TI Rating Report: NAOS Finance

NAOS Finance is an on-chain lending protocol based on real-world assets. By cooperating with third parties in the real world, users can use real assets as collateral to obtain loans of fiat which is converted from stable coins. NAOS Protocol consists of two sub-protocols, NAOS Formation and NAOS Galaxy. 

Among them, NAOS Formation is a future-yield-backed synthetic asset protocol with 3 components: Vault, Transmuter, and Staking Pool. 

• Vault: Vault is the module for future-yield lending. After users deposit their DAI in the vault, they can obtain their future yield in the form of synthetic stable coin nUSD. The collateral ratio is 200%, which means that the max borrowable value of nUSD equals half of deposited assets generally. Users’ deposits will be staked on yearn.finance for DAI yield farming, and the farming profits will be used for paying users’ debts. On this basis, users can choose to withdraw some deposits or borrow more nUSD to keep the collateral ratio. As of Nov 4, 2021, the yield APY is 6.76%, while the amount of nUSD has exceeded $9m. 
• Transmuter: Transmuter is the module for converting nUSD to DAI gradually when users borrow nUSD from Formation. These DAI can be used to pay debts. Users can also withdraw the remaining nUSD and transmuted DAI at any time.
• Staking Pool: NAOS Finance provides 5 staking pools on Ethereum and BSC to attract liquidity for NAOS and nUSD, including NAOS single staking pool, NAOS/ETH LP Pool, NAOS/ETH SLP Pool, nUSD/3CRV Pool and NAOS/BNB LP Pool.  Liquidity mining rewards will be paid back to LPs in the form of NAOS.

NAOS Galaxy is the lending protocol based on real-world assets. It has a lending pool (“Alpha pool”) for making loans and an insurance fund pool ( the “Beta pool” ) for paying the loss of lending pool. Alpha pool accepts stable coins, and only liquidity providers (LPs) with KYC and eligible, while Beta pool has no KYC requirement and accepts nUSD only. As “compensation” for taking risks, LPs of the Beta pool will receive higher yields. If borrowers defaults on their debts or borrowers’ loan are liquidated, the Beta pool will pay the loss of Alpha pool with nUSD, while the principal remains untouched and continues to earn yields to pay down the nUSD loan.

As of Nov 4, 2021, NAOS Formation is in stable operation on Ethereum and BSC network, and its V2 version is expected to be audited completely at the end of November. NAOS Galaxy is still in the testing phase and is expected to be officially launched at the end of November.