*obligatory not financial advice*
What is Port Finance?
Port Finance is a DeFi application on the Solana blockchain that offers its users various ways to lend and borrow cryptocurrencies.
Solana is famous for its ridiculously high speed since it can process multiple ten thousands of transactions per second. The smart contract chain has gained a lot of popularity in 2021 due to its speed and efficiency, despite still being quite centralized and having had a few outages. Port Finance is, like Solend, a lending protocol that takes advantage of Solana’s scalability, what makes it unique is that Port offers variable and fixed APYs to its users.
The lending and borrowing with variable rates works like Aave, Compound, Venus and most other lending protocols work. People can deposit cryptocurrencies into a pool to lend them out or to use them as collateral to borrow a different crypto. The borrowers can only borrow less value than what they left as collateral and they need to pay their loan back with interest if they want their collateral back. They can pay it back whenever they want, but should their collateral lose value or their loan rise in value to a point where the collateral is at risk to soon no longer back the loan, it will be sold automatically to pay the loan back. The APY for lending and borrowing is set automatically based on how much is supplied and how much is being borrowed. If more is being lend, the APY is falling and if more is being borrowed, the APY is growing.
This is useful for people that need liquidity but don't want to sell their crypto because they are bullish or for people that want to do leverage trading, where they use their crypto to borrow money to buy even more or to short the borrowed crypto. But the variable APY can be a problem for some people because the APY for their loan could suddenly jump a lot higher or the APY for their lent coins could fall a lot. That’s why Port Finance is also offering fixed rates for lending and borrowing.
This fixed rate lending works with an order book system where lenders can post the type of asset they want to lend and for how long and for what interest rate and Port Finance will use the matching engine of the Serum order book DEX to match them with fitting borrowers. This is providing both sides with more certainty and the loans themselves are being tokenized, which means that the lenders are able to sell the loan with its future interest if they want to get their money back sooner.
Port Finance is also providing flash loans to the Solana blockchain. A flash loan is a special type of loan that requires no collateral but must be repaid within the same transaction. This sounds useless, but it is can be used for things like arbitrage trading if 2 DEXes are trading the same asset for slightly different prices and it can also be used to pay back a loan on one protocol and take a new one where the interest rate is lower. However, such flash loans require a lot of programming skills and are not for everyone.
In the future Port Finance will also add support for leverage trading where users of the Serum DEX could easily take up to 3x leverage for their trades. There will also be an Interest Rate Swap Protocol, where users could basically trade fixed rate loans with flexible rate loans.
The PORT Token
Port Finance has its own governance token called PORT. It is used to vote on changes to certain parameters of the protocol including which currencies should be supported and how much can be borrowed with certain assets as collateral. In the future there will also be a staking program for the PORT token where the holders can earn a share of the interest rate and fees for flash loans.
There is a max supply of 100 million tokens. 33% of the supply was set aside to further build the Port Finance ecosystem, 31% are being distributed to lenders, 20% went to the developers, 10% were sold to investors in the initial fund raising, 4% were used for the initial liquidity on exchanges and 2% went to the advisors of the project. The supply for the actual users is relatively low and the founders control a relatively big share but the supply will be spread further when they sell them to fund future development.
The value of the token depends on how much liquidity is in the Port Finance smart contracts and on how well the Solana blockchain performs. If more money is in the smart contracts there will be more demand for the governance rights of the token and the stakers will be able to earn more rewards. Port is one of the most used dApps on Solana and has a solid road map. However, Solana had multiple outages so far and is rather centralized which could be a risk for Port Finance.
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