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Last updated: Aug 15, 2023
Hundred Finance is a decentralized application (dApp) that enables cryptocurrency lending and borrowing across multiple blockchains via third-party bridges. Assets deposited on the platform can be transferred between these third-party bridges, allowing the free movement of capital to those chains where there is greater demand for their use. In the future, the platform also plans to introduce cross-chain collateralization as part of the Hundred Finance functionality.
The Hundred Finance lending platform launched on the Ethereum mainnet in September 2021 and has since expanded into EVM-compatible blockchains such as Fantom, Harmony, Moonriver, the L2 solution Arbitrum and others.
There are several borrowing and lending cryptocurrency markets available on Hundred Finance. The interest rate that users can earn on the platform is determined by the supply and demand curve of the deposited asset, as well as the interest rate model set in the smart contract. By contributing their assets, users create liquidity pools for borrowers and can also use the contributed funds as collateral.
Each market on Hundred Finance has its own interest rate. A holder of hTOKEN for one block or more automatically receives an interest paid by the borrowers of the asset, which is measured as an increase in the value of the hTOKEN relative to the corresponding underlying asset. Even if the amount of hTOKEN in the user's wallet remains unchanged, the amount of the asset for which they can be exchanged increases.
Changes in the market value of borrowed and loaned assets can cause the collateralized asset value to cease to sufficiently secure the loaned asset-liability. Once the collateral for a debt position falls below a certain level, an account becomes vulnerable to liquidation. The Health Factor, or the ratio of the total borrowed against the borrowing capacity, should not be < 1. The liquidation process entails a claim of hTOKENS (plus a liquidation penalty) by independent liquidators in exchange for repayment of the account's debt until the collateral ratio returns to the normal level.
Some markets in the Hundred Finance app have a special liquidation system that functions through community support. In these markets, users are able to deposit their assets to a reserve fund (backstop pool) to provide liquidity for automatic liquidation. Assets supplied to the backstop pool both accrue interest from borrowers and earn HND rewards. Furthermore, whenever a liquidation is carried out using the backstop funds, the reward paid (approximately 8% of the liquidated amount) is set aside for buying back the underlying asset which is then distributed pro-rata to those providing the backstop.
Hundred Finance app can be connected to any wallet supporting Ethereum, Arbitrum, Fantom, Harmony, or Moonriver networks (for example, MetaMask).
After transferring assets to Hundred Finance, users receive hTOKENS tokens (e.g., when depositing ETH, a hETH token is minted) in return. These tokens are interest-bearing versions of the underlying asset and can be used within the protocol in a number of ways. Minting, redeeming, borrowing, repaying, account liquidation or hTOKENS transfers are all done through an interaction with the relevant hTOKEN contract. hTOKENS can be exchanged at any time for the original asset plus any accrued interest.
Hundred Finance does not charge fees for supplying assets. However, there is a small fee generated from interest spreads, which depends on a specific asset.
One of the main uses of the native Hundred Finance token is staking. Idle HND tokens can be put into staking for a period of 1 month to 4 years, during which time they will be locked within the protocol at the contract level (early unlocking is not possible). By depositing their coins into staking, users receive an APR boost across hTOKENS (gauges) and the ability to use voting power to increase HND emissions going to specific gauges.
The native Hundred Finance token HND has a supply of 100 million. At launch, 20% of HND was allocated to Percent Finance (PCT) token holders; 20% was granted to Compound DAO and another 20% to the development fund, both allocations with a four-year vesting schedule. The remaining 40% is assigned to the project treasury for liquidity mining incentives and partner acquisition.
HND can be staked for a period of up to four years to mint a mveHND token, the protocol governance, and utility token. Currently, mveHND tokens are used in gauge voting to manage the protocol rewards and vote on HIPs, Hundred Finance Improvement Proposals. Eventually, mveHND's governance powers will include the ability to decide on the onboarding of new assets, the setting of Loan-to-Value figures, fee usage and accrual settings, risk parameters, interest rates, etc.
Hundred Finance team members are anonymous, though all of them openly share their Twitter accounts: the lead smart contract developer vfat, community manager acidbird, web developer nipa, interest rate modeler and liquidity manager Bluecrypt, full-stack developer 0xSHA2, and communications manager TerraBellus. Most of the members can be found on Discord by the same nicknames.
In the middle of March 2022, Hundred Finance was exploited in a reentrancy attack on the Gnosis Chain for approximately 2,100 ETH worth over $5.5 million at the time of the event. The attack was made possible due to a vulnerability in the Hundred Finance Gnosis Chain wETH contracts that allowed the attacker to continue borrowing crypto before the dApp could calculate the debt and prevent further borrowing.
Hundred Finance has many collaborations. For instance, they partnered with Immunefi, a platform for finding code bugs in the DeFi industry, and with B.Protocol for liquidation mitigation and Olympus Pro for building protocol-held liquidity.
The Hundred Finance team is working on mveHND mirroring and cross-chain collateralization, a mechanism that enables the collateralization of assets across chains (supplying collateral on chain A facilitating borrowing on chain B).
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