Deposit crypto to use as collateral and receive a cash loan, deposited into any bank account in the world.
MELD links the world of crypto backed loans with traditional (and non-traditional) FIAT lenders. The MELD protocol acting as the middleman between the two parties. Here’s how it works:
Fiat lenders provide FIAT to the MELD protocol and this is then used to fund loans that are backed by the collateral deposited by borrowers.
Borrowers deposit approved crypto collateral. Borrowers must deposit 200% of the value of their loan as collateral, e.g $100USD worth of crypto entitles you to a $50USD loan. Borrowers can take out a direct loan or open a line of credit against their deposited crypto.
Borrows make regular monthly payments to pay back their loan or line of credit, and the interest. Once their loan or line of credit is fully paid off they can retrieve their collateral. Lenders receive 100% of the interest paid on the loans they provide.
If a loan reaches 85% of the value of the deposited collateral then the borrower liquidated and the lender receives 100% of their FIAT back.
When lenders deposit their FIAT and borrowers deposit their collateral they receive MELD tokens in return. These tokens entitle the user to receive a portion of the rewards generated by the protocol.
Those taking out loans are required to go through KYC/AML checks.
MELD Vaults and Token
The crypto assets deposited by borrowers are locked into "MELD Vaults", i.e. community managed liquidity pools, where they accumulate trading fees from external DEX aggregators. This is how the protocol generates revenue.
The rewards from these pools are split 50:50 between the MELD protocol and MELD token holders. These tokens also give them platform governance rights and it is worth noting that they are not returned at the conclusion of the loan.
MELD has integrated impermanent loss protection for crypto depositors. This is done by other users who staking MELD tokens to the MELD protocol staking pools specifally for covering impermanent loss. The incentive to stake to these pools is that 40% of all fees collected for the protocol are distributed to those staking here.