Written by: @scupytrooples, Co-Founder, Alchemix
Compiler: Lu Jiangfei
It is expected that by 2022, we could see the rise of the so-called “DeFi 2.0”.
As a DeFi cultivator, Degen, student, and builder, I find that the vision of the future of DeFi that I have in mind is already beginning to materialize. In the second wave of DeFi boom, many excellent projects emerged, but the arrival of "DeFi 2.0" is mainly due to the early pioneers in this field, such as MakerDAO, Compound, Aave, Uniswap, Sushiswap, and yearn .finance.
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Olympus DAO did something that no other protocol had ever done before - instead of attracting liquidity to the protocol through liquidity provider (LP) mining, they leveraged the concept of "protocol controlled value" And its innovative binding mechanism subverts the traditional DeFi liquidity model.
In fact, Olympus DAO's bond structure is very well designed. Users only need to set the number of bonds they want to sell and the initial price to start easily. The bond price will be adjusted according to market demand. If no one buys it, the price will drop. until someone buys it. Once a bond is purchased, the price rises, and then when demand decreases due to the price increase, the price of the bond starts to fall again—the biggest advantage of this model is that it can always ensure that supply meets demand.
On the other hand, the biggest difference between Olympus and ICO is that the funds will not flow to the Olympus team, but to the protocol's own liquidity: when bonds are purchased along with liquidity provider stocks, the Olympus protocol actually becomes its own Market makers earn income and provide liquidity.
Frankly, I didn’t really realize until a few months ago that liquidity mining is a double-edged sword: Yield mining is good for the initial growth of DeFi protocols, but not good for long-term sustainability. At the same time, I also found that the DeFi protocol seems to have no other way to attract liquidity besides providing incentives-indeed, this is what I thought before I seriously observed Olympus DAO.
Driven by curiosity, I recently started to try liquidity mining on OHM tokens to see what is so special about this protocol. It turns out that the solution to DeFi’s yield farming problem is actually Olympus bonds.
So I contacted Olympus DAO to see if they could provide their bond technology to Alchemix. In fact, they also saw great utility in other DeFi protocols using their mechanisms.
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How Olympus Pro works
At this stage, if you are already part of a DeFi protocol, or are considering launching one, I highly recommend checking out Olympus Pro (OP).
Yield mining is great for early growth, but it’s a bit like a drug: it feels great at first, but gets worse the more you use it and rely on it. The main problem here is that a large amount of "toxic" liquidity will invade the liquidity pool and affect other participants. When other participants discover this problem, they can't make much change. The only winning strategy is Go with the flow. The Olympus Pro (OP) solves this problem and cleans up the "dirty" floating on the pool.
In the process, something magical happened. I think everyone is very familiar with it now: when the "toxicity" disappears, the community will formulate strategies together. In the past, liquidity mining was like a "people-to-people" competition, but now it has become a "lying competition". Cooperative play from the comfort of your couch, the Olympus community is a testament to that.
Olympus Pro (OP) brings this magic to any protocol that uses its services, of course it may be a while before the overall trend of liquidity mining changes, but I do believe that when liquidity providers trade "diamond hands" , Olympus Pro (OP) can give holders and traders more confidence in the project.
The following are some examples of DeFi protocols with strong liquidity mining. I hide the project name and only keep the dollar trend of liquidity mining (more intuitive than using ETH), from which you can see how you are liquidated in a bull market affected by sexual mining.
As part of @AlchemixFi, I am very happy with the Olympus Pro (OP). In less than 10 days we've secured ~$500k worth of bonds, continuing to do so will allow $ALCX to get inflation under control faster.
Since we are also offering incentives in the $alUSD and $alETH markets, bonds will be available for those markets as well, which will ensure we have long-term liquidity and give people confidence in the platform for decades to come.
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The beauty of Tokemak
Another DeFi protocol that gave me goosebumps is Tokemak, which aims to solve the DeFi liquidity problem and make liquidity rental and sales more efficient than owning a secondary pool.
As of now, the Tokemak protocol has not officially launched, so we cannot be 100% sure how well it will work, but I am very optimistic about the protocol. Let me explain how it works and why your protocol should have it as the next option.
The goal of the Tokemak protocol is to be a decentralized market maker. So, what is a market maker? Basically, a market maker provides liquidity on an exchange so others can trade with low slippage and make money on the spread. In fact, market-making transactions are not easy, but those who are good at market-making can benefit themselves.
Some centralized financial market makers have participated in arbitrage in the DEX market, but until now, we have not seen a truly decentralized market maker. The Tokemak protocol has a large amount of ETH and USDC reserves, so it can be paired with other tokens in the protocol.
Users stake their tokens on the Tokemak protocol (the first batch of supported tokens include $ALCX, $FXS, $TCR, $OHM, and $SUSHI), and then receive tToken, which can be used as their deposit receipt. As a tToken holder, you are eligible to earn $TOKE tokens to match the other side of the liquidity.
For liquidity providers in the Tokemak protocol, the protocol provides them with a way to provide liquidity while minimizing the risk of impermanent losses. Not only that, but the design of the $TOKE token by the Tokemak protocol is also very good, let me explain further:
When you hold TOKE tokens, you can mortgage them on the "reactor" of the Tokemak protocol. The more TOKE tokens entrusted to a "reactor", the more available liquidity can be directed to on the token. What's even cooler is that liquidity guides can also get incentives after providing an appropriate amount of liquidity.
If liquidity is high but volume is low, it means you are allocating too much liquidity and vice versa. There is a trick here, which is to get your liquidity and trading volume just right, and the Tokemak protocol will reward liquidity guides who do this. As a liquidity guide, if you want to maximize your returns, you must allocate liquidity in the most sensible way!
Looking to the future, I definitely think that the largest holders of TOKE tokens will be some decentralized autonomous organizations (DAOs). I will discuss this issue in depth in other topics later, because game theory involves very cool things. So it takes a long time to explain.
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Understanding Next Generation CDS Platforms: Alchemix and Spell
Let’s talk about the next generation Collateralized Debt Position (CDP) platform. In my completely unbiased opinion, @AlchemixFi and @MIM_Spell will remain at the forefront of the CDP platform evolution. If you've followed me before and read some of my analysis, you've heard a lot about Alchemix. Alchemix invented non-liquidable, self-repaying loan products. cool right?
Alchemix's second version of the product will support multi-collateral, multi-strategy assets. Now, people can put their tokens into income aggregators, such as Yearn, Pickle, Harvest and other protocols. Alchemix will support these protocols and will Collateralized debt position functionality is extended to these protocols.
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The magic of Convex
The last DeFi protocol to talk about is @ConvexFinance, which can be said to have been built on the shoulders of @CurveFinance, and @CurveFinance is also one of my personal favorite DeFi protocols. In my opinion, Conve, and their veCRV governance token, are well designed and one of the most profitable DeFi protocols.
For those who don't know much about the Cruve protocol, let me give a brief explanation. Curve liquidity mining is completely controlled by the liquid token voting in the curve metering system, while in the Convex protocol, veCRV holders vote for (LP mining pool) indicators and guidance for each indicator.
On the other hand, the more veCRV tokens you own, the higher the yield of tokens deposited in the liquidity pool will be. The Convex protocol is built on top of this system, they have a large amount of veCRV and are ready to expand veCRV to everyone. The Convex protocol plans to issue its own $CVX token, which itself will have some great features, and eventually the Convex protocol will become the best place to put stable assets on Ethereum, and they will lock some $CRV to veCRV , and distribute the rest to users.
Thanks to innovations from @AndreCronjeTech and @VotiumProtocol, veCRV and CVX holders have become powerful liquidity providers, even if people dump these tokens for rewards, the passive income more than makes up for it.
All in all, the next-generation protocol will make DeFi more capital efficient, and the token economic model will be more complete, which in turn will allow all DeFi protocols to develop sustainably, so I am very bullish on these protocols mentioned in this article.
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