# 1. Introduction

The market for cryptocurrencies and digital blockchain assets has grown into a vibrant ecosystem of investors, speculators and traders exchanging thousands of blockchain assets. Unfortunately, the sophistication of financial markets has not continued: participants have little ability to negotiate the time value of assets.&#x20;

Interest rates cover the gap between people with surplus assets that they cannot use and people without assets (who have a productive or investment use); Trading the time value of assets benefits both parties and creates non-zero sum wealth. For blockchain assets, there are two major flaws today:&#x20;

● Borrowing mechanisms are extremely limited, which contributes to assets being valued incorrectly (for example, "scamcoins" with unfathomable valuations, because there is no way to shorten them).&#x20;

● Blockchain assets perform negatively, as a result of significant storage costs and risks (both on and off the market), with no natural interest rates to offset those costs. This contributes to volatility, as holding is disincentive.&#x20;

Centralized exchanges (including Binance, Coinbase ...) allow clients to trade blockchain assets on margin, with 'loan markets' built into the exchange. These are trust-based systems (you have to trust that the exchange will not be hacked, leak with your assets, or improperly close your position), they are limited to certain customer groups and limited to a small number of (the most ( mainstream) assets. Finally, balances and positions are virtual; you cannot move a position in the chain, for example, to use Ether or borrowed tokens in a smart contract or ICO, making these facilities inaccessible to dApps.&#x20;

Peer-to-peer protocols facilitate secured and unsecured lending between market participants directly. Unfortunately, decentralization imposes significant costs and frictions on users; In all revised protocols, lenders must publish, manage, and (in the case of secured loans) monitor loan offers and active loans, and loan compliance is often slow and asynchronous (loans must be financed, which takes time).&#x20;

In this paper, we present a decentralized system for frictionless lending of Ethereum tokens without the flaws of existing approaches, allowing the right money markets to function and creating a safe, positive-return approach to storing assets.
