Flux Finance, a fork of the popular lending and borrowing protocol, Compound, has launched a decentralized lending protocol that will allow users to deposit USDC or DAI into the Flux protocol. This will be backed by Ondo Finance’s U.S. Treasury-backed Government Bond Fund (OUSG).
Announcing this in a Twitter post, Flux stated it is bringing US Treasuries yield on-chain to permissionless lenders.
Flux made this move following the recent trend in DeFi about yield farming which is backed by the US government debt. Yield farming enables users to earn rewards with a project’s token by providing liquidity to the project. Flux relies on smart contracts to provide financial services such as lending and borrowing to its users.
With Flux’s lending protocol, users can deposit USDC or DAI and in return, gain fUSDC or fDAI as a reward. Lenders can supply stablecoins (USDC and DAI) to earn yield while borrowers can pledge tokenized treasuries as collateral.
These two derivative tokens can then be used as collateral at lending and derivatives protocols. It will also be used on custodial platforms like neo-banks and centralized exchanges.
According to a statement by Flux Finance,
“Flux is an autonomous, transparent, decentralized lending protocol connecting the on-chain and off-chain worlds by supporting permissionless assets like stablecoins as well as permissioned assets like tokenized securities.”
Flux protocol will be governed by the ONDO holders. Also, anyone has the freedom to integrate the fTokens
The increased interest in yield from tokenized US Treasury comes as lending rates for DeFi platforms continues to struggle due to the 2022 bear market. Also, the Federal Reserve has continued to raise interest rates, hence, making conventional assets more interesting than DeFi.
