What is Hifi Finance (HIFI)?

One of the new players in the market is the DeFi protocol Hifi Finance. In this article, let's understand what this project is, its features and its development plans and prospects.

What is Hifi Finance?

Hifi Finance is a decentralized credit or lending protocol created based on the leading blockchain with Ethereum smart contract technology. Users of the protocol can borrow cryptocurrencies against collateral and provide liquidity (analogue to deposits) to borrowers at fixed rates for a fixed term.

The lending protocol was launched in late 2017 under Mainframe and was initially conceived as a decentralized communication layer for the Web3 ecosystem. However, in early 2020, the team renamed the project to Hifi Finance and focused on developing a decentralized loan product. The Hifi Finance loan protocol only supports the Ethereum network.

How does Hifi Finance work?

Like any decentralized lending protocol, Hifi Finance supports two main functions:

1. Depositing (borrowing). A token holder deposits his asset into a lending pool, such as USDC, and becomes a liquidity provider to the protocol. For depositing tokens, the liquidity provider receives income according to the protocol's set interest rate and can use open positions to collateralise and borrow in cryptocurrency. Currently, only ETH is available among ERC-20 tokens to provide liquidity;
2. Borrowing (lending). By providing collateral, users can borrow cryptocurrency. The amount allowed for borrowing is determined by the collateral ratio, which differs for different digital assets. For example, for ETH, this ratio is 125%. To borrow $1000 in USDC, a user must deposit at least $1250 in ETH cryptocurrency.

One of the main features of Hifi Finance is asset tokenization. When users provide liquidity, in return, they receive so-called hTokens (instead of liquidity tokens), which are a "synthetic" version of the underlying asset. These tokens can also be used as collateral or traded on other decentralized platforms. These hTokens are used to redeem digital assets pledged as collateral.

Another feature of Hifi Finance is the ability to provide NFT tokens as collateral. The protocol currently supports ERC-20 tokens VWMBp and SHEETp backed by NFT. All these features make Hifi Finance a next generation protocol.

Hifi Finance ecosystem

In addition to the lending protocol, there is also the Hifi Finance decentralized exchange (DEX). This DEX exchange is designed to exchange native MFT and HIFI platform tokens.

Also, through the Hifi Finance DEX exchange, users can delegate their votes to other users to participate in the platform's governance. Finally, the HiFi Governance protocol manages the entire Hifi Finance ecosystem by voting native token holders and their delegates.

HIFI token

HIFI is an ERC-20 standard native governance token based on the Ethereum blockchain. The HIFI token grants its owner the right to delegate votes to any address, including their own.

When the balance of tokens in the delegates' wallet changes, the protocol will also adjust their voting rights. The Hifi Governance division gives its community the right to make proposals, votes and changes to the protocol through the protocol's inbuilt governance features. Proposals can affect system parameters and add new types of provisioning or direct resources to specific purposes.

Another feature of HIFI tokens is stealing. Users can stack their tokens and earn income in HIFI. Currently, about 95 million HIFI tokens are circulating in the market.

HIFI is an inflationary token with a no-issuance ceiling, that is, a limit on the maximum number of units issued. The token poured on exchanges at the end of January 2023. HIFI peaked at $2.61 in September 2023 — a sharp price jump, which then rolled back just as quickly. After reaching ATH, the price was corrected, and at the time of writing, it was $0.77.

The HIFI token is traded on major exchanges such as:

• Binance,
• Bitget,
• HTX,
• Uniswap,
• Kucoin,
• Gate.io.

Hifi Finance has another token, Mainframe (MFT). MFT is a utility token but can also be used for management and staking. The token was launched back in July 2018. There is already a maximum of 10bn MFT tokens circulating on the market, making staking no longer relevant.

The MFT token reached a historical high of $0.036 in April 2021. Since then, the token's price has fallen by more than 90%, and as of early December 2023, it stands at $0.0035.

Hifi Finance's growth plans and outlook

In 2024, the Hifi Finance team plans to add the ability to use "real world assets" (RWAs) tokenized using blockchain. Users can borrow digital assets against property, such as vintage cars and real estate if the feature is integrated.

The developers also plan to make other changes to attract more liquidity. For now, Hifi Finance is far behind the leading lending protocols, Aave, Compound and JustLend, in terms of the number of locked-in assets (TVL) and the number of cryptocurrencies available. As new assets are added to the Hifi Finance protocol, TVL is likely to grow: in 2024, the project team plans to increase this figure 25 times to $25 million.