Isolated pools are created through developing separate money markets for each supported asset or token within Tren Finance.

In existing lending/CDP protocols like AAVE and MakerDAO, assets share a common lending pool, and the risks of one asset impact all of the others, hence why they are unsuitable for listing long tail assets.

Isolated pools take a different approach by creating an individual pool for each of the supported tokens. Protocols like Kashi made by Sushi and Midas Capital introduced isolated lending pools, allowing anyone to create a lending pool as if it is a pool on an AMM.

While it sounded promising, a challenge emerged as these protocols required users to supply both assets in the pool, limiting participation for niche assets due to insufficient counterparty assets.

Upon identifying this issue, Tren Finance entered the stage with a novel approach — create isolated lending pools and introduce trenUSD to provide capital to each pool, ensuring borrowers have access to the liquidity they need. With this, there is a lending market for every asset and borrowers can seamlessly access the capital they require, overcoming the supply constraints that previously marred existing protocols.

In this article, we’ll dive into the intricacies that make Tren Finance’s Isolated pools a paradigm shift in the DeFi space.

At the heart of Tren Finance’s Isolated Lending is trenUSD, a stablecoin meticulously designed for protocol control. Unlike traditional stablecoins, trenUSD is more than a pegged value; it serves as the token bridging long tail collateral assets to any other token on chain. Also, unlike traditional stablecoins it is fully backed on chain by overcollateralized loans ensuring that the total value locked in smart contracts on Tren will always be greater than the value of the circulating supply of trenUSD.

Tren Finance offers users unparalleled flexibility by enabling over 100 different assets as collateral. This diverse range spans cryptocurrencies, to tokens representing tangible assets, LST and LSDs, providing users with an extensive array of options to secure loans. Users are no longer limited to a handful of options as seen in existing protocols, providing them with unprecedented flexibility in managing their collateral.

Assets deposited by users are never lent out to other borrowers and thus depositors are protected from various risks.

A typical example of this risk is governance attack where tokens with voting power are borrowed and used to maliciously vote on proposals that may not be preferred by the broader community. This feature help to mitigate individuals with sinister motives from accumulating a large percentage of the tokens that can be used to vote on malicious proposals.

Another example of such risk is cascading liquidations. When assets are borrowable, users can create short position with them, creating a significant price impact that may result in the loss of users’ funds due to liquidation penalties. With protected deposits users are not able to short asset thus preventing them from being exposed to risks.

Each isolated pool is a modular lending market that can be customized to fit the requirements of securely integrating the collateral token at hand. Each module serves a specific function, and the modules can be combined or replaced with others, offering flexibility, scalability, and a bespoke approach to integrating any collateral token. Anything from the liquidation mechanisms to yield generating functions can be customized and changed through governance.

Tren Finance’s Isolated Lending model not only addresses current market needs but also lays the groundwork for the future of decentralized finance. As the platform continues to evolve, users can anticipate the addition of new assets, enhanced protocol features, and a continually expanding ecosystem. We aim to ensure users experience a new era of decentralized lending — one that prioritizes flexibility, security, and the limitless potential of DeFi, opening doors to new opportunities and financial empowerment.

Tren Finance is a CDP protocol designed to provide liquidity for various types of assets. Our team comprises of core contributors from various successful DeFi projects, boasting a combined TVL surpassing $1 billion. Drawing insights from our experiences at Venom, MakerDAO, Ajna, Parity Technologies, Parallel Finance, Casper Labs, and more, we bring a wealth of knowledge to the table.

We are excited to unveil numerous use cases for users interested in exploring leveraged staking, restaking and farming opportunities.

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