Eigencloud is exploring the composability potential of Ethereum DeFi. I recently developed a Cap AVS, which is quite interesting. I'm trying to bring in some big institutions to play. Previously, in the eyes of some institutions, on chain lending lacked sufficient security and dared not participate in the game. Eigen's Cap may make a difference: This time, a large institution called Flow Traders has arrived. It is one of the world's largest market makers and a company listed on European exchanges. Market makers have high liquidity and often need to borrow money to make markets in order to earn greater profits. Now it can borrow money directly on the Ethereum chain. So, the question is, who dares to lend it? At this point, Eigen's Cap can come into play, which can be simply understood as "Ethereum's on chain bank". The money deposited by users into the pool (such as USDC) is often the money on the chain that retail investors/funds/institutions/DeFi projects want to earn more interest. Therefore, when the returns are in place and there is insurance, they are willing to lend it to Flow Traders. If Flow Trades market makers can provide returns to idle money, while guarantors (such as YieldNest, also the operator of Eigen) provide insurance. YieldNests are willing to use their ETH as collateral. If Flow Traders borrow money but do not repay it or engage in reckless behavior (borrowing money recklessly/excessive collateral ratio), the lender can confiscate the ETH mortgaged by YieldNesT through the contract and receive compensation. So, what are the benefits for guarantors like YieldNest? Aren't you afraid of risks? The guarantor can also make money and the risk is relatively controllable. The cost mainly comes from collecting guarantee fees (insurance premiums), for example, Flow Traders borrows 100 million USDC and is willing to pay an additional "insurance/guarantee fee" to the guarantor (assuming the loan interest is 5%, now willing to pay 8%, the extra 3% is the net profit for these guarantors such as YieldNest). ）For YieldNest, pledging their ETH can earn millions or even tens of millions of dollars in guarantee fees annually (depending on the size of the loan). Originally, this portion of ETH had already been pledged on Eigenlayer, and guaranteeing it was equivalent to earning a high guarantee fee. In terms of risk, YieldNest will consider the qualifications of Flow Traders (regulated European listed companies) and will lend corresponding guarantees based on on on chain credit limits, without providing all structural guarantees; In addition, if there is a default, a warning will be received first, and if the LTV exceeds the limit, it will automatically trigger forced liquidation. When borrowing money from Flow Traders, they write a dead whitelist and are not allowed to transfer to other account addresses (an alarm will be triggered upon outflow); Require the other party to mortgage their assets on the Cap agreement, not exceeding the agreed LTV mortgage rate; Submit data according to requirements.