Beta Finance is an Ethereum-based money market for lending, borrowing, and shorting coins. This platform aims to provide users with access to a scalable and accessible money market in which tokens may be listed automatically and without authorization. Shorting is a hedge against price volatility and an important component of financial infrastructure for mitigating risk.

According to the whitepaper, the goal of this project is to enable DeFi customers to act as a counterforce to price volatility by offering a seamless and uncomplicated experience to short assets. Furthermore, the objective of this network is to counteract the current volatility in DeFi by developing critical infrastructure and user tools to promote market efficiency.

History

Sequoia Capital India led the private investment round. Participating firms included ParaFi Capital, DeFiance Capital, Spartan Group, GSR, Delphi Digital, and Multicoin Capital. Allen Lee's firm is seeking to make it easier for customers to short a cryptocurrency coin in order to combat price volatility while also providing them with another route to hedge their risk. It was founded in 2021.

Existing DeFi protocols only allow users to borrow and short a small number of mature crypto assets, making the overwhelming majority of such tokens inaccessible to them. Beta Finance, which is built on the Ethereum blockchain, claims to be addressing this inefficiency by developing the first user-friendly protocol with greater choice and flexibility.

How does it work

Beta Finance operates on an isolated collateral strategy that does not employ cross-collateralization. This is intended to provide a safe haven for investors who utilize the borrowed funds to diversify their assets. For easier understanding, consider the following scenario: 10 ETH is utilized as collateral, with 6.5 ETH assigned to shorting DOT and 3.5 ETH allocated to shorting EOS. Now, if the price of DOT rises and threatens the user's 6.5 ETH, the other 3.5 ETH tied to the EOS position will not be liquidated.

This is the primary advantage of an isolated paradigm, in which a single asset liquidation risk poses no threat to the whole protocol and is free of market, counterparty, and smart-contract risks and threats.

Lending - Lenders using the Beta Finance protocol can lend their assets for any money market offered on Beta Finance. When assets are placed in Beta Finance's money markets, bTokens are issued to the lender, representing the lender's share of interest from the underlying tokens. Users can receive a yield from the lending interest rate by lending their assets.

Borrowing - Borrowers who want to utilize collateral to enter a borrow position on Beta Finance can only do so if the loan-to-value (LTV) ratio is less than the safety standards of the asset tier in which the borrow position is needed.

Shorting - On Beta Finance, short selling operates on the same principles as the borrowing mechanism. Short sellers can initiate short positions using supported collateral and have the opportunity to leverage a borrow on the Beta Finance platform and sell the borrowed token.

Total supply and circulation

Total token supply is set to 1 billion BETA, while currently there are only 3 billion BETA tokens in circulation.