DeFi 2.0原理:元界PRO案例

2021 年 12 月 10 日

DeFi 1.0 vs. DeFi 2.0

Most, if not all, DeFi protocols have been struggling with a major conundrum – how and where to source liquidity in a sustainable manner? There is a new wave of projects that concentrate exclusively on resolving this issue by owning their liquidity rather than temporarily renting it. They are referred to as representatives of DeFi 2.0 and we are about to puzzle out what they are all about.

DeFi projects need long-term, reliable liquidity for their dapps to function properly. In the standard DeFi 1.0 case, protocols launch liquidity mining programs where they rather generously distribute their [governance] tokens in exchange for liquidity providers’ (LPs) funds. Unfortunately, the high supply of said token often leads to its depreciation which in turn frequently generates severe impermanent loss. Consequently, LPs get disincentivized and move their holdings to a more attractive yield farm, leading to protocols being forced to give away even more tokens to get fresh liquidity.

To address this, OlympusDAO created a new paradigm where liquidity is owned and controlled by the protocol itself.

Here is how it is done:

OlympusDAO’s cryptocurrency OHM is a Decentralized Reserve Currency – i.e. similar in some sense to а stablecoin in that it has a floor price of $1, but it is not pegged to USD but to a basket of various assets (referred to as treasury). OlympusDAO sells OHM at a discount from the market value in exchange for different assets (DAI, ETH) or for LP tokens representing OHM liquidity on decentralzied exchanges (DEXs). As a result, OlympusDAO has control over its liquidity and the sell pressure over its OHM token is significantly reduced. What is more, this mechanism cuts the LPs’ exposure to impermanent loss, while allowing the protocol to additionally gain from DEX trading fees.

In practice, there are two main strategies for market participants to interact with OlympusDAO’s protocol:

  • Users can stake their OHM tokens to earn more OHM tokens. The main benefit for stakers comes from supply growth: the protocol mints new OHM tokens, the majority of which are distributed to stakers. The gain comes from auto-compounding balances. Furthermore, the price exposure needs to be considered: if the increase in token balance outpaces the potential drop in price, stakers would make a profit.
  • Users can provide either LP tokens representing OHM liquidity deposited into decentralized exchanges such as Uniswap or SushiSwap, or other assets such as DAI, FRAX, wETH or LUSD, and in exchange to earn discounted OHM tokens after a fixed vesting period. This process is called bonding. The main benefit for bonders comes from price consistency. Bonders commit a capital upfront and are promised a fixed return at a set point in time. This is represented in the form of OHM tokens and thus the bonder’s profit would depend on OHM price when the bond matures. Bonders benefit from a rising or static OHM price, as the price is floored by design. Moreover, since whoever holds the LP tokens is in fact in control of the staked liquidity, and since OlympusDAO never sells these LP tokens, the liquidity is effectively locked within its treasury. Bonding operations represent the main concepts that allow Olympus to own its own liquidity.

The Case of MetaversePRO

OlympusDAO was our entry point into the emerging world of DeFi 2.0 solutions but we decided to focus on MetaversePRO since it is OlympusDAO’s Binance Smart Chain fork.

MetaversePRO positions itself as the reserve currency for the Metaverse and GameFi. In fact, the MetaversePRO Bond protocol will be indispensable in solving many of the early stage problems that the GameFi projects encounter mainly by establishing long-term mutually-beneficial relationships through interchange of tokens.

Protocol Structure

Like OlympusDAO, MetaversePRO aims at pursuing the core concepts of the DeFi 2.0 movement and thus reaching a certain degree of independence when it comes to liquidity provisioning into the system. It embraces the tokenomics of OlympusDAO in building the following structures: reserve currency Meta, protocol-managed treasury, protocol-owned liquidity, bond mechanism, and staking rewards designed to control supply expansion.

According to MetaversePRO’s documentation:

  • Each Meta is backed by low-risk Treasury assets (50% BNB and 50% stablecoins).
  • Only the protocol has access to the Mint function.
  • The protocol issues and burns tokens in reaction to price changes:

When “the price of Meta” < “price of Treasury assets backing Meta”, the protocol buys back and burns Meta.

When “the price of Meta” > “price of Treasury assets backing Meta”, the protocol mints and sells new Meta.

Meta is not rebased. This allows for a true and accurate backing by the value held in the treasury.

Treasury

The treasury consists of various assets that can be used to generate additional income. Moreover, other complex operations and combinations can be performed so as to achieve superior capital efficiency. HODLing assets in its treasury is a primary goal for MetaversePRO since their appreciation over time will contribute to Meta’s equal rebase.

Protocol-Owned Liquidity

On one hand, protocol-owned liquidity or POL that’s in the Treasury ensures enough liquidity for Meta on PancakeSwap. In addition, the POL continually earns LP fees, allowing for exponential growth in time. It is important to note that there is no one apart from the multisig wallet participants (4 out of 6) who has access to the POL, which translates into a reliable liquidity mechanism and greatly diminished rug-pull risk. By owning most of its liquidity, the MetaversePRO DAO achieves several goals:

  • It does not have to pay out high farming rewards to incentivize liquidity providers.
  • It always has the required liquidity to guarantee the market and to facilitate sell or buy transactions on decentralized exchanges.
  • By being the largest liquidity provider, it earns most of the LP fees which represents another source of income to the treasury.
  • Apart from the treasury, the POL can also be used to back META.
  • As the protocol controls the funds in its treasury, Meta can only be minted or burned by the protocol. This also guarantees that the protocol can always back 1 Meta with 1 BUSD. You can easily define the risk of your investment because you can be confident that the protocol will indefinitely buy Meta below 1 BUSD with the treasury assets until no one is left to sell.

Bond Mechanism

The bonding mechanism consists of selling the discounted Meta token in exchange for other assets. The bonding operations play a very important role in the liquidity provisioning mechanism. This is a major function MetaversePRO shares with OlympusDAO. It features a bond issuing system that serves as the main income source for its treasury. Because MetaversePRO is a community-driven project, the bond rates are set by the platform’s stakeholders. That means that participants have an active say in how the bond issuance system works and how much profit it will produce for the platform as a whole.

With liquidity bonds, the protocol is able to accumulate its own liquidity. Bond sales generate profit for the protocol, which is then used by the treasury to mint the Meta token and distribute it to stakers.

Staking Mechanism

Staking is a passive, long-term strategy. According to MetaversePRO documentation:

“the increase in your stake of Meta translates into a constantly falling cost basis converging on zero. This means even if the market price of Meta drops below your initial purchase price, given a long enough staking period, the increase in your staked Meta balance should eventually outpace the fall in price.”

Within the protocol, staking operations are the primary value accrual strategy of MetaversePRO. Staking allows for the accumulation of Meta tokens on the original amount staked. When staked, Meta tokens get locked and receive an equal amount of sMeta tokens back representing the deposit into the protocol. When a user decides to unstake, they burn their existing sMeta and receive an equal amount of Meta tokens directly from the treasury.

结论

DeFi 2.0 could bring a strongly positive change in the DeFi space. Apart from protocol-owned liquidity that is quickly becoming a necessity for the majority of projects, other spillover effects we are currently witnessing are also rather encouraging.

First, OlympusPRO was born to offer Bonds as a Service and to introduce its solution to all interested parties. Apart from it, other bond marketplaces are constantly emerging which will lead to more interoperability and cooperation in the space.

What’s more, the inception of more decentralized reserve currencies which, similarly to OHM, are not pegged to volatile and inflationary fiat currencies, but to a basket of assets, would move the whole DeFi space further away from fiat and would make it more decentralized.

DeFi 2.0 will not fit all protocols out there. New DeFi projects would still need to adopt liquidity mining practices but they should plan ahead for a smooth transition to owning the liquidity they need.

At Mettalex we are currently looking for ways to incorporate some of these new principles with the aim of ensuring a long-term, sustainably sourced liquidity.

What do you think? Should we aim to incorporate DeFi 2.0 approaches in Mettalex? Let us know on Twitter, Telegram, or Discord.

…..

This article is based on research conducted for the Mettalex project by Felix Bucsa.

…..

The Mettalex Research blog post series dives deeper into the latest innovations in Decentralized Finance. Check out our analyses on the different uses of NFTs as collateral in DeFi (Part I), (Part II), (Part III), on the novel tokenomics model Ve(3, 3), on The 8 Hottest DeFi Trends to watch in 2022 with Part I exploring Regulations.

…..

加入我们的频道,随时了解所有 Mettalex 新闻!

推特 | 电报官方 | 电报新闻 | Discord | 领英