Here is a review of Nolus Protocol, a lending protocol with goal of connecting TradFi and DeFi.
This review dives into an operational model, governance, and security among others.

Inspired by traditional finance (TradFi), the Nolus Protocol bridges the gap between lenders and borrowers in the Decentralized Finance (DeFi) money market. Essentially, the Protocol operates in the form of a traditional lease system where users can pay a small fraction upwards and ownership is obtained upon repayment. 

Nolus Homepage interface

According to the official website, borrowers can obtain up to 150% financing and retain access to leveraged assets via whitelisted strategies. Through this leasing system, Nolus improves capital efficiency, lowers over-collateralization requirements, and gives borrowers better loan terms. 

Simply put, Nolus aims to leverage advantages from both the TradFi and DeFi ecosystem to provide a holistic experience for users. The protocol envisions a money market where lenders earn interest on deposited stablecoins, while borrowers can leverage their holdings to access a wider range of digital assets. Notably, users can get a 6.16% annual percentage yield on lent assets, according to details on the website. 

History

The core team of Nolus has over 15 years of combined expertise in product development, marketing, and trade finance. The co-founders’ idea for the protocol’s business model originated in 2021, and even then, they have worked to make improvements and clear the way for the Nolus protocol to succeed.

Core contributors to the protocol include Kamen Trendafilov for Finance, Gancho Manev, Tech Lead, and Kiril Mihaylov as Rust Engineer.

The majority of the core users at this point in the development are those actively involved in Cosmos, Osmosis, Levana, Umee, Mars, and other comparable protocols. These users include traders, degens, airdrop farmers, members of other protocols, and retail consumers in particular.

Mission, Vision, and Values

Leveraging the power of blockchain technology, Nolus claims it is at the forefront of pioneering decentralized finance. The protocol says it is dedicated to effectively addressing inefficiencies in lending markets through innovative, convenient, and sustainable solutions.

Nolus envisions a future where all assets will be tokenized on-chain to provide efficient financial management for individuals. 

Nolus was established with the values of transparency, efficiency, and inclusivity in mind. These values are evident in the protocol’s open-source technology, governance-informed decision-making, and committed efforts to provide a genuinely global service that offers wealth-creation opportunities to everyone.

How Nolus Operates

First, Nolus is designed as a very simple-to-use platform with a unified user interface. 

The Nolus Unified UI overview

 

Nolus connects to a host of interconnected liquidity hubs like Osmosis DEX and Neutron Astroport to facilitate instantaneous loan or digital asset swaps. This eliminates the need for managing multiple liquidity pools and ensures a smooth lending experience.

To borrow assets through Nolus, users need to provide a down payment. Borrowers can get up to three times the value of the down payment. When a borrower opens a “DeFi Lease,” both the down payment and the borrowed funds are secured in a smart contract, acting as collateral. Fixed interest rates throughout the lease term ensure predictable cash flow for lenders and clear yield expectations.

Repayment Options

Nolus operates on a cash-basis model, rewarding lenders with actual yield generated from DeFi Leases. Interest payments are collected periodically, and if unpaid, they are automatically deducted from active lease positions. 

While principal repayment remains flexible, the protocol employs a “margin call” mechanism during market downturns. This triggers partial liquidations to maintain a healthy loan-to-value ratio, safeguarding the system’s stability.

The protocol generates deposit yields from interest-bearing DeFi Leases and incentivizes lenders with additional rewards distributed through NLS tokens. These tokens are released from a dedicated Incentivization Pool. This method ensures a sustainable model that rewards active participants.

Nolus leverages a multi-pronged revenue generation strategy. With Nolus, DeFi Leases generate an average Annual Percentage Rate (APR) of approximately 15%. From this, lenders receive 11% in stablecoins, while the remaining 4% becomes protocol revenue. 

This revenue stream is combined with swap spreads earned from asset exchanges and a small transaction fee to repurchase NLS tokens from the open market. This continuous buyback process replenishes the Lender’s Incentive Pool, ensuring a long-term sustainable system that rewards users for their participation.

Security and Safety

Nolus emphasizes security with team members devoting resources to guarantee reliability and safety. Nolus says it complies with the strictest security guidelines and is audited by leading firms in the industry. Oak Security audited Nolus Core, whilst Halborn audited Nolus Money Market.

Nolus security overview

 

In addition, verification of contracts and balances is possible through open access. The team contends that scalability, transparency, and longevity are the true measure of a smart contract platform.

Nolus Governance Model

Through voting and delegation, members actively participate in protocol governance. Proposals range from implementing protocol enhancements to fine-tuning parameters. This happens all within a Proof-of-Stake blockchain framework. Here, the community plays an important role in promoting decentralization, guaranteeing consensus, and strengthening security.

Nolus Governance Overview

The NLS token is a governance token that permits staked token holders to decide the future of the protocol, including every implementation detail. All fees for processing and validating transactions on the network will be paid with the NLS token.

Nolus currently has 50 validators whose duty is to maintain the blockchain integrity and sustain the network’s liveness. Actively engaged in governing the protocol’s development are 3,454 delegators. Furthermore, 272 million NLS tokens provide economic security to the Nolus blockchain.

Achievements and Investors

So far, the transaction volume that has been routed via Nolus since inception is valued at $55,380,918. Additionally, the total liquidity locked across 28 assets distributed on three chains equates to $3,305,867. The protocol also recorded 5,302 DeFi Leases worth $10.8 million, with $4.6 million down payments, growing at 40% monthly.

Backed by investors like Dorahacks, Everstake, Cogitent Ventures, Token Metrics Ventures, and Autonomy Capital, the team has secured $2.5 million in pre-seed and seed funding at a $20 million valuation. With this funding, Nolus aims to fully complete the technological backbone and further expand the platform both within and outside the Cosmos ecosystem.

Assets and Competitors

Digital assets that can be borrowed on the Nolus protocol include USDC.axl, ATOM, WETH, OSMO, CRO, TIA, STARS, USDC, INJ, amongst many others. 

KAVA, Umee, Levana, and Mars Protocol are amongst the key competitors within the Cosmos ecosystem while AAVE and COMPOUND are those outside the Cosmos ecosystem.

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Filed under: Bitcoin - @ May 21, 2024 3:19 pm