Scallop is a DeFi money market protocol on the Sui Blockchain providing users with seamless crypto lending and borrowing, as well as an easy to use token swap feature.
Since launching the mainnet, Scallop has been driving change in how money markets operate across decentralized finance. Through these efforts, the protocol has pioneered new models for Liquid Staking Derivatives (LSDs) and introduced advanced architectures like the Trilinear Interest Rate Model, which have positioned Scallop as a top DeFi money market on the SUI network.
One of the key solutions that has put Scallop on the map addresses a significant challenge we’ve observed in the Sui lending space: the problem of increasing idle assets caused by an overemphasis on supplying and locking up assets.
This focus has led to a reduction in the liveliness of the DeFi space due to the lack of free-flowing liquidity. Scallop’s approach to directly tackle this issue has seen it adopt a borrow-centric incentivizing model and therefore help revitalize borrowing activity.
Through this approach, the money market protocol has successfully locked up 9 million of its SCA tokens, an increase of 1 million since 2 weeks ago! This means that people have committed to keeping these tokens stashed away for an average of 3.65 years, a milestone that will boost borrowing benefits in the long run. At the same time, it shows strong confidence in the project, as users are willing to hold onto their tokens for a long time.
What is the Scallop Borrowing-Centric Incentive Model?
The Borrowing-Centric Incentive Model by Scallop is an innovative approach designed to encourage borrowing activity within the Scallop DeFi ecosystem and the overall SUI ecosystem.
Unlike traditional models that primarily reward users for supplying or locking up assets, Scallop’s model focuses on incentivizing users to borrow assets.
By doing so, it aims to reduce the amount of idle assets and increase liquidity flow in the market, thereby enhancing the overall dynamism and efficiency of the DeFi space on the SUI network.
What Differentiates Scallop Vs other DeFi lending protocols?
A unique aspect of Scallop is the separation it maintains between lending and collateral pools.
This approach, combined with incentives for borrowing, ensures that both lenders and borrowers see gains, with increased demand also benefiting the lenders.
In essence, Scallop’s interest rate model functions in three stages, each one kicked off by different levels of capital utilization. As the rate of borrowing climbs, the rate of utilization follows, leading to higher interest rates for asset suppliers on Scallop, which eventualy rewards the lenders with greater returns.
Scallop’s Growth Numbers
Scallop has recorded exponential growth since the start of 2024. As of January 3, its total value locked (TVL) was $34 million.
Today at press time, Scallop’s TVL has once again shot over $110 million. This growth indicates a significant rise compared to last year’s September TVL when it was below $4 million.
Not to mention, Scallop’s swap volume has surpassed $20 million with their recent UI upgrade and swap event!
This positive trend points to the increasing adoption of Scallop’s lending pools, where users can earn interest against their crypto savings or borrow assets for a range of purposes. The protocol’s focus on making the platform accessible, secure, and easy to navigate likely resonates with SUI users.
Scallop also has a bridging solution to help users port cryptocurrency assets across different networks while enjoying flexible transaction fees, competitive marketplace offers and high speed transactions. This has made the decentralized protocol attractive for users who want to save more when it comes to conducting decentralized finance transactions.
How to Borrow Crypto on Scallop
- Go to Scallop App, connect your wallet (the wallet must be compatible with the SUI network)
- At the top left of your screen click the “Lending” button, and in the resulting page, switch to the “Borrow” tab as seen below:
- Tap on the “Create Obligation” button
- Then on the “Collateral Pools” tab just below the create obligation button,select a suitable pool for depositing your collateral funds. While you can lock up any crypto asset that’s available on the SUI ecosystem, we strongly advise you to deposit LSD assets such as vSUI, haSUI or afSUI. (Keep in mind that you cannot borrow the same amount of asset as the one you deposit as collateral).
- On the right of the Collateral Pools tab, click the “Borrowing Pools” tab and pick the asset you are borrowing from Scallop. As you see, when you borrow particular assets such as USDT, USDC or SUI, the borrowing incentives or rewards will be provided in SCA or SUI tokens.
Earn More By Staking SCA
The SCA Staking Platform on Scallop has a 4X BOOST program for everyone who stakes SCA for veSCA. However, the SCA that qualifies must come from the SCA Borrow Incentives.
How to Calculate veSCA Boost
Incentivies Boost is determined by held veSCA amount with respect to one’s borrowed amount. The more holding of veSCA one has, the higher the amount they could borrow, hence receiving the highest Incentive Boost.
The Incentive Boost is now derived from the percentages of one’s borrow amount against their total borrowed funds on Scallop, and the amount of held veSCA against the total amount of veSCA.
Deriving SCA Incentive Distribution
Anyone who holds veSCA will get a multiplier on their final APR.
For instance:
If 25.02% is the present SUI borrowing incentive pool, the user will have a 4X BOOST for holding an amount of veSCA. Thereby making their final APR amount 25.02% x 4 to get 100.08%.
To get an estimation of your boost amount, you could try the official Scallop veSCA Boost Calculator.
Final Take
Scallop has big plans to redefine the standards of borrowing, lending and staking on decentralized finance platforms through its focus on better user experience, thanks to its recent upgrade of the user interface, as well as focus on security to safeguard user funds. Through reinventing borrowing and lending in the crypto space, Scallop hopes to not only transform the DeFi space on the SUI network but to also set the standards for money markets across all blockchains.
