4️⃣Business Model
The REDHeal project team provides De-Fi services based on the REDHeal platform. To achieve this, the platform plans to initially implement basic De-Fi services, such as staking and swapping, as well as lending and borrowing, in order to create a stable liquidity pool. This will generate interest and fee revenue, which are the primary income sources of the De-Fi service platform. Additionally, by requiring that the interest and fees from the De-Fi lending service be paid in the platform's governance token, the REDH token, the project aims to enhance the utility of REDH tokens, stimulate the circulation of the token economy, and ultimately increase the value of REDH tokens as an asset, expanding its market position.
| ※ The main revenue models of the De-Fi protocol offered by the REDHeal platform are as follows: |
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• Transaction Fees - Fees charged for processing transactions in the De-Fi services. • Lending Interest - Generating interest revenue based on the duration of loans. • Staking Rewards - Rewards given for contributing to network security by staking tokens. • Automated Market Makers (AMMs) transaction fee |
| ※ To analyze the profitability of the REDHeal De-Fi protocol, the following methods will be employed: |
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• Financial Modeling - Developing a financial model to predict the protocol's profitability. • Cash Flow Analysis - Analyzing past and future cash flows of the project. • Market Research - Conducting research on the target market and competitive landscape. • Auditing - Having a trusted third party review the financial status of the protocol. |
(1) Liquidity Pool
To provide De-Fi services, it is essential to secure and maintain liquidity stably. Here, liquidity refers to the ability to easily exchange one coin/token for another. Liquidity reduces the queue of pending trades concerning supply and demand in the cryptocurrency trading market, facilitating the buying/selling process. All trades are conducted through quotes, and when the order book is empty, buyers and sellers cannot find appropriate price levels, which can lead to issues such as slippage (the execution error that occurs during trading orders). The role of liquidity is to mitigate such problems.
A liquidity pool is a mechanism that allows users to pool their assets into a decentralized exchange (DEX) or De-Fi service platform's smart contract, providing liquidity for trading between cryptocurrencies. In simpler terms, it can be described as a "place where coins/tokens are gathered for trading between different coins/tokens." Therefore, a liquidity pool must securely hold a diverse and ample supply of cryptocurrencies so that anyone can exchange the coins/tokens they possess for others at any time.
All transactions occurring within a liquidity pool are processed by smart contracts that are programmed to automatically manage the liquidity pool. The Automated Market Maker (AMM) algorithm of the smart contract determines the prices of each coin/token and adjusts prices in real-time based on supply and demand. This ensures that the supply of each coin/token in the liquidity pool is always proportional to the other coins/tokens in the pool. The smart contract uses mathematical formulas based on the current reserves of the liquidity pool to determine the price of each coin/token, ensuring fair and transparent transactions for all parties involved.
(2) Staking
Staking refers to the process of depositing your owned cryptocurrency into a blockchain network and participating in the operation and validation of that platform, in return for receiving network tokens as rewards. Users can deposit mainnet coins (such as BNB) or coins/tokens issued by networks compatible with the mainnet through the REDHeal platform. Based on the amount deposited, users will earn interest in the form of governance tokens (REDH) from the platform. This structure creates liquidity without the need for additional capital by utilizing game theory and incentive structures. Additionally, if the value of the deposited coins/tokens decreases, users can sell them to mitigate risks. Conversely, if the value increases, both the users who deposited the coins/tokens and the foundation can achieve greater profits, forming a 'win-win' structure.
Staking can be considered a concept similar to the deposit system of traditional central banks. When money is deposited in a bank, the bank pays interest based on specific ratios De-Fined by internal criteria regarding the period and amount. In the REDHeal platform's De-Fi service, the platform acts as the bank, and the tokens deposited by users become their deposits. For users, the advantage is that by simply depositing tokens, they can generate interest income without risk. Additionally, it plays a role in verifying whether the blockchain processes transaction data properly and whether blocks are being generated smoothly.
(3) Lending
De-Fi lending refers to a financial service that occurs automatically on the blockchain according to pre-set smart contracts, without the control of centralized financial institutions. Since De-Fi lending utilizes blockchain technology where smart contracts are executed automatically, it guarantees transparency and safety. Users can provide their coins/tokens as collateral and, based on this, borrow other coins/tokens. After taking out a loan, a certain interest rate is applied, which fluctuates according to the supply and demand of the assets.
The REDHeal platform determines the terms of contracts recorded in smart contracts for the execution of De-Fi lending services and connects borrowers (those seeking loans) and lenders (depositors) through a liquidity pool. Through De-Fi lending services, borrowers can obtain the coins/tokens they desire and pay interest based on the duration and amount borrowed, while lenders contribute to creating a liquidity pool by depositing their coins/tokens, earning interest income in return.
In the current banking system, the process of lending involves assessing the borrower's creditworthiness and mitigating information asymmetry between lenders and borrowers through collateral-backed credit enhancement processes that are often difficult to evaluate with credit information. In contrast, collateralized loans using coins/tokens in De-Fi services do not require credit assessment procedures due to their anonymity. This means that De-Fi lending protocols can recruit borrowers and lenders without centralized intermediaries. As long as a party has an account (wallet) to run the smart contract, they can maintain their anonymity and, consequently, are eligible for loans backed by coins/tokens.
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