Ape-tizers:

• Altitude is a DeFi lending protocol that automates loan management and optimizes borrowing rates for users
• The DeFi lending sector ($54 billion) is growing, but still has a lot of room to grow when compared to traditional markets ($200 trillion+)
• Altitude improves the lending sector by providing an intuitive user experience while utilizing idle capital to increase capital efficiency

The current market size for the DeFi lending sector is $54 billion (per TVL). As most people’s focus remains on AI and memecoins, the perception that DeFi is this archaic dinosaur that will soon be irrelevant is a misinformed myth.

Yes, DeFi might not be as “sexy” or “fashionable” as the newer sectors, but that’s a good thing. Financial primitives are not meant to be sexy; they’re meant to be effective.

How Altitude fits into the picture  

The DeFi lending sector has been showing great promise, especially over the last two years, with a CAGR of roughly 127%.

Of course, the industry is unlikely to continue to grow at this pace, but the importance of a permissionless lending/borrowing instrument in the broader global context should see the sector continue to grow into a multi-billion or potentially even a trillion-dollar industry.

With that in mind, we are going to introduce you to an up-and-coming player in the DeFi lending sector, specifically designed to simplify and optimize the lending experience.

That player is Altitude.

But before that, let’s quickly get into the current state of affairs of DeFi.

The problems with DeFi lending

Despite the sector's growth, it’s still relatively early days when you compare it to traditional markets.

Estimates suggest that the size of the consumer lending market is between $5.5 trillion and $7.5 trillion. But when you look at areas like mortgage debt, those sectors are well above $200 trillion globally.

This means many inefficiencies still need to be fixed within the DeFi lending arena to allow the sector to grow at a good pace.

Currently, there are four overarching issues.

1. Overcollateraliztion

Overcollateralization means you have to lock up more value as collateral than the amount you borrow when you take a loan.

This is the standard for DeFi lending because users can’t put up any collateral other than on-chain assets.

Combine this with DeFi's anonymous and distributed nature, and defaulting becomes a major issue. Therefore, to protect lending platforms, loans need to be overcollateralized.

Overcollateralized loans allow you to hold onto your assets while spending liquidity. While there is a market for this, the current DeFi lending market does not operate at maximum efficiency.  

2. Idle capital

In DeFi lending, there is a massive issue of idle capital to protect a loan from price fluctuations.

For example, imagine a user is borrowing USDT against their ETH. The loan is already overcollateralized, so the max amount that can be borrowed could be around 85% of the collateral value. However, ETH price fluctuations may leave the position open to liquidation.

Therefore, to protect the position, only 40% of the collateral amount may be borrowed. That buffer is what is referred to as idle capital. Having that much idle capital in the system is a major issue.

This leads into the next issue.

3. Capital inefficiency

So much idle capital in the system is a major inefficiency.

Since protocols keep a collateral buffer, the utilization rates of the pools are far from optimal.

In fact, the utilization rates often affect the interest rates, making them vary frequently. This makes it difficult to optimize for getting the ideal borrow rates and protecting the position.

In addition, there are simply major opportunity costs associated with locked capital that is not actively earning yield elsewhere.

4. User experience

The final issue, which seems to be a common theme in the industry, is poor user experience.

Researching and finding the appropriate pools and rates across the fragmented ecosystem is difficult. Some interfaces can be difficult to understand. Manually opening and balancing positions can also be tedious. Lastly, optimizing your position while staying safe from liquidation is an incredibly tedious task.

With this in mind, allow me to show you how Altitude fixes all of these problems to take the DeFi lending industry that one-step further.

What is Altitude?

Altitude is a DeFi lending protocol that automates loan management and optimizes borrowing rates while generating yield with idle capital. It does this by acting as an automated intermediary between the user and lending protocols.

Altitude is integrated with lending giants like AAVE and Morpho and popular DeFi protocols like Curve, Convex, and Pendle. When a user deposits assets on Altitude, it algorithmically monitors for the best rates and allocates assets accordingly.

Simultaneously, it uses DeFi protocols like Curve, Convex, and Pendle to generate yield for users to pay back loans.

Think of Altitude as an on-chain financial manager that’s available 24/7.

Imagine how handy this would be in the real world. Imagine you have a mortgage, and this 24/7 financial manager is constantly monitoring it.

If your home value increases, they will borrow more and make some investments to pay off the mortgage faster. If the home value goes down, they will pay the loan faster to ensure you don’t default.

The best part is that your finances are optimized in the background without you needing to think too much about it.

User flow

Rather than me boring you with all the technical details of how it works, let’s first run through the general user flow for Altitude, which should give you a better understanding of the product.

The point of interaction for the end user is Altitude Vaults. These vaults are simply a lending pool of two assets that are available on lending protocols like AAVE and Morpho. There’s a borrow side (USDC) and a supply side (ETH).

A user would now like to deposit their ETH as collateral through this Altitude Vault and borrow USDC. This is where the borrow rate optimization feature kicks in.

The protocol constantly monitors all lending protocols for the best interest rates available, with a utilization rate to match the user's liquidity. This ensures that a user can borrow the maximum amount against their collateral at the cheapest rate possible.

Okay, great. You’ve borrowed your USDC, and you can now go buy that car that you’ve always wanted.

The great thing about Altitude is that while you’re at the dealership scanning for cars, your money is being used as efficiently as possible, as the idle capital is being used for generating yield.

Typically, in DeFi, there’s a collateral buffer to ensure you are safe from liquidation due to price fluctuations. The difference between the maximum amount you can borrow with your collateral versus the actual amount borrowed is the idle capital being referred to here.

Altitude employs automated strategies to put this capital to work.

The yields being generated are from relatively safe and sustainable sources; there are no 1,298,288,389% APY ponzi farms to be worried about here. The yield is automatically used to pay back the user's debt in parts.

If the value of the user’s collateral goes up, then the system will borrow more, so there’s more capital that’s generating yield to pay back the loan faster.

If the value of the user’s collateral goes down, then the system will reduce the borrowing to ensure that the position remains healthy and safe from liquidation.

Technical nuances

Beyond this, there are a few additional details associated with the protocol that are worth noting.

Currently, Altitude’s V2 vaults are live, allowing you to borrow stablecoins against your ETH and BTC (wstETH and cbBTC) most efficiently. Initially, Altitude could only farm and interact with one protocol to utilize idle capital. However, they've now introduced the parallel farming feature.

Parallel farming essentially allows one Altitude vault to interact with multiple protocols at the same time. This will be great for efficiently farming idle capital and optimizing yield for better returns.

For example, under this new feature, Altitude vaults will be able to simultaneously generate yield from Pendle and Convex to ensure maximum returns.

The other element that’s important to touch upon is security measures.

The most important one is liquidations. Although the protocol does generate yield with idle capital to payback the loans, there’s always a chance that a user’s position may be too unhealthy.

In volatile market conditions, these positions are open to liquidation. Liquidations take place in a similar way to other lending protocols: the user's collateral is claimed. So, when you have an active position, keep a close eye on the health of your loan.

Liquidations are just one aspect of the security concerns; the other is protection from malicious actors. In this case, ingress controls are employed.

Ingress controls involve the use of the rate limiter and a pausing protocol function to protect user funds against hacks and exploits.

Another security measure is audits. Altitude has been audited by two separate companies and also works with Hypernative.

Hypernative constantly monitors partner protocols in real time for malicious smart contract detection and then acts in accordance to protect the protocol.

In short, funds are safu.

Altitude protocol’s ALTI token

The ALTI token will be the protocol's governance token. The governance system will be weighted, so the number of ALTI tokens held by a user directly correlates to that user's voting power.

ALTI holders will be able to vote on things like:

• Protocol performance fee
• Deploying new yield farming strategies
• Deploying new lending strategies.

Tokenomics

Max supply: 1,000,000,000

The distribution is as follows.

• Ecosystem and community - This will be distributed through airdrops, community grants, staking rewards, and partner incentives
• Altitude Foundation - This allocation will be used for protocol growth purposes
• Team and advisors - 6-month lockup followed by a 30-month linear vesting period
• Seed investors - 6-month lockup followed by a 30-month linear vesting period
• Pre-seed investors - 6-month lockup followed by a 30-month linear vesting period

Concluding thoughts on Altitude

Ultimately, Altitude presents a necessary next step for the DeFi lending sector.

Implementing automated loan management and monitoring the ecosystem for optimal borrow rates while generating yield gives users peace of mind when borrowing through DeFi.

Not only does it make it better for the average user to use DeFi lending, but it also makes the overall system more efficient by putting more capital to use.

By having a simplified user interface, Altitude will attract more liquidity and users to the ecosystem, allowing the sector to grow further and hit the heights that we know it can.

While everyone's eyes are on AI and memecoins, serious stuff is still being built in the DeFi world, keeping the sector growing at a steady pace.

Altitude has the potential to go on and do great things. If you ask me, I’d say keep a close eye on what they’re doing.