TL;RD
We are excited to announce our partnership with Mendi Finance, a forward-thinking DeFi lending platform which will soon be rebranded to Malda and become the first Unified Liquidity Lending protocol powered by ZK proofs! Together, we’re introducing advanced data-driven lending features powered by the Brevis ZK Coprocessor. By leveraging Brevis’s cutting-edge ZK proof technology, Mendi can implement intelligent lending modules that dynamically adjust collateral ratios and interest rates based on real-time and historical liquidity and market data. With the entire implementation being open-source from day one, Mendi is setting the stage for a future where we have more efficient, secure, and data-driven DeFi systems!
Intelligent Lending: Why It Matters
Effective risk management is critical to any lending protocol’s success. Thoughtfully set parameters—such as collateral ratios, interest rates, and liquidation thresholds—protect lenders, minimize borrowing costs, and ensure protocol growth through capital efficiency.
Setting and adjusting these risk management parameters would ideally be carried out on-chain through smart contracts, completely decentralized and verifiable. Unfortunately, smart contracts alone cannot directly access comprehensive historical liquidity and market data, and running complex computations on-chain is prohibitively expensive due to gas fees and resource limits.
As a result, current risk management solutions in DeFi often rely on off-chain centralized systems for calculating these parameters. However, these centralized solutions introduce inherent conflicts of interest. Off-chain providers often serve both asset issuers and lending protocols, meaning they may have incentives to downplay the risk of certain assets to benefit their clients while simultaneously analyzing risk for the protocol.
This creates a challenging situation for lending protocols. Without effective risk management, lending protocols are vulnerable to cascading liquidations during volatile market conditions. And without a decentralized, trustless solution for that risk management, protocols risk manipulation of risk parameters by entities with misaligned incentives.
To truly align with the ethos of DeFi and tackle this challenge, we need a way that risk management can be both effective and decentralized—trustless, verifiable, and transparent.
That is where Mendi and Brevis come in!
How Brevis Powers Intelligent Risk Management
Mendi is solving this challenge by partnering with Brevis to deliver a trustless, dynamic risk management system with ZK coprocessing.
Here’s how it works:
- Verifiable Input Data: Brevis extracts historical on-chain liquidity data—for example, liquidity depth and price volatility—from DEXes like Uniswap V3.
- Verifiable Computation: Using zero-knowledge proofs (ZK proofs), Brevis computes advanced risk models off-chain. These models determine optimal collateral ratios and interest rates for lending markets.
- Trustless Updates: The ZK proofs validate both the input data and computation results on-chain, enabling secure and transparent updates to Mendi’s smart contracts.
For instance, Brevis can generate a proof that certifies the amount of ETH required to reduce the ETH/USDC price by 2% within a specified timeframe. This liquidity depth data provides the foundation for dynamically adjusting the Mendi vault’s setup including its borrowing interest rate and the collateral ratio, ensuring precision and resilience across different market conditions.
Here’s an example of this showing that a user would need to sell 8000 ETH for a 2% ETH/USDC price drop:
By eliminating the centralized black-box systems, this approach fully embraces DeFi’s ethos of trustlessness, security, and transparency.
Next Steps: Building the Future of Intelligent Lending
Our collaboration with Mendi Finance begins with the rollout of a dynamic risk module powered by Brevis’s liquidity depth proofs. This module will:
- Dynamically optimize collateral ratios based on historical liquidity depths of collateral assets in DEXes like Uniswap V3.
- Adjust lending interest rates in real-time to reflect evolving market conditions and specific asset risk profiles.
Looking ahead, we plan to support machine learning (ML) models including Brevis’s SpaZK framework to enable Mendi Finance to develop even more advanced and adaptive risk parameters, creating:
- Smarter, ML-driven risk management systems.
- Highly flexible lending platforms that evolve continuously with market dynamics.
This innovative roadmap solidifies Mendi Finance’s position as a trailblazer in decentralized, intelligent lending solutions!
To ensure full transparency, Mendi will open-source the entire implementation. This allows the community to audit and verify the models and computation pipelines, ensuring that risk management is intelligent, secure, trustless, and community-driven.
We’re also excited to soon see Mendi onboard community developers who share our passion for combining blockchain and ML. By providing the tools to build with verifiable data and models, we look forward to seeing innovators help shape the future of Mendi’s lending platform utilizing Brevis and SpaZK!
About Mendi Finance
Mendi Finance, soon to be rebranded as Malda, is a decentralized lending protocol currently on the Linea blockchain. In Q1, we will elevate the protocol to new heights by seamlessly unifying liquidity across Ethereum Mainnet and L2s through the integration of ZK proofs.
About Brevis
Brevis is an efficient, verifiable off-chain computation engine that brings limitless computation capacity to existing smart contract blockchains. Utilizing zero-knowledge proofs, Brevis offloads data-intensive, costly computations from on-chain environments to a drastically lower-cost off-chain engine, and empowers Web3 applications to scale seamlessly while preserving the security of L1 trust assumptions.
With Brevis’s versatile Go SDK, smart contracts can access blockchain states, transactions, and receipts across multiple blockchains and timeframes. DApps can transform complex business logic that are expensive to execute with smart contracts into succinct, low-cost circuit outputs that are mathematically verifiable on-chain. Powered by Brevis, use cases like data-driven DeFi, personalized GameFi experiences, and on-chain reputation systems can unlock the full potential of decentralized data, and accelerate blockchain adoption on a broader scale.Dive
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