DeFi
Reading time: ~2 m
Adapting to new market trends, DeFi platforms attract users with new functionality and earning tools
The opinions of the invited authors may not coincide with the position of the editors. “RBC-Crypto” does not give investment advice, the material is published for informational purposes only.
The cryptocurrency sector is oversaturated with DeFi platforms. A pool of DeFi developments is being formed around well-known blockchains and second-level (L2) solutions, many of which are similar in functionality or frankly copy each other. So there is a need to stand out among the variety of projects with technologies or an attractive economic model.
Convenient exchange of tokens
If earlier, to exchange the assets of one network for the assets of another, there was often no other choice but to upload funds to a centralized exchange, carry out the exchange there and then withdraw funds to a wallet in the required network. Undermined trust in centralized exchanges after the collapse of the leading players in the crypto market in 2022 and the search for new functionality by DeFi platforms led to the emergence of a new product line. Non-costodial wallets in the form of browser extensions (such as MetaMask) allow convenient exchanges between assets on different networks.
Further, the need to develop new solutions was not least influenced by the inconvenience and risks of existing decentralized means of exchange. In well-known gateway bridges, the exchange process can sometimes drag on for hours, there are restrictions on the minimum amount of exchanges, vulnerabilities in the code or logic of their work are exploited by hackers.
An interesting example of a new approach to the movement of funds between networks is “xSwap” from the DeFi platform Sushi. The solution allows exchanges between Ethereum, Arbitrum, Avalanche, Polygon, Fantom, Binance Smart Chain and Optimism networks. For most networks (except Ethereum), exchange fees will be less than $1, with virtually no spread.
The new method of exchange will be more convenient and faster than the usual bridges, as it becomes possible to exchange a token that exists in one network for another token in another network. For example, using the service, you can exchange USDT on Binance Smart Chain for USDC on the Fantom network in one step. With a conventional bridge, the number of steps and required services would be greater: transferring USDT from one network to another and then exchanging USDT for USDC on the new network.
In addition to cross-chain exchanges, Sushi is integrating another new service for DeFi platforms – Furo Streaming, which allows you to automate the regular distribution of funds to many addresses. Possible ways to use the service include: salary accrual for participants of decentralized autonomous organizations (DAO), mass mailing of rewards in contests and Bounty campaigns, organization of small airdrops of tokens for a previously known list of addresses.
Given the integration of the service into the Sushi ecosystem, one can also predict a potential merger of the functionality of various components of the DeFi platform. For example, it would be logical to automate the regular withdrawal and distribution to the list of addresses of rewards earned in liquidity pools on the platform in the Earn section.
New trends
New projects now choose not to distribute and sell tokens, waiting for the improvement in market sentiment, however, with a change in the cycle, it is logical to expect that initial token offerings will take place much more often. It can be assumed that one of the popular ways will be the distribution of new tokens through existing DeFi platforms or Initial Farming Offering (IFO). Such a decision could become something between the popular ICOs in 2017 and the Initial Exchange Offering (IEO), the credibility of which was undermined after the collapse of the FTX exchange and the crises of other platforms last year.
For new projects, it may be cheaper and easier to arrange an IFO with the administrators of existing DeFi platforms than to secure expensive cooperation with large centralized exchanges. In turn, users can be more confident in the reliability of the IFO process compared to the often uncontrolled ICOs, most of which turned out to be outright fraud during the period of hype. During the IFO, the quality of the offered tokens will be to some extent tied to the ecosystem of the DeFi platform and its existing community.
One of the popular DeFi platforms already hosting IFOs is PancakeSwap Finance. After changing the formulas for calculating rewards in the Syrup Pools section in 2022, interest on staking the platform’s native token (CAKE) has dropped many times, and now rarely exceeds 10%. For comparison, earlier CAKE staking could bring 50-100% per annum in new tokens. Such a high percentage had a negative impact on the price dynamics of CAKE itself: as the end date of the desired “handouts” approached, users massively sold tokens, thereby provoking a sharp drop in the exchange rate and mass liquidation of margin positions.
After giving up high interest rates per annum for staking CAKE, users began to look for new ways to make money. So the IFO section on PancakeSwap gained additional popularity and attractiveness, but the bear market made its own adjustments. The price dynamics of many projects issuing tokens through the platform turned out to be negative. Some of the IFO projects, such as the P2E game Duelist Kings (DKT), have become completely worthless, lost trading volumes, and were found to be fraudulent. Raydium on Solana, Biswap on Binance Smart Chain, SpookySwap on Fantom and many other projects are also involved in the distribution of initial token offerings.
Existing DeFi platforms can also play a role in popularizing and attracting users to new blockchains. The integration of the Aptos Network (APT) into the Pancake Finance platform gave participants the opportunity to transfer CAKE tokens from Binance Smart Chain to the new Aptos Network and stake them at a higher interest rate. At the time of writing, CAKE staking can bring 26% per annum in the APT token. Income for providing liquidity to pairs with stablecoins in the new network will also be higher – about 10% per annum instead of the usual 4-5%.
DeFi platforms with their own approaches to tokenomics (economic model) deserve special attention. The Biswap mentioned above motivates users to use the service by returning up to 50% of commissions to their wallets in the form of a BSW token. This approach allows to achieve a higher decentralization of token distribution, as well as draw users’ attention to ways to interact with the project ecosystem without the need to purchase a token. Despite the described innovations, the BSW rate is in a long downtrend and, at the time of writing, is trading at values close to historical lows.
#DeFi #platforms #convenient #exchange #tokens #distribution #coins #earnings
