LP Token Lending Market

Temperature Check
1

In anticipation of the roadmap dropping, I thought I’d start a product discussion around a feature I think we should build (obviously not in the next 6 months). Maybe Christmas will come early and it will be in the roadmap already.

Summary

The Algofi core developer team should implement a lending market where liquidity providers can use
their LP tokens as collateral to borrow the tokens in that same pair. A DeFi platform on Ethereum, Impermax, has already been succesful with this functionality.

  • LP lending can be leveraged at higher multiples than normal tokens while still being over colateralized
  • To see an example of this live, check out Impermax on EVM chains
  • Here is their whitepaper to get into the technicals of how it works
  • An LP lending market would bring users, demand, and therefore higher TVL
  • An LP lending market can be the basis of further products, such as a decentralized ICO

Proposal to Discuss

Implement an LP token lending market

Motivation

The sustainable way to grow the platform is to increase demand for loans. More demand for loans increases interest rates, which leads to more people puttin up collateral (increasing TVL) in order to get the juicy yields. Launching products that encourage borrowing is the sustainable way to do this. Currently the lend product serves users who would like to bet on or against the price of an asset (longing vs shorting). An LP lending market would open up a new bet, betting on the price of two assets to stay correlated.

LP lending markets are special because they can facilitate loans above 1X leverage while still being overcollateralized. That means users can borrow more than they have in collateral without lenders being at risk of unpaid loans. The loans can only be made against the same pair. For example, if I have STBL2<>USDC LP tokens as collateral, I can only borrow STBL2<>USDC LP tokens. I would also not be allowed to remove those borrowed tokens from Algofi. Consider the following example:

  • Right now the STBL2<>USDC LP is yielding around a 3.2% return
  • I have $10 worth of LP tokens
  • I borrow $1000 worth of LP tokens (500 STBL2 and 500USDC), with my $10 as collateral.
  • I am now earning 3.2% on the $1000 on top of the 3.2% on my original $10, minus whatever borrowing interest I’ve incurred.
  • I cannot withdraw or sell the LP tokens I borrowed, only earn fees from swaps
  • I will be liquidated if the balance of tokens in the AMM drifts too much (essentially a large price swing in the pair). Let’s say in this example STBL2 depegs and is now worth $0.98.
  • The value of what I borrowed is now around $990 but the value of my collateral has fallen below $10. So right as those values cross, my collateral would be liquidated and sold to make borrowers whole. This is why I can put up $10 of collateral but borrow $1000

This can be composed in such a way that borrowers are actually borrowing from the STBL2 and USDC2 lending markets and the smart contracts compose zapping into LP tokens. That means that people can supply liquidity to Algofi lend and now also be exposed to yields of AMM swaps without taking on Impermant Loss (IL) risks. Those that are very confident in their ability to manage the IL can leverage their position for extremely lucrative yields. All of this deepens liquidity on the DEX as more of the collateral on the platform gets utilized for swaps.

Further Discussion

Oracle Risks

Impermax uses Time Weighted Average Price (TWAP) to handle liquidations. There have been concerns before ( Lending Pool Collateral Factor Adjustments ) about the risks of manipulation with LP tokens. One of the things that is nice about an LP lending market is that the collateral is the same set of assets as what is borrowed, so there is no market selling that needs to happen during liqiudation.

Out of Scope for Algofi

There is argument that this could be a seperate product (like Impermax is) with a seperate DAO entirely. Personally I think there are benefits to vertically integrating this functionality into Algofi the same way the DEX was.

Decentralized ICO

I believe an LP lending market could be the foundation of a decentralized ICO functionality. Right now a huge problem in the space is rug pulls. Lack of a desire for devs to dox themselves, lack of credible backers, and liquidity are all barriers to credible tokens being launched. I believe an LP lending functionality could be composed into something grander, I’m imagining something like:

  • A team with a project but no token wants to launch a token (think NFD, etc)
  • Team goes to Algofi and uses the decentralized ICO functionality
  • They enter a few parameters (collateral in STBL2, token supply, initial price, vesting schedule, leverage, etc) and execute a contract
  • Algofi mints a new token and creates an AMM with the team’s collateral and their new token as the pair
  • The team’s LP is instantly leveraged (to the multipier they specified) with STBL2 borrowed from the lending market and the newly minted token coming from an emissions wallet created with the token.
  • The emissions wallet is only for lending into LP or for preconfigured fair launch emissions related to the project
  • The team regains control of their collateral on a schedule according to the vesting schedule they created
  • Users can now feel assured the token won’t instantly rug because the project would lose their STBL2 collateral if the price moves aginst them too much.
  • Projects can tap the STBL2 lending market for liquidity and the trust of Algofi for a token launch without dealing with a centralized entity
  • Algofi earns interest on the tokens it minted for the project in the emissions wallet, by lending to the project’s leveraged LP position. This earns the Algofi treasury a piece of the ICO.

Prioritization

We’re about to see the Roadmap so it will be interesting to see how much this aligns or diverges from the developer’s priorities. There are things like Ranged LP pairs that could be arguable as signifigant of product enhancements, so quite open to a debate on where this falls.

Exit Poll

Would you be interested in Algofi supporting an LP Lending Market?
  • Yes
  • No
  • Undecided
  • Don’t Care

0 voters

2

thats still a problem with assets like goETH for example. the oracle price of it is not affected by the ratio in the liquidity pools since off-chain data is used for that. they would need to have different oracles for the different lending markets (aka an orcale for the normal lending market and one for LP lending market), am I correct?

3

Yes a TWAP oracle for LP borrows and a traditional oracle for traditional lending. Knowing the actual USD price of goETH isn’t necessary because all the collateral and all the loans are denominated in the same units. Its more like borrowing ALGO against itself for governance in the lending market, knowing the price of ALGO in USD does not actually matter to figuring out if someone should be liquidated. The liquidation point for an LP is the point where your LP collateral doesn’t have enough of either one of the tokens in the pair to repay lenders for the IL their tokens have experienced. All of that is denominated in units based on the pair.

1 Like
4

“The collateralization model calculates the 𝑐𝑜𝑙𝑙𝑎𝑡𝑒𝑟𝑎𝑙𝑁𝑒𝑒𝑑𝑒𝑑 for a loan to not go
underwater if a price swing of 𝑠𝑎𝑓𝑒𝑡𝑦𝑀𝑎𝑟𝑔𝑖𝑛 happens on the Uniswap pair when the loan
is in a not liquidatable state. In other words, we guarantee that if a loan is not liquidatable
at a certain point of time, after a price swing of 𝑠𝑎𝑓𝑒𝑡𝑦𝑀𝑎𝑟𝑔𝑖𝑛 the value of the collateral
will still be enough to back the loan.”

thats not what the whitepaper says tho

5

My understanding is that is the same thing. 𝑐𝑜𝑙𝑙𝑎𝑡𝑒𝑟𝑎𝑙𝑁𝑒𝑒𝑑𝑒𝑑 doesn’t need a an external price orcale to be computed. Let’s say the pool is goBTC/goETH. If the price of ETH and the price of Bitcoin drop by exactly 50%, my collateral will have lost half its value in USD. But so would the goBTC/goETH LPs I borrowed. So my debt dropped just as fast as my assets, making my utilization the same. I borrowed X ETH and I still have X ETH so I’m not getting liquidated, the USD price doesn’t matter. If one of ETH or BTC drops/rises in price faster than the other, this only matters because arbitragers are going to force IL on the pool (if the price is dropping faster than swap fees compensate). That IL is what chips away at my holdings goBTC or goETH and can force liquidation, because its possible I’ll end up with not enough of one of them to back my loan.

So when the whitepaper talks about price, its not the USD price, its the ratio of the AMM. so for goETH/goBTC it is the price of goETH denominated in goBTC. The USD price can move without the goBTC price moving. The price we care abot is always the AMM ratio so we don’t need an external orcale to know that, TWAP works.

7

Hi there are several things I don’t understand.

  1. From my understanding of your explanation, the borrower receives the LP APR. This means that the lender stop receiving it. I don’t understand why anybody would then lend their LP tokens unless the supply APR (and thus the borrow APR) is superior to the LP APR. In which case there is no point in borrowing.

  2. In the current version of Algofi, I can already deposit my LP tokens as a collateral, borrow assets from that pair (or literally any assets available) and deposit more in LP tokens (or do whatever I want with it). Why is the existing solution not satisfactory?

  3. You say that with 10$ of collateral you can borrow 1000$ and still be collateralised can you please explain how that works because for me that is not the definition of being collateralised.

8

@Rone thanks for the thoughtfully written questions. Hopefully I can clarify

  1. From my understanding of your explanation, the borrower receives the LP APR. This means that the lender stop receiving it. I don’t understand why anybody would then lend their LP tokens unless the supply APR (and thus the borrow APR) is superior to the LP APR. In which case there is no point in borrowing.

The lender is not actually holding LP tokens. The lender(s) were holding the individual tokens of the pair separately in the existing Algofi market. If I were to borrow 1 STBL2/USDC LP from this market, what is actually happening is the smart contract is borrowing 1 STBL and 1 USDC from their corresponding Algofi markets and zapping them into an LP and then acting as a custodian for that borrowed money. Because the LP token can always be redeemed for the underlying assets, the LP is one to one the same as the two things I borrowed. So the lenders who are just supplying to the Algofi lend markets are not currently exposed to DEX swap fees. Anyone supplying collateral should support this proposal because it add another reason people will want to borrow their collateral and pay them interest. It allows them to earn that interest without actual exposure to IL because they were never actually holding LP tokens.

  1. In the current version of Algofi, I can already deposit my LP tokens as a collateral, borrow assets from that pair (or literally any assets available) and deposit more in LP tokens (or do whatever I want with it). Why is the existing solution not satisfactory?
  2. You say that with 10$ of collateral you can borrow 1000$ and still be collateralised can you please explain how that works because for me that is not the definition of being collateralised.

So just to clarify, I’m not proposing replacing any existing functionality with lending. This would be a separate type of borrowing but against the same collateral. The existing mechanism would stay in tact for anyone who wants to use it .

Currently you can deposit LPs (just USDC/STBL2 actually) and then borrow tokens, not LPs. You can also borrow any token available, not just USDC/STBL2 LPs. The tokens you borrow have to be overcollateralized, such that the value of what you borrowed does not exceed your collateral. You can also withdraw what you borrowed and send it to any wallet and spend it as you see fit. You can even redeposit what you borrowed into Algofi and borrow even more (ie leveraging). An LP lending market would be a parallel borrowing market with additional constraints. You could borrow any LP pair that can be composed from the lending collateral, so any pair formed from ALGO, USDC, STBL2, Tether, goBTC, or goETH. However, you have to have that exact same pair as collateral for the loan. You also would not be able to withdraw what you borrowed from Algofi or send it to any other wallet. What you borrowed would have to stay in the Algofi platform and would not count as additional collateral. These constraints make the LP borrowing market more limited than the normal market but this is what allows for much more aggressive leveraging.

Okay so let’s talk about how you can supply $10 of collateral but borrow $1000 in this LP lending market. Remember, I am supplying something like USDC/STBL2 LP tokens and then executing a smart contract that borrows USDC tokens and STBL2 tokens separately, and zaps them into custodian USDC/STBL2 LPs. So my assets will look like $10 of USDC/STBL2 LP token, my debt will be $500 of STBL2 and $500 of USDC, and my custodial assets will be $1000 of USDC/STBL2 LP. I’m still overcollateralized because my custodial assets + my deposited assets are greater than my debt. Because my debts and my assets are all functions of the same two tokens, if they both drop in dollar terms by the same amount, I wont be liquidated. Liquidation will occur only because Impermanent Loss (from arbitragers) is greater than the swap fees and my LPs (both deposited and custodial) fall such that I’m at risk of no longer being over collateralized. That is when just like the normal lending market, you’d get liquidated. The reason this can allow for leveraging to crazy rates like 100x is that you only get liquidated when the value of the LP drops enough that selling your initial deposit won’t cover the losses on what you borrowed. When everything is denominated in the same units, this is actually allows for very high amounts of leverage. If you have ever played with cap.finance on ETH you can see that playing out.

All of this can be thought of as the multivariate case of borrowing the same asset against itself. Like when people borrow ALGO against ALGO to maximize governance rewards. It doesn’t matter what the price of ALGO in USD is because your assets and debts are all denominated in ALGO.

1 Like
9

ok you are saying that people will only get liquidated it the IL is too high. so isnt this easy to manipulate? the devs retired the borrowing against LP tokens of those lower liquidity pairs for a reason. one could be that the composition of the LP tokens could be manipulated to force liquidations, wouldnt that still be possible with your systen?

11

Ok thanks for the details explanation. So what happens is you do not really borrow collateral but rather you borrow the right to put existing collateral into a LP token and you are vouching only against impermanent loss. Even though it’s an interesting idea I find it artificial and potentially dangerous. With this amount of leverage x100 (or more), it will easily be possible to have pools with artificial liquidity, that is pools were most of the LP tokens come from the lending market and not from ‘true’ liquidity providers.

Let us assume for example that someone deposit 5k$ of A/B LP tokens on Algofi and use it to ‘generate’ 500k$ LP tokens. At the time of deposit the price of A and B are the same (1$) and only 500k$ other LP tokens exists on the protocol. So the composition of the pool is initially 500k/500k with half of it belonging to lenders

The price of B drops to .8 while A stays at 1. The composition of the pool is ~450k/560k. The impermanent loss is ~.6% thus taking into account collateral factor, liquidation premium and so on, we can assume the user gets liquidated and that the lenders are given back their collateral.

So the composition of the pool becomes 200k/310k. If my computations are correct this corresponds to a price of .65 for token B if A is still considered at 1.

This behaviour seems toxic for the protocol and should be avoided in my opinion.

12

yes exactly

Even though it’s an interesting idea I find it artificial and potentially dangerous. With this amount of leverage x100 (or more), it will easily be possible to have pools with artificial liquidity, that is pools were most of the LP tokens come from the lending market and not from ‘true’ liquidity providers.
…
So the composition of the pool becomes 200k/310k. If my computations are correct this corresponds to a price of .65 for token B if A is still considered at 1.

I’m going to respond this in two ways. The first is simply empirically. Impermax has been running for over a year and they don’t use their own dex, they use the LPs of existing DEXs like Uniswap, Sushi, etc. TVL at the peak of the bull was $75M and that has not had a noticeable effect on the AMMs Imermax has built on. The most popular pairs to leverage are stable to stable pairs since its the safest bet and so they get leveraged to the maximum (around 50x). Impermax has also survived a number of different market conditions and not had failures, which is very promising for this model.

But to answer this based on theory, to start your example doesn’t include the users collateral as a part of the pool, remember their collateral has to be denominated as that same LP. So to make this math easier, let’s say the person borrowed $490K and the rest of the pool was $500K. Second, IL of 0.6% is too much IL, the user should have been liquidated far earlier than that. If they have $10K in LP tokens as collateral and $490K in debt (245K A and 245K of B) then they will get liquidated when they don’t have enough of A or B between their loan or collateral for that token. When this all starts, the borrower will be holding 250K of B and have a debt of 245K. The point when the loan would get liquidated is around B being 0.98. At around 0.98 for B the pool will be 505K/495K. Once the 0.98 threshold is crossed the borrower gets liquidated and the pool goes to 255K/ 245K. B would be priced at 0.96, which is substantially less distortion than the sample you gave.

Even then there are a few other things that can be done to limit this. Impermax limits leverage to 50x and the example I gave above was double the amount of leverage with still not a ton of distortion on liquidation. Second, like any smart contract based lending market, you need to put a safety margin in to handle delays in the market or with price oracles. So even though the threshold would be 0.98 in the example, we’d actually want to liquidate them at say 99 cents. That would take the pool from 502.5K/497.5L to 252.5K/247.5K which is a post liquidation price of 0.98. So playing with the variables of safetyMargin and max leverage, or more intelligently basing them off the non borrowed liquidity of the pool, can ensure that the distortion is capped.

13

these uniswap pools have deep liquidity tho, something that we can only dream of on algorand right now sadly… and just because something worked somewhere else its not safe imho. we have to talk about the risks it has irrespective of its success and imo its looks like its way to easy to force liquidations with this low liquidity we have right now.

but i will be honest i dont understand where TWAP would be used now to help with sudden changes in the LP and if it would be used how it would not leave the protocol with potentially bad debt

14

tl;dr

  1. My earlier comment provides math that shows that the price impact of liquidations won’t distort prices, Impermax’s success in practice should add confidence to that.
  2. TWAP is just the average price over the last hour, it prevents from manipulation of the pools because manipulating a pool for that long is not feasible due to arbitrage
  3. The risk of bad debt is the same risk as the regular lending market and can be hedged with the same tools.

these uniswap pools have deep liquidity tho, something that we can only dream of on algorand right now sadly… and just because something worked somewhere else its not safe imho.

Well @Rone’s line questions weren’t about people manipulating the underlying pools it was about liquidations creating unwanted price movements. My point about Impermax is we haven’t seen that in practice. Now I can hear your point about the deepness of other DEXs liquidity, however the point of the example I provided earlier is that even with a market with just $1M in liquidity and half the pool is borrowed at 100x leverage, a liquidation would only cause a ~2% price movement. Limiting and leverage and having a safety margin can easily bound that to under 1% with that level of liquidity and half as much less leverage (still 50x). So unless someone can provide a counter example based on the math or based on practice, imo this fear is unsubstantiated.

but i will be honest i dont understand where TWAP would be used now to help with sudden changes in the LP and if it would be used how it would not leave the protocol with potentially bad debt … we have to talk about the risks it has irrespective of its success and imo its looks like its way to easy to force liquidations with this low liquidity we have right now.

“In finance, time-weighted average price (TWAP) is the average price of a security over a specified time.”. If the pool was goETH/STBL2, TWAP at any given time is the average ratio of goETH/STBL2 in the AMM for every block of the last transaction. So if you were to say flash loan a ton of goETH and dump it on an AMM to move the price, that won’t force any liquidations because the vast majority of blocks had a ratio corresponding to the actual price. That one flash loan wouldn’t be enough to raise TWAP. Distorting the pool long enough for TWAP to adjust and force liquidations would take an hour. Attempting that would never work because all the money tossed into that strategy would get arbitraged away as smart players. If you are dumping goETH in the pool people will buy it and sell it on another DEX like tinyman or a CEX. Their arbitrage buys rebalance the pool.

Now the case where the protocol ends up with bad debt is that the price actually dumps within an hour and it is not manipulation. goETH dumps 50% within an hour for example and its not manipulation. That risk is also hedged for via the safetyMargin. You liquidate the position before the actual threshold where the collateral is no longer able to cover in order to build a buffer. We are already doing this via collateralization factors on the existing lending market. You can only borrow 80% of the value of your USDC because if USDC depegged, there is no guarantee that liquidations would happen fast enough to cover. So the 20% buffer exists so that the price can fall even more before all the liquidations are sorted out and the protocol can still cover. If you believe that risk can’t be managed, then you shouldn’t even be participating in the regular lending market let alone an LP one.

This isn’t a new risk, its one we already have to systematically manage and is lending protocols biggest risk. Imo the way you cover that risk is by being very careful about the collateral that you offer. I will very strongly oppose adding pretty much anything risky enough for a . That is why personally I agree with others in voting against things like Defly, Planets, etc as collateral. IF those tokens got rug pulled, they can drop in price fast enough that even on the regular lending market the protocol ends up in debt.

15

but that flash loan would be enough to hit the safety margin possibly? or is another oracle used for the safety margin? (btw maybe a flash loan wouldnt work anyways since all that happens in one block and i dont know if that would really affect anything)

and what i dont understand in general is: if this works so well why did impermax’s liquidity literally die?

16

but that flash loan would be enough to hit the safety margin possibly? … since it happens in one block

With a flash loan, one could compose one big transaction that borrows the money, distorts the pool, liquidates someone, and then repays the loan all in one block. It is the most risky situation because it is a set of transactions not liable to arbitragers. However, the risk is still present outside of a flash loan, as you’ve pointed out. However TWAP protects this. Let’s say that our TWAP is averaged on a per second basis over the last hour. There are 3600 seconds in an hour. Let’s say I crashed the ratio of goETH in the pool to $1000, when its normally $1500 and I was able to sustain this against arbitragers for 10 minutes. So for 600 seconds of the 3600 seconds the price is $1000 but for the other 3200 seconds the price was $1500. So TWAP = (600/ 3600) * 1000) + (3000/ 3600) * 1500 = 1416. The point of TWAP is to make it so an attacker needs incredible amounts of liquidity to force liquidations because it would take a lot of liquidity to suppress the price for such a long duration of time assuming there is sufficient volume of arbitragers.

and what i dont understand in general is: if this works so well why did impermax’s liquidity literally die?

A lot of the TVL decline is just the decline in the value of the assets in the bear. Part of it is their team had a key hack which didn’t effect the protocol but did effect their token staking and wales pulled out. Lastly they went big on EVM side chains like AVAX and that hasn’t gone well for anyone who has tried it. I’ve held positions on it for over a year now and have both leveraged some LPs and made some nice yields lending.

1 Like
17

Ok thanks for the explanation. I thought that 1% of collateral meant up to 1% of impermanent loss but it makes more sense now. Even if the impact is less than what I though initially, it still something that can impact liquidity on algofi. I would like to point out that since uniswap and impermax are two different entities, the impact of those LP pools on uniswap was not a priority when they designed the protocol.

If this kind of feature were to be implemented the leverage, the quantity of ‘borrowed liquidity’ and their interaction with algofi should be watched extremely carefully. This would add a lot of complication to the protocol for a feature whose advantages are still not clear to me.

The main advantage mentioned in the OP is that it would bring users and increase TVL. If people want to bring liquidity to Algofi at the moment they can provide liquidity and/or put their assets as collateral and/or farm in the Lend and Earn. You can also leverage your LPs by borrowing against them and creating more LPs.
Actually most of the lending liquidity in algofi is already through Lend and Earn or LP collateral. For instance only ~2M USDC are raw (ie, not from LP or not from Lend and Earn). I believe this shows there is no need to add concurring yield farming options at the moment. The priority should really be to solidify and increase existing options

18

If this kind of feature were to be implemented the leverage, the quantity of ‘borrowed liquidity’ and their interaction with algofi should be watched extremely carefully. This would add a lot of complication to the protocol for a feature whose advantages are still not clear to me.

Yes but it also why I propose it should be a different borrow market. For the record, just like Impermax, anyone including myself could build this on top of the Algofi lending contracts and DEX contracts. Without some of the special constraints the leveraging amounts wouldn’t be the same but you could still leverage a lot and impact the pools in the same way. I’d rather have Algofi offering it and capturing the fees than a 3rd party. However if the DAO decides not to pursue it, honestly I might decide at some point to be that third party.

The main advantage mentioned in the OP is that it would bring users and increase TVL. If people want to bring liquidity to Algofi at the moment they can provide liquidity and/or put their assets as collateral and/or farm in the Lend and Earn. You can also leverage your LPs by borrowing against them and creating more LPs.

Yes but a specific leveraged LP product would offer higher amounts of leverage and way better yields. Better yields attracts speculators who want to try to bet on the AMM spreads and they will up utilization on the lending market. That increased utilization leads to increased interest rates for supplying collateral which is what brings more liquidity.

Actually most of the lending liquidity in algofi is already through Lend and Earn or LP collateral. For instance only ~2M USDC are raw (ie, not from LP or not from Lend and Earn).

That’s true for USDC and largely because the STBL2/USDC LP has better yields, which supports my argument. goETH and goBTC can’t be used as collateral and don’t have incentives. Their LPs are shallow compared to the available supply. They are very underutilized and a leveraged LP market could make a dent in that. Personally I would absolutely make a bet on goETH/goBTC LPs if I could borrow at high rates of leverage to do so. ETH and BTC ratio has been relatively bounded for years. That makes it a prime candidate for this kind of bet. More liquidity in the pools makes them less likely to experience slippage and attracts swaps to Algofi over other platforms like Tinyman.

I believe this shows there is no need to add concurring yield farming options at the moment. The priority should really be to solidify and increase existing options

I disagree. Right now the yields on supplying USDC nor STBL aren’t even competitive with simply buying US treasury bonds, which are the closest thing to risk free. To me that says that the demand for liquidity on the market is waaaay too low. If we want to claw liquidity from other ecosystems we have to offer similar opportunities for yields to borrowers. Right now outside of governance, shorting, and longing, there isn’t many other bets to make in Algo DeFi. The EVM DeFi ecosystem has many more products, like leveraged LP markets, that attract borrowers. I don’t want to replicate anything stupid like an algorithmic stable coin but leveraged LP is something that works, is relatively safe, and doesn’t impact the user experience of the existing product. It could exist without most users even knowing it is there, just like most people using Uniswap don’t realize their swap could have been done on borrowed funds.

19

I’m a Dragon King for the people. This stuff is over my head, but to achieve our goal of mass adoption, shouldn’t we be making DeFi LESS complex?

20

@DragonFi
Well the complexity to the end user is a matter of UI/UX. Not to get too off topic but I think the long run mass adoption is going to look more like Pera’s new swap function (Algofi should get into that btw) with Tinyman. The end user is doing swaps on Tinyman without possibly ever have interacted with Tinyman directly. I think the long run is wallets acting as the primary entrypoint for most people’s crypto needs. DeFi is already too complex for the mass adoptee, stuff like liquidity pools isn’t intuitive.

So just like using a robo advisor app, I see people just putting in the assets they want to hold in a wallet and risk tolerance and then the wallet app could decide how to allocate those funds into DeFi for yield. End users wouldn’t need to know anything about the specifics of how this works, the same way people don’t really know how something like Vanguard works.

I think in terms of Algofi, I believe we should be trying to build the most robust set of options for generating yield. That will make the platform an attractive integration point for wallet apps. I also think that having those features is going to attract token projects to work with Algofi. More options for yield means more demand and therefore higher interest rates for anything Algofi allows as collateral. Leveraged LPs would create deeper pools which is more price stability for anyone who has there own token.