy product and significant community are considered. The currency risk assessment explores whether the currencies represent a reasonable amount of risk for the protocol, calibrating the currencies parameters to mitigate those risks.