Mantle Ecosystem is rapidly establishing itself as a hub offering a diverse range of decentralized applications (dApps) to its users. Mantle aims to create an environment rich in opportunities for ecosystem participants, enabling them to accumulate yield by engaging with various financial protocols that are part of Mantle Network.

One of the core functions of a healthy decentralized finance (DeFi) ecosystem is the ability to put idle capital to work and increase capital efficiency. To facilitate this objective, decentralized money markets have been established — enabling users to borrow assets while allowing others to lend their assets and earn yield. This brings a financial product traditionally associated with traditional finance (TradFi) into the DeFi space.

This article explores how lending and borrowing protocols improve capital efficiency within Mantle Network, and how users can capitalize on the yield opportunities they present.

The Evolving Landscape of Money Markets

Although both TradFi and DeFi money markets serve the same fundamental purpose of providing a platform for lenders and borrowers, decentralized money markets have become increasingly popular. This popularity stems from the benefits they offer — benefits not available in their centralized counterparts, thereby positively impacting DeFi ecosystems like Mantle.

Through the use of smart contracts, on-chain money markets operate in a permissionless manner, allowing anyone to earn yield through lending and/or borrow working capital freely. This leads to increased participation within these protocols, enhancing capital efficiency within the ecosystem. Regarding Mantle Network, users can freely engage in lending and borrowing activities on decentralized money markets, such as Lendle, without any restrictions. To participate, visit https://app.lendle.xyz/markets and navigate to the dashboard, where you'll find a list of assets available for lending and borrowing.

As with all decentralized money markets, Lendle is noncustodial, meaning borrowers and lenders directly control their funds. This direct control is a perceived advantage that decentralized money markets have over their centralized, traditional alternatives. To see a list of supported wallets, navigate to the “connect wallet” option on Lendle's platform.

The Role of Money Markets in Mantle's Strategy

Integrating lending and borrowing protocols into Mantle Ecosystem has created a new opportunity for owners of Mantle's native tokens to generate yield. This extension of asset utility aligns with Mantle's goal to maximize use cases and opportunities for holders of its native assets within the ecosystem. In addition, the integration of decentralized money markets opens up new avenues for yield enhancement strategies, like looping. On platforms like Lendle, users can use Mantle native assets such as $mETH to engage in looping strategies to optimize their yield farming returns*. This approach aligns with Mantle's objective of offering a diverse range of yield-generating strategies to participants in its ecosystem. Participants engaging in $mETH looping within Mantle native money markets will benefit from Mantle’s recent initiative, which rewards users holding $mETH on layer 2 (L2). The Mantle Treasury has announced its plan to restake 100,000 mETH to generate EigenLayer rewards. To determine eligibility for these rewards, a series of snapshots will be taken of wallets holding $mETH on L2, this includes wallets actively using $mETH within Mantle Ecosystem dApps. The latest developments of this initiative will be shared across Mantle’s social media platforms. Make sure to follow us on X/Twitter and our other social media channels to stay updated.

Enhancing capital efficiency through lending and borrowing protocols directly benefits Mantle Ecosystem dApps. By allowing users to borrow against idle capital, these protocols introduce a dynamic layer of liquidity into the ecosystem. The availability of easily accessible capital encourages users to explore and interact with various dApps, contributing to their growth and development. This aspect is crucial to Mantle’s strategy, emphasizing the importance of creating an ecosystem where dApps can thrive.

*Disclaimer: Users that adopt looping strategies will be leveraged long on the asset they are looping and run the risk of liquidation. Please ensure you understand the risks associated with looping and manage your risk accordingly.

Maximizing Borrowing Potential With Mantle's Money Market Efficiencies

Mantle Network has strategically selected decentralized money markets for its ecosystem by selecting protocols that offer a superior user experience and address common issues associated with decentralized money markets. For instance, their overcollateralized nature limits borrowing power within decentralized money markets. Borrowers are required to deposit a significant amount of collateral relative to the amount they wish to borrow. To help alleviate this limitation, decentralized money markets have introduced creative solutions to address the challenge.

INIT Capital, a “liquidity hook” money market built on Mantle Network, is a great example. With their Auto E-mode (Auto Efficiency Mode), INIT Capital maximizes users' borrowing power by strategically grouping collateral and borrowed assets with closely correlated prices. This approach ensures the highest capital efficiency, allowing users to enjoy strategies that leverage their borrowing capacity to its fullest potential within Mantle Ecosystem.

Here are a few examples of modes on INIT Capital:

• ETH & wstETH mode (ETH and wstETH)
• LST mode (ETH, wstETH, rETH, ETHx, mETH)
• Stable RWA mode (USDY, sDAI, stUSDT, TBILL, USDT)
• Stablecoin mode (USDT, USDC, DAI)
• Majors mode (BTC, ETH)

INIT Capital is now live with the launch of Phase 1 of their campaign. During this phase, users have the chance to earn INIT points by engaging in lending and borrowing activities on INIT, or through referring others to the platform. For every $100 lent per day, participants will receive 1 INIT point. For every $100 borrowed per day, participants will receive 7 INIT points. Start earning your INIT points today by visiting INIT Capital at: https://init.capital/.

Growing Institutional Participation in Money Markets

Institutional clients are increasingly seeking to access the liquidity in decentralized money markets, attracted by the benefits of lower transaction costs, enhanced efficiency, and the permissionless nature of these platforms. Recognizing this, platforms such as Clearpool have worked on creating the first permissionless marketplace for unsecured institutional liquidity. Mantle's recent alliance with Clearpool is set to bring two new borrowers to the Clearpool ecosystem and establish permissionless pools on Mantle. This alliance will provide Mantle Ecosystem with an additional lending vehicle that allows users to accumulate yield. Unlike other platforms, Clearpool empowers lenders by providing direct access to institutional borrowers who comply with Know Your Business (KYB) and Anti-Money Laundering (AML) standards. This compliance introduces an extra layer of security for lenders, thereby safeguarding those aiming to accumulate yield within Mantle Ecosystem.

Mantle Expands with MethLab

Despite the integration of many decentralized money markets within Mantle Network, the team recognizes the benefits they bring to the ecosystem. This is why Mantle is planning to launch MethLab, a liquidation-free, oracle-less lending and borrowing protocol that supports fixed-rate and fixed-term positions on Mantle. Built on an intent-based architecture, MethLab will operate through immutable and permissionless smart contracts, enhancing user security and trust. Users will be able to navigate through MethLab and MNT Stations to utilize assets like $mETH, $MNT, $USDC, and $USDY, leveraging these for various financial activities. The launch date of MethLab's mainnet is still to be determined. If you wish to find out more about MethLabs, please visit https://docs.methlab.xyz/.

The ongoing integration of money markets into Mantle Network signifies a shift towards creating a more inclusive, efficient, and secure financial ecosystem. Platforms like Lendle and INIT Capital showcase how Mantle is making a deliberate effort to mitigate traditional barriers to borrowing and lending, therefore enhancing capital efficiency and unlocking new yield opportunities for users. As discussed in this article, the introduction of decentralized money markets benefits not only users, but also the dApps within the Mantle Ecosystem. Thanks to increased capital efficiency, capital can flow more freely throughout the ecosystem, thereby benefiting the applications within it.