Pans, Eggs, and Bacon. The keys to a delicious breakfast, or the tools to decentralize the $16T US mortgage ecosystem? 🤔
The Bacon protocol is creating a decentralized mortgage lending system that will become the new industry paradigm. Bacon’s permission-less, open-source environment will allow any investor to get access to the tools that major financial institutions have utilized for decades. Anyone can be a part of this lending or borrowing – all you need is an Ethereum compatible wallet and USDC.
To leverage this revolutionary technology, there are a few terms we want to introduce - all components of a balanced breakfast – Pans, Eggs, and $BACON. Let's start cooking!
Glad you asked! Pans, Eggs, and BACON are three of the core functional elements of the Bacon Coin protocol:
Pans are the smart contracts that help us pool funds in the protocol. Pans help us manage the total funds, mint bHOME tokens, and fund new mortgages. A Pan is the core smart contract of the protocol. It holds deposited USDC, as well as the liens against homes as mortgages are taken out using the Bacon Protocol. Currently, the Total Value Locked (TVL) in the Bacon Protocol is held in one Pan (a depositor’s stake in which is represented by the bHOME token), but over time Bacon Protocol may add new Pans that target specific kinds of homes or loans. For example, an Austin Pan that groups home mortgages in the Austin area (aHOME).
Eggs are NFTs that represent ownership of the property being mortgaged. A loan originator can issue an Egg (or NFT) of a home to the owner. The owner can then stake that Egg into the Bacon Protocol in order to take out a lien against their home. By staking the Egg, the owner can take a loan out for $10,000 USDC and make payments back to the Pan. Once payments are made and the balance is paid, the owner can un-stake their Egg. Eggs open up a new world of composability for homes in DeFi.
$BACON is the governance token of the Bacon Protocol. Holders of $BACON vote on the future policy decisions of the protocol including; the creation of new pans, adjustment of the AMM parameter for interest rates, changes to protocol behavior, allocation of liquidity incentives, usage of treasury funds, and bonding for servicers.
Note: As a reward for depositing USDC into the Pan and staking their corresponding bHOME tokens, early adopters of the protocol are rewarded with $BACON.
Pans, Eggs, and BACON are each individually delicious, but together they create a powerful ecosystem leveraging smart contracts and innovating the home mortgage system.
There are two different aspects that make the Bacon Protocol work: lending and borrowing
Lending is one of the most important features of the Bacon Protocol and a powerful diversification tool for investors. Traditionally, it was difficult for the average retail investor to diversify their portfolio by investing in consumer mortgages (historically one of the safest yield generating asset classes) since the minimum threshold for access was limited to institutions and high-networth individuals.
Now, users are able to deposit USDC into Pans in exchange for bHOME. The deposited USDC is used to pool funds together for loans. More USDC in the Pans means more available capital for home mortgage loans. The more loans that are given out, the more interest that the protocol collects, which ultimately makes the protocol stronger for more robust investor diversification.
Once there is sufficient liquidity in the protocol and USDC in the Pan, users can begin borrowing funds against their homes. Bacon Protocol uses approved loan originators who are licensed, regulated, and incentivized to act in the protocol’s interest.
Originators help you mint Eggs and turn your home into an NFT, but before they do that they must:
After the originator confirms the home has sufficiently met these requirements, the originator can mint an Egg (or NFT) of the home and send it to the owner's wallet. After receiving the Egg, the owner can then stake the Egg in the Bacon Protocol and borrow funds against the home using the home as collateral.
Once the borrowed funds are repaid, the owner can un-stake the Egg and return it into their wallet, and (in the future) use the Egg in other protocols that accept Eggs as collateral. They may also return the Egg to the originator who will then in turn remove the lien on the home.
The traditional mortgage system is littered with stories of prejudice and other predatory activities. We’ve created the Bacon Protocol to bring the open-source, permissionless promises of DeFi to a $16T market that has lacked significant innovation for decades.
Investors lend to Pans. When a Pan has sufficient liquidity (lots of USDC) this allows homeowners the ability to stake Eggs (NFTs of their homes) and then take out a smart loan (mortgages taken out against their home) and borrow against the value of their home. Investors benefit by gaining access to a low-risk, high-return asset class, and homeowners have access to liquidity (based on their home value) in a decentralized, transparent process. All of this is governed by $BACON.
By creating a system for decentralized borrowing and lending against homes, Bacon Protocol is pioneering a new wave of finance that hopes to lower rates, give more access, and overall create a better infrastructure for one of the largest sectors of the economy.
To get started decentralizing home mortgages deposit some $USDC into our Pan