Is Cream Finance Set To Disturb Centralized Banking?
For as long as we can remember, the public has remained the pawn of the banking system. That is about to change. Cryptocurrencies swear an oath to cut out the middle-man, to give ourselves the profit the banks have always collected.
Decentralized finance technology is rapidly evolving. It’s inevitable that these crypto services will continue to gain enough security and stability to further challenge traditional banking services, such as loans and mortgages. Let’s speak about a certain service that is part of that very mission: Cream Finance!
What is Cream Finance?
It is a lending and borrowing service, as well as an exchange, that returns profit upon anyone who provides the platform with crypto capital.
Through the use of smart contract algorithms, anyone who lends crypto to Cream will receive an APY as well as Cream tokens, for their contribution. The APY is awarded for the liquidity contribution of the token they have deposited, and the Cream tokens awarded provide the user with governance rights to have a say on how Cream will develop. On the flip side, you can also borrow money from Cream with interest, in order to do so, you need to have collateral, meaning you must have deposited sufficient funds to begin borrowing.
See how you can use Cream Finance with your Trust Wallet, here.
The interest you pay for borrowing is rewarded to the lenders you are borrowing from as their APY. This is where it gets interesting, since Cream is an automatic-market-maker (AMM), anyone engaging with the Cream market, is benefiting the system, whether you’re a lender or borrower.
For this reason, even borrowers receive Cream governance tokens just for the fact that they are borrowing!
Once you are done borrowing, you may pay back your loan, and this allows you to withdraw your collateral if you wish. That’s it for the borrowing and lending component of Cream, let’s discuss how this can disrupt traditional finance.
In the centralized banking model, a bank would lend you money when you need it and buy from you when you are selling. For this reason, they establish a market by always being available to engage your transactions. Sadly, that model means much of the profit of that market, goes to the bank through fees and interest.
Cream, on the other hand, does the same thing but with smart contract algorithms, so there is no bank to take the profit.
All the fees and interest of the transactions are either returned directly back to the user, as their APY or Cream Token rewards, or are owned by the community collectively in a decentralized manner. This is why you can earn such high returns from the platform, for the first time in history, you can actually be awarded for borrowing money! This is what it means to be a decentralized AMM. This is Cream. Let’s dive into the platform’s beginning as well as its exchange component.
Cream Finance’s Origin Story
As mentioned, Cream is a fork of Balancer.
What is Balancer? Simply put, it is a self-automated index fund that removes the need for the trading middle-man.
Users can choose from, or create their own pool of crypto assets, and Balancer will do the job of maintaining the same value ratio of each asset in the pool for the user.
Balancer itself, released in March 2020, adding to the features of another platform, Uniswap, by allowing an uneven ratio of value between many tokens in a single pool. For example, you can have, 80% BAL with 20% BTC of the total value in a pool instead of the default 1:1 ratio in Uniswap.
Cream Finance features a pool staking section, just like balancer, as well as the lending and borrowing section mentioned.
The founder of Cream Finance, Jerry Huang, wanted to merge the financial services important to many users in an all-inclusive bundle. So the team behind Cream combined the borrowing and lending service provided by Compound Finance, with the rewarding pool staking services of Balancer.
Since Cream features no KYC, anyone who has the funds necessary to participate may do so.
Cream is smoother on Binance Smart Chain
As of September this year, Cream switched from the Ethereum blockchain to Binance Smart Chain. This switch allows faster speeds and lower transactions as well as increased access to many crypto assets due to Binance’s large cryptocurrency listing.
This is a beneficial aspect of Cream Finance for anyone interested in the exploding DeFi trend of yield farming. This is exemplified by the fact that Cream Finance amassed more than $300 million value locked, within the first month of it’s August 2020 launch.
How to use Cream Finance
Interested in being part of the Cream community? Let’s get into the setup to get you started! Head over to app.cream.finance and the first thing you’ll need is a crypto wallet.
Cream features WalletConnect, which will allow you to use a QR code to connect any wallet such as Trust Wallet from your desktop. Or you can use Cream directly in the Trust Wallet DApp browser.
After you connect you will first see the borrowing and lending page:
Over here you can click on any of the displayed assets on left to supply funds that borrowers can borrow. This will allow you to gain the APY displayed for that currency. If you would like to borrow currencies, you have to switch on the collateral for any of your supplied assets on the left, and then you may engage the right panel to borrow any currency of your liking.
Both lending and borrowing will reward you with Cream Tokens, however, lending will also give you an APY while borrowing will demand you pay the APY as interest to the lenders. Your net APY, lending APY minus borrowing APY, can be viewed at the very top. Once you borrow funds you are free to lend them out as well, or you could transfer them out of the platform for external trades.
On the left menu in the image above you have the Swap Pools and Rewards section. In these sections, you can stake tokens into pools.
Take note that in centralized exchanges the buying and selling price demanded by traders creates the price of an asset. Alternatively, in Cream Finance, there are no direct buyers or sellers rather pools of tokens.
This means you don’t have to wait for a buyer to give you a price to sell your token, rather you can go straight to a pool with that token and the smart contract will automatically trade your token for the other token in the pool.
Currently, Cream Finance has listed 30 tokens in its lending and borrowing section with pools covering much of these tokens, but this list is continuously being added to.
Cream Finance also announced recently the addition of TWT for borrowing and lending in its platform!
All in all, if Cream continues to expand its asset listing and maintains it’s level of service, its wide range of trading services are guaranteed to make it last the long haul. So hop on to the platform, practice your yield farming and, get those high returns! Also, feel free to share your thoughts on the future of Cream Finance below.