Introducing Kashi Lending & Margin Trading on SushiSwap’s BentoBox
We are so thrilled to announce that #whento is now a thing of the past and we are formally announcing the release of BentoBox on SushiSwap and the first lending and margin trading solution powered by BentoBox, Kashi! We would first like to thank all of you in the community for your incredible patience and support over the past several weeks, allowing us the time to get this product right.
During the period it took to perfect BentoBox, we found that one product actually turned into two, so we felt it was the right decision to separate BentoBox and Kashi. For many of you, both products need no introduction, but for those who are just hearing about it, please enjoy this writeup detailing how Kashi can work for you, why we decided that two products are better than one, and how Kashi delivers revolutionary innovation in L1.
Before we get started, we would like to explain the interconnected relationship between BentoBox and its upcoming Dapps. BentoBox is a vault, serving as a decentralized “App Store” where you can deposit assets within to enable other Dapps. We are excited to announce that Kashi is our first Dapp within BentoBox, a margin trading platform powered by its lending protocol, allowing users to create lending token pairs of a wide range of however they perceive could optimize returns.
This means that many tokens that were not previously available for shorting will finally be accessible to traders via Kashi Margin Trading.
How It Works
The BentoBox (or “Bento”) is a vault that securely stores tokens and generates yield from flash loans and strategies for any protocol built on top of it. Kashi, which is the Japanese word for lending, is built off of BentoBox, meaning that Bento holds the tokens and Kashi utilizes those assets for lending, borrowing, and most importantly, one-click leverage trading transactions. In Kashi’s case, BentoBox serves as a wallet, separate from your externally owned wallet, that optimizes transaction time and fees, and allows dual, simultaneous usage of your tokens.
With our built-in AMM, your assets on BentoBox can be used to provide flash loans, even while the same tokens are being farmed in Onsen, for example. This provides extra revenue for you, the supplier. Even if the assets are not being borrowed, you can still use your tokens to earn yields or LP fees on SushiSwap, meaning that assets are never sitting idly at an opportunity cost! BentoBox basically allows you to maximize the use of your tokens by offering you the ability to maximize token usage and yield by doing two things at once with your assets.
Getting excited yet?
To get started, you simply need to add a SUPPLY/BORROW pair, which is quite similar to adding liquidity, but with one added factor. In the future you will need to select different oracles in addition to the asset and collateral, taking into consideration which oracle the asset you wish to lend already uses. So your lending pair will look more like this: SUPPLY/BORROW/ORACLE.
Anyone can create a lending pair on Kashi — It takes under 5 minutes! You simply need to add your assets to the BentoBox vault, select the asset you wish to lend out, along with the collateral you wish to put up and, in V2, select your oracle. The collateral you select cannot be lent out and the oracle you select is used to provide liquid price data from collateral to asset. Selecting oracles can be a little confusing, so we suggest leaving this to the pros!
Kashi’s margin trading solution uses an elastic interest rate with a target utilization rate of 70–80% for V1. Different parameters may or may not be chosen in the future. This means that we expect over 70% of a certain asset to be used for flash loans at any given time. If a certain asset has under 70% utilization, it does not make financial sense to keep the asset in Kashi as it is not considered a yield-lucrative pair, so it is natural to assume that Kashi users, like yourself, would take their money out of a lending position in this instance.
This 70% figure is the target percentage of assets that are borrowed from the total supplied. The elastic interest rate moves up if the pair is underutilized and down if it’s over-utilized. If 100% of an asset is borrowed out, the interest rate will be 20% for example. This means that suppliers are incentivized to keep in-demand assets on Kashi and vice-versa, the elastic rate finds optimal interest rates for any combination.
We can also assume that many assets will meet this 70% minimum utilization rate as many tokens will be available for leveraged shorting that has not been made available to traders before. Kashi will not use a stringent screening policy for supported shorted assets, meaning that traders have the opportunity to margin trade higher-risk assets at their convenience.
It is important to note that the risk for each lending pair is isolated. This means high-risk pairs cannot affect other assets that are margin traded on the Kashi platform, which is one of its unique benefits and which leads us to our next subheading.
What Sets Kashi Apart
First of all, BentoBox itself is the definition of a game-changer. It is a single vault that holds all tokens and because it utilizes a principal location for held assets, it eliminates an unnecessary multitude of transactions, which lowers the overall gas processing fees for internal token transfers. Kashi users can capitalize on this, because it means that shorting can be done in a single transaction with more than 1x leverage. With gas optimization on everyone’s minds, we know this is music to everyone’s ears.
The elasticity of the Kashi interest rate is also interesting when looking at some of the other lending platforms. If an asset is temporarily under the target interest rate of 70% utilization, the reward rate will not immediately go to zero, but the lower reward may incentivize users to take those low-demand assets out, as they are not highly sought after on Kashi. On comparable platforms, TVL, sometimes of a few billion dollars, is used as collateral but since they lack borrowers, the interest rate is almost zero, which is not good for suppliers. Since Kashi is built to incorporate isolated pairs at any risk tolerance, we are confident that lending pair suppliers will be able to gain yields, particularly on pairs that have not been available to the shorting market until now. Moreover, the more an asset is utilized, the higher the interest rate and underutilization results in an inverse interest rate.
Another way that Bento can benefit you through Kashi is that it is a vault that can apply strategies. Strategies, for example, is where you can set a pair to remain 20% liquid, and lend the other 80% out or to allow placing the SLP tokens in Masterchef and earn rewards while being lent out for flash loans. This amount of user governance is quite unique to Kashi, Anyone can create a pair; it is up to individual users to decide which assets they find safe enough to lend out, but, in the end, platform risk is isolated to just that pair.
That being said, let’s circle back to isolated lending pairs and how this will benefit you. To better understand it is probably best to compare Kashi’s lending solution makeup to current platforms on the market. For example, on Compound the pools are not isolated, which means that the protocol is entirely implicated if one of the assets goes to zero. With that in mind, Compound is very selective on which tokens they allow you to use as lending assets, but in reality, the whole pool is susceptible to its highest risk asset. In Kashi, you can create lending pairs at whatever risk tolerance you like and we are very unique in this offering.
To highlight, Kashi’s main purpose will serve to offer margin trading for a large variety of tokens that are not yet currently widely available for shorting. You will not only be able to short a wider variety of tokens, but you can even leverage the short. The assumption is that this will result in a higher trading volume on the associated swap pool, which we would encourage to be executed on SushiSwap.
What V1 Will Offer
For Kashi V1, which will be released on Friday, March 26th (today), we will be issuing a selection of primary lending pairs for the community to take a stab at Kashi margin trading without having to put up their own collateral.
In overview, Kashi V1 will offer:
- Isolated lending pairs with optimized yield
- Chainlink oracles to feed prices
- Margin shorting for any Kashi supported token
Supported token lending pairs are:
We are so excited for you all to take advantage of this amazing platform and want to thank you again for your patience and your unwavering support for SushiSwap. This community has really empowered us to build these groundbreaking solutions, so the thanks is all to you guys!
In true Sushi style, there’s more!! We hope you guys stay excited for Kashi V2, coming soon. What to get hyped for:
- Adding UI for liquidations powered by flash loans
- Activation of new lending pair creation interface
- Allowing users to select their own oracles