Agrotoken is still a new project and probably not mature enough yet, but it seems like exactly the kind of collateral STBL needs. Real World Assets (RWA) won’t be as correlated to cryptos and would help with resiliancy. Curious if the teams have engaged at all
i would say the same points that are valid for why lofty tokens cannot be collateral yet are also true for Agrotokens one, although i agree would be sick to have it on algofi as collateral
I would imagine it would be slightly different? With lofty the token value is derived from real estate incomes while agrotokens are wrapped commodities. The real estate lofty is tokenizing is somewhat illiquid. Also there is an income stream to collect and disperse. Lofty may scale to having thousands of different properties, each with their own token, but Agrotoken deals with a handful of commodities. These commodities are traded in highly liuqid markets so creating price oracles for them won’t look too different than existing oracles.
i mean these problem:
and is there even a way to liquidate those without KYC? do the ASAs represent the actual underlying asset or is it some internal centralized system?
Here is their whitepaper but my understanding of it is that it works similar to USDC. Where the average person can’t go and redeem it for the collateral but their network participants can. It seems like there are already Tradfi institutions loaning against them so that makes me think there it is possible. I think the larger thing is getting a market maker involved who would make money on redeeming agrotokens and create a liquid market on dexes.
I have the impression that agrotokens are (for now) not for a general audience. They can be minted by farmers who own cereal and be used as collateral with large institution (banks, factories…). However agrotokens don’t trade against money on a open market. Thus it has values only for people who are willing to possibly hold tons of cereals. If this design changes and it becomes a tradable asset like another then it would be great collateral indeed
Agrotoken is a very interesting way of bringing real world assets and crypto together and represents a huge opportunity if done right. I believe, as you suggest, the project is not mature enough yet to consider bringing on to Algofi as collateral. There are quite a few things that would need to be vetted in depth: 1. Independent Audits - well beyond smart contracts into verifying the real world assets and their unbreakable and unique tie to the PoGRs. 2. Regulatory clarity and stability - will permissionless DEX’s be legally allowed to facilitate trading of the Agrotokens without requiring KYC? The whitepaper talks about exchanges in the abstract, but which exchanges can legally trade these tokens and whether KYC will be required may vary from country to country. 3. Liquidity - they would need to show multiple sources of deep liquidity on Algorand and beyond. To date liquidity is missing and transaction volume is not significant. Reliable price oracles would need to be available in real-time. 4. Each type of agrotoken (i.e. the token associated with each type of grain) should be evaluated individually since they have different characteristics and presumably different burning fees.
The recent Mango market ‘hack’ was done by hugely inflating the price of a small cap asset on CEX’s and then borrowing against it, I believe. Over $100 million gone. I hope Algofi think long and hard before using any ASA’s as collateral, ever.
thats why ASAs should be listed with collateral factor 0 probably when they dont have deep liquidity or are related to the protocol
Yes - without deep, deep liquidity, the price of a staple commodity is open to manipulation. So while this does open up opportunity to the farmers, the downside is palpable. Not to mention all of the reasons above.