Voluto is a savings account alternative that allows you to earn a high-interest return on your digital cash. We provide an easy way to access the Compound digital cash pool. While traditional banks offer 0.05% interest on average, Voluto’s users can earn up to 6%. Further, there are no lock-up periods or any hidden fees.
Voluto connects your funds with a digital cash pool on a Compound platform. Compound and Voluto is powered by an open financial technology called DeFi. On one side there are suppliers who supply funds to the pool and immediately start earning interest. On the other side, there are borrowers, who can access the funds supplied to the pool and borrow. To make suppliers safe, borrowers must lock-in their own assets as collateral. Once the loan is issued, the borrower automatically starts paying the interest back to the pool. This interest is then distributed to all of the suppliers. There are no middlemen, no exorbitant fees, or any lock-up periods.
If you want to open a savings account in any traditional bank, you are offered a 0.05% interest rate on average. Meanwhile, banks are lending your money to others and earning 2 to 10% interest. Voluto removes any middlemen and automates the process. The app is connected to the Compound - open digital cash pool powered by DeFi (“Open Finance” or “Decentralized Finance” ). So, instead of depositing your money to the bank, you supply funds to an open digital cash pool. This pool starts paying interest right away. Even if nobody has borrowed your money. However, if someone wants to borrow, they have to secure a loan with 150 to 200% of their own assets as collateral. Once the loan is issued, the debtor automatically starts paying back the interest which is returned back to the pool. There are no middlemen, nor exorbitant fees and you can withdraw anytime with Voluto.
To take a loan from the pool, the debtor has to provide collateral of 150-200%. This means that before borrowing $100, the person has to provide at least 150 to 200$ worth of digital assets. It prevents collateral drops below the loan’s balance over the contract duration. Moreover, the Compound system ensures that there are always significantly more funds in digital cash pools than issued loans.
Additionally, digital cash pools are controlled, audited, and supervised by the network and 3rd parties. This assures that digital cash pools work as intended. If you’re interested, you can check more on Compound audits here and here. We understand how important security is in such cases, so Voluto is protected with Apple Passcode, Face ID or Touch ID. Despite all the efforts, it is important to understand that DeFi (Decentralized Finance), Compound, and the whole digital asset ecosystem are very recent and still evolving. There are risks involved when supplying funds to a Compound digital cash pool through the Voluto app and that it should be done solely at one’s own discretion. More information on the Compound available here.
As the whole DeFi ecosystem is still young and evolving, there are some risks that you should be aware of.
“Bank-run” risk. There is a risk of all pool suppliers deciding to withdraw their contributions. In such a case, the surplus would be draught, and for a short period of time, some contributors would not be able to withdraw their funds. However, if such an instance arises, the lending interest rate would increase to the maximum (at the time of writing 20%) and the borrowing rate would increase a lot as well. Such development motivates borrowers to return their loans, and new contributors to come in. During the whole Compound history, this (“pillow drain”) happened only once and was resolved in a few minutes without any effect on users funds.
Smart contract risk. Even though DeFi smart contracts have been actively used for the last several years, there is still a possibility that bugs are there to be found. However, most of those smart contracts have already been audited by renowned blockchain auditors, such as OpenZeppelin. On top of that extensive stress tests to evaluate Compound’s robustness had been performed by Gauntlet Network.
After you transfer funds from your bank account, our partner converts them to a digital cash called USDC. Once these funds are in USDC, we send them to the Compound and you begin earning interest. When you decide to withdraw your money, USDC is converted back to EUR and returned to your bank account.
The digital cash pool is a virtual network, where people supply and borrow funds from one big pool, based on pre-established rules. The reason why this works is that instead of depositing your money to the bank, you supply funds to an open digital cash pool. This pool starts paying interest right away. Even if nobody has borrowed your money. However, if someone wants to borrow, they have to secure a loan with 150 to 200% of digital assets as collateral. Once the loan is issued, the debtor automatically starts paying back the interest which is returned back to the pool.
In the Compound liquidity market, interest rate fluctuates based on supply and demand. For example, if suppliers start taking out the funds from a pool, the interest rate rises. This motives more suppliers to come to the market. With an increase in funds supplied to the pool, the interest rate declines, which increases borrowing and so on.
Users can withdraw funds instantly with no restrictions because the system ensures that there are always more funds on the supply side of the pool than on the borrowing side. This supply surplus means that the interest paid by the borrowers must be spread across a large pool of suppliers and that the borrowing rate always exceeds the supply rate. It is for this reason Voluto users have the freedom to withdraw funds from the pool quickly and at any time.
In short: DeFi is a financial technology that enables global and open financial systems. A global lending pool like the Compound, and Voluto, is powered by DeFi. These open financial systems are accessible to anyone wherever they are.
Recently, one of the most prominent and successful Venture Capital firms, Andreesen Horowitz invested $25m into Compound. Industry leaders describe DeFi as the future of finance!