James Chung

Nov 02 2022

Timeswap: A Permissionless, Oracle-less and Non-liquidable Lending Protocol

Introduction

Despite the bear market, decentralized finance (DeFi) accounts for over $50B in capital (over $170B at its peak about a year ago). This is tremendous growth, considering DeFi was worth less than $1B three years ago. With only 8% of capital locked in lending protocols (a primary use case within DeFi) at its peak, the current market serves as an opportune time for builders to address some of the capital and structural inefficiencies experienced today by the community. Inspired by Uniswap, Timeswap has created a unique 3-variable constant product automated market maker (AMM) and an oracle-less design to address potential attack vectors while still being scalable. Such structural improvements in financial primitives will continue to set the protocol apart from its peers by preserving efficient markets and preventing potential oracle exploits in the future.

Overview

Timeswap is a unique 3-variable AMM to facilitate lending and borrowing transactions in a self-sufficient, non-custodial, gas efficient and permissionless manner. As a result, anyone can lend or borrow an ERC20 token with any maturity date by creating a pool with another ERC20 token as collateral.

Launched on Polygon, Timeswap 3-variable AMM represents the principal pool (X), interest rate pool (Y) and the collateral factor pool (Z). As a constant product formula (K), when any of the variables change, the other two variables will also change dynamically to maintain equilibrium.

Shown below, the principal pool (X) represents the assets that can be borrowed, interest rate pool (Y) determines the maximum interest rate per second of the pool and the collateral factor pool (Z) determines the minimum collateral debt position required to be locked up by borrowers.

Additionally, there is also the asset pool and the collateral pool as illustrated below. The asset pool accounts for the amount of ERC20 asset tokens locked in the pool resulting from assets lent by lenders and debt paid by borrowers, while the collateral pool is the amount of collateral tokens locked in the pool by borrowers.

When assets are deposited to the principal pool (X), both interest rate pool (Y) and collateral factor pool (Z) will need to decrease for the next lender. This will continue as long as assets are added to the principal pool (X). Inversely, when a borrower withdraws assets from the principal pool (X), both interest rate pool (Y) and collateral factor pool (Z) will increase.

The protocol is oracle-less, which means that it does not depend on an oracle to fetch real-time rates for the assets being put into the pools. Therefore, it primarily relies on arbitrageurs to maintain the interest rates and collateral debt positions when price dispersions occur. Arbitrageurs may also monitor for imbalances across various markets and other DeFi protocols to benefit from such price dispersions, allowing for a more capital efficient ecosystem. As a result of the constant product formula (K), lenders and borrowers will also have the flexibility to change the variables based on their interest rate and collateral risk appetite. As an example, for borrowers wishing to borrow assets at a lower rate, it will require a higher amount of locked collateral whereas for lenders wishing to lend assets at a lower rate, it will result in a higher amount of insurance issued. Such flexibility will further enable the respective pool for real-time market price discovery of these factors.

In order to account for every transaction conducted on Timeswap, the protocol relies on its suite of six native tokens that represent the bond principal, bond interest, insurance principal, insurance interest, liquidity and the collateral debt position. Below is an example for a DAI/ETH liquidity pool and the interactions of the six native tokens with the pool.

Brief descriptions of the six native tokens:

Bond principal token (BPT): issued to lenders to account for the principal owed upon maturity

Bond interest token (BIT): issued to lenders to account for interest receivable upon maturity

Insurance principal token (IPT): issued to lenders to hedge against the default risk of borrowers

Insurance interest token (IIT): issued to lenders to hedge against the default risk of borrowers

Liquidity token (LT): issued to liquidity providers of the pool who add assets and collateral

Collateral debt token (CDT): issued to borrowers who deposit collateral and borrow assets

Unfortunately at the moment, lenders can only claim their assets after maturity and may only exit their position before maturity by selling positions in secondary markets such as Opensea. When lenders claim assets after maturity, the bond tokens and insurance tokens are burned as the lent asset is returned along with interest to the lender. From a borrower’s perspective, they must pay back the debt before maturity to withdraw their collateral stake or forfeit it to their respective lenders. In an unfortunate scenario where a default occurs, the insurance token plays an important role and would allow lenders to have a proportional claim to the underlying collateral staked by borrowers. Below is an example where we see that if one were to default on the loan, the lender would receive ~742 MATIC in compensation.

Lastly, Timeswap’s AMM also addresses the risk of impermanent loss for liquidity providers on their yield and insurance values that is typically seen in a constant product design. Impermanent loss typically occurs when the price of tokens inside a constant product AMM diverge in any direction, with greater divergence resulting in greater impermanent loss. However, Timeswap’s AMM eliminates such losses by using an algorithm where the parameters for debt, yield, collateral and insurance adjusts with time making the parameters time-invariant or unaffected by the passage of time

Tokenomics and Mechanism Design

Timeswap is in the process of introducing its own native TIME token to help facilitate the governance of the protocol through its community members. The token will help facilitate participation in the decentralized network which may be acquired by users to also play the role of liquidity providers through a liquidity mining event. The native token may also be distributed to users as incentives for contribution and maintenance of the network. Although the TIME token will initially have limited functionality, various features are expected to be implemented overtime as the development of the protocol progresses further.

Macro View

As the DeFi ecosystem continues to grow and mature, structural and capital inefficiencies will be resolved overtime as protocols such as Timeswap bring real solutions and new financial primitives to the ecosystem. Most lending platforms today only allow for stablecoins as collateral, therefore enabling long tail assets as collateral will greatly improve liquidity and capital efficiency as assets are pooled together in a single pool. The DeFi ecosystem also continues to experience liquidations and oracle manipulation attacks with the most recent being a $100M+ Mango exploit on Solana. Liquidation and oracle-based money markets will continue to be vulnerable, therefore protocols that are oracle-less, permission-less and AMM backed, such as Timeswap, may prove to be the leading and self-sustaining money market model.

Since launching on mainnet in March 2022 of this year, Timeswap has witnessed high demand as lending and borrowing volume both reached ~$1M across 37K transactions and 6K unique users. Timeswap also plans a V2 launch of their protocol and will introduce new features that will further scale capital efficiency of the protocol. Such features will allow lenders and liquidity providers to exit before maturity and the ability of re-paid assets by borrowers before maturity to be lent out to future borrowers. As one of the protocols that continue to build in turbulent times, Timeswap will be worth monitoring as it progresses in building a permissionless and decentralized financial infrastructure for everyone in the world.

Atlendis: A Lending Protocol Enabling Borrowers to Access Crypto Loans Without Collateral

Introduction

Lending platforms are an integral part of the DeFi infrastructure as protocols like Aave, Compound and MakerDAO have locked up over $13 billion in combined TVL. However, the market continues to be dominated by a process where users must deposit collateral in order to borrow funds which often introduce unnecessary friction and limit potential growth for both the borrowers and lenders. There is an overwhelming opportunity for uncollateralized loans to yield even higher than collateralized loans as institutional lending becomes one of the fastest growing segments in DeFi. Despite the fact that uncollateralized loans may imply higher credit risk than its collateralized counterparts there are several platforms that have come to market to address these concerns and satisfy institutional demand.

Overview

Atlendis addresses capital inefficiencies in the DeFi lending market by enabling uncollateralized crypto loans for institutional borrowers while offering lenders attractive returns and flexibility in managing their risk. Uncollateralized loans offer similar function and act as a revolving line of credit to institutional borrowers, a solution often offered to businesses by banks in traditional finance. Institutional borrowers which include dApps, protocols and DAOs benefit significantly from the protocol since there are no collateralization requirements. This approach significantly frees up their funds while also allowing lenders to obtain better rates. Despite these benefits, uncollateralized loans imply higher credit risk than its collateralized counterparts therefore borrowers on Atlendis will need to go through a credit scoring process to become whitelisted when seeking a loan. Once approved, the protocol will open a borrower specific pool parameterized according to their needs to get automatically paired with the lenders. The pairing happens through a bid order book where the borrower ends up as the price taker of the fixed lending term that is primarily set by the lender. Every whitelisted borrower would have their own limit order book that is used to determine the borrowing rate which would allow for a fair rate discovery in the market. Once borrowers and lenders are paired and the liquidity pool is set-up using the bid order book the liquidity pool can remain open indefinitely. This would allow the borrower to obtain recurring crypto loans to meet their evolving liquidity needs after each fixed term. Lenders will have the ability to select their borrower and define their own fixed term (e.g. lending rate) through the bid order book as well. This would allow lenders to have better control over their risk profile since they will be able to choose the amount of risk they are willing to take for the level of potential return. Each pool will be composed of no more than one asset that is specified by the borrower. Unlike other platforms, it will not be shared with other borrowers to prevent any dilution that would occur from new deposits that may enter the liquidity pool.

The protocol also plans to spur a wide range of trading possibilities by incorporating NFTs and representing the lender’s position through original artwork. In exchange for the loan the lender would receive an NFT representing the entire position and the underlying assets attached to it. Therefore, if the lender was to sell their NFT the position would be sold and when the position is withdrawn the NFT would be burned.

Liquidity Rewards and Payments

Liquidity rewards are rewarded to lenders (liquidity providers) for providing borrowable liquidity and will be on the portion of capital that is not actively loaned out. Until the lender is matched with a borrower, the lender’s yield is optimized for the idle capital and placed on a trusted third party protocol such as Aave. When the lender is matched up with a borrower and deposits capital into the borrower’s bid order book, the lender will start to earn additional interest on the portion of the capital that is not used at the rate that has been defined by the borrower. Therefore, liquidity providers on the Atlendis protocol are able to earn interest from three primary sources: 1) trusted third party protocol 2) liquidity rewards paid by the borrower on capital that is not actively loaned out and 3) actively lending to borrowers at the chosen lending rate. Similar to zero coupon bonds, the borrower will need to pay back the principal and interest on the used capital upon maturity as no interest is typically paid during the life of the bond. A mechanism to enforce a penalty fee has also been built in to discourage late payments. Additionally, the protocol does not assume they are immune to liquidity risks as it is a possibility that lenders do not offer attractive rates for the borrowers. In such a scenario, the pool would be in a bind and fail to deliver a capital efficient lending platform. In order to address such a possibility, the protocol allows the borrower to set the upper and lower bounds of the lending rates to determine the amount of reward that will be distributed to liquidity providers. The liquidity fees will correspond to the difference between the maximum borrowable amount and the current borrowed amount. Therefore, even if the funds were not actively loaned out, liquidity providers will be at least rewarded for providing borrowable liquidity.

Tokenomics and Mechanism Design

The protocol is undergoing its initial phases and making sure the product finds its product market fit. Therefore there is no governance token as of today however as the protocol looks to decentralize its governance in the future, it can be expected that a governance token will become available for the community to create proposals and vote on them.

Macro View

The market opportunity put forth by uncollateralized lending will be massive as DeFi continues to mature by refining the needs of institutional borrowers including dApps, protocols and DAOs. Lending protocols that continue to chip away at friction while providing more transparency seamlessly through smart contracts will start to represent a larger portion of the DeFi infrastructure. Atlantis has already gained significant traction just several months after launching on Polygon mainnet by issuing more than $2.4 million in loans, attracting 2,700+ lenders, locking $1.4 million in total value and attracting Wintermute, a leading digital assets market maker, as its first borrower with a credit score of AA.

Adopting similar functions from traditional finance such as a revolving line of credit is an example of Atlendis protocol differentiating itself amongst other DeFi lending platforms. The Atlendis protocol is also helping to close the gap with CeFi offerings as other protocols will only offer lending to borrowers that can front some amount as collateral. By offering uncollateralized loans, Atlendis aims to facilitate true borrowing where a participant gets into a position of net debt. Despite the incredible opportunity ahead of Atlendis, the protocol is still in development as it undergoes its first few phases in proving the model. Therefore, there are plenty of risks to consider before participating on the lending platform. Offering lenders the flexibility to manage their own risk profile does not come without risk to those who are unable to assess the perceived risk profile of the investment. Whitelisted borrowers will not guarantee protection from default risk despite the process entailing audited and renowned organizations in the crypto space. Therefore, lenders will have to have a key understanding of the risk they are willing to take for the reward they are seeking. Another possible risk is the placement of unused capital on Aave as any event on the protocol will directly affect the Atlendis protocol and its lenders. Aave’s sources of risk directly affects the Atlendis protocol therefore it would benefit Atlendis and its lenders to diversify the placement of capital across several reputable and safe protocols in future phases. Considering such risks and the massive opportunity for uncollateralized lending, it will be worth monitoring further development of the Atlendis protocol in facilitating true borrowing and closing the gap with CeFi offerings today.

UXD: Algorithmic Stablecoin Backed by Delta-Neutral Position using Derivatives

Introduction

Despite recent attacks on stablecoins following the collapse of TerraUSD, they continue to serve an important purpose in supporting the DeFi ecosystem. Therefore, it is critical to understand the structural differences, objectives and potential flaws for some stablecoins we see today. Stablecoins come in many different forms in an attempt to optimize for stability, efficiency and decentralization. Typically there are tradeoffs that happen across these key features which is known as the “stablecoin trilemma”. As a result of not being optimized across all three features, stablecoins often fall into one of three sub-categories: 1) fiat backed, 2) collateralized debt position or 3) algorithmic stablecoins. The UXD protocol attempts to optimize for all three through its novel approach using derivatives and presents a unique opportunity to make decentralized assets more productive.

Overview

UXD is a stablecoin protocol native to Solana (soon to be multichain) that is backed by a delta-neutral position using perpetual swaps on decentralized derivative platforms. As a result of being fully collateralized and pegged to the US dollar using derivatives, users will be able to redeem 1 UXD for 1 USD worth of assets with any deviations from the peg arbitraged away by traders. There will also be no risk of liquidation or significant loss as the protocol will not require over-collateralization. Additionally, stakeholders in the stablecoin will receive an attractive yield when the perpetual futures funding rate is positive (contango) and conversely, there will be an insurance fund to pay when the yield is negative (backwardation). By design, these features and components offer the protocol a competitive edge to some of the dominant stablecoins in the market today.

A delta-neutral position is when the value of the position doesn’t rely on the value of the asset. In short, this is typically achieved using derivatives where you would balance both a long and short position to effectively have zero delta exposure. In the case of UXD, when a user deposits $100 of BTC, the protocol would open a corresponding short perpetual future position and effectively maintain $100 BTC value. The protocol would then issue $100 UXD stablecoin which would represent the delta-neutral position and it would be redeemable anytime for $100 of crypto assets.

When dealing with perpetual future positions, the delta-neutral position backing the stablecoin generates interest depending on market conditions and the funding rate may be positive or negative. When the funding rate is positive, the protocol has been structured in a way where the interest would be distributed to UXD protocol stakeholders and the insurance fund. Conversely, when the funding rate is negative, the insurance fund will be used to pay out the negative funding rate so UXD holders do not have to bear the burden in such scenarios.

The insurance fund will be managed by the DAO and will be used to not only pay out the negative funding rate as mentioned above but any situations that may cause the under collateralization of UXD’s stablecoin (e.g. exploitative hack). Although the insurance fund is well capitalized at around $57M there may be the rare instance it gets depleted. In such situations, the protocol will have a backstop and hold an auction for UXP tokens to replenish the insurance fund. As the stability of UXD is correlated to the health of the insurance fund, the team has done extensive research to better understand the historical funding rates and to stress test the insurance fund in different markets across centralized and decentralized exchanges. Understanding historical and projected funding rates will be critical in understanding the sustainability of UDX as a stablecoin.

In addition to smart contract risk and market risk, there are several counterparty risks specific to the protocol that may cause the stablecoin to be undercollateralized. When attempting to make the insurance fund more productive in asset management strategies there may be exploitative hacks causing UXD holders to be undercollateralized. Another possibility can be insufficient liquidity in the underlying derivatives exchange and the counterparties trading on margin. In such scenarios, stakeholders may not be able to redeem their crypto assets and UXD may be forced out of its positions.

Tokenomics and Mechanism Design

The native UXP token serves as a governance token and is required to make decisions for the protocol through its DAO. As mentioned earlier, UXP token holders will also receive cash flow from the delta-neutral positions while serving as the last reserve to back the insurance fund in case it gets depleted. The total token supply has been adjusted to 7B following a 30% burn proposal that was introduced and passed by the community early this year. The proposal was put in motion to bring a degree of “tightness” on the DAO with respect to having complete flexibility on issuing future token supply from the “community” allocation shown in the diagram below. As a result, the proposal aimed to create a more sustainable ownership structure by bringing the fully diluted value metric down. Unfortunately the burn has increased the concentration of ownership of all UXP holders including institutional holders at the cost of its community.

Macro View

Despite current macro conditions, the stablecoin market continues to remain fairly healthy with a total market cap of $143B and trading volume of up to $100B a day. Stablecoins have found a clear product market fit by facilitating crypto trading pairs, cross-border payments, e-commerce and more. However, more than 90% of the market cap in stablecoins is composed of centralized stablecoins. Centralized stablecoins are at high risk of being censored by hostile third parties, therefore having a decentralized stablecoin that is uncensorable, stable and capital efficient will greatly benefit the crypto ecosystem as a whole.

The market cap for the UXD stablecoin is at $20M which is significantly small compared to the likes of USDC or DAI. However, the novel approach addressing the stablecoin trilemma has gained significant interest since its recent launch as the number of holders has grown to 1,300 this year.

Further adoption may happen in the future as the protocol goes multichain, integrates with various perpetual swap protocols and accepts a wider range of cryptocurrency assets as collateral to back the stablecoin. It will be interesting to continue monitoring such activity and see if UXD can truly deliver on solving the stablecoin trilemma.

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Aug 05 2022

DeFi Market Commentary | July 2022

With major contributions from structural deleveraging and liquidations, the crypto drawdown (-70%) continues to be one of the fastest ever. While some signs are pointing to a potential bottoming, risk appetite is still low. Investors, who are focused on the global macro environment, are optimistic about the possibility of inflation peaking, but still taking into account the increasing possibility of a prolonged recession.

The possibility of inflation peaking (as well as the upcoming Merge) has piqued investor interest enough to rally markets – Ethereum alone has rallied ~55% in the month of July.

Source: CoinMarketCap

Despite the market rallying, DEX volume is still relatively low and slightly decreased from the the prior month. This may indicate that most activity is focused on ‘sound money’ and blue chips rather than active trading on alt-coins.

This graph shows monthly decentralized exchange volume divided by centralized exchange volume (as a percentage). From June to July, it has seen a significant decrease. Taking into account a market rally, it again shows more evidence of decreasing broader market DeFi activity in favor of ‘sound money’ and bluechips.

Monthly DeFi revenue has again decreased in light of a market rally. Still, investors are not yet convinced enough to undertake DeFi risk.

However, in the second half of July, DEXs have seen net added liquidities in pools increase significantly from past months. Although the broader DeFi ecosystem has not recovered, investors are increasingly staking assets into DEXs. Staking (depositing assets into smart contracts that these exchanges use for liquidity, in return for some yield) in DEXs is seen as a safer form of yield relative to alt-coins and more novel DeFi protocols due to a combination of its battle-tested, proven model, higher TVL, and importance in the ecosystem.

While DeFi is mainly focused on Ethereum today, budding ecosystems across different Layer-1s have been seeing traction. Some speculate on a multi-chain, interoperable future with bridges like Nomad who are able to secure assets cross-chain with ease. Though a noble quest, security of bridges has shown to be difficult (previously, Axie Infinity’s Ronin Bridge was exploited for ~$650M, and Wormhole for ~$300M) as Nomad’s bridge has been exploited and drained of nearly ~$200M. These exploits continue to stress the importance of security and raise questions about the validity of the cross chain thesis.

In light of prolific blowups like the Terra Luna ecosystem, an interesting development in the algorithmic stablecoin space is Aave’s new stable coin $GHO. Aave users will be able to mint $GHO by using existing assets on the platform, where 100% of the fees will go towards the Aave treasury. Other projects, like Curve, may be interested in a similar model – this may signify a point of increasing verticalization of DeFi products between ecosystems, where high TVL projects may want to own the whole stack.

July has been a relatively strong month in the context of a bear market. While correlation with traditional markets was broken from DeFi-native liquidations and capitulation, there are small indications that we may be nearing at least a local bottom (current market expectations are beginning to be priced in) . Macro economic conditions should be monitored closely, in particular for growth and recession indicators.

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Jul 22 2022

Umee: A Layer 1 Blockchain for Access to Cross-Chain Leverage and Liquidity

Summary

Umee is a Layer 1 permissionless blockchain built on the Cosmos SDK, allowing for the development of DeFi primitives and for users to access cross-chain leverage and liquidity. It will encourage better capital efficiency and allow users to collateralize staked assets on one blockchain towards borrowing assets on another blockchain by using inter-blockchain communication protocol (IBC) from the Cosmos ecosystem. As a Cosmos SDK blockchain, the protocol is interoperable with other blockchains in the Cosmo ecosystem to provide enhanced latency, improved scalability and diversified risk from centralized bridges. Umee also differentiates itself from other protocols that use bridges by allowing users to lend and collateralize without creating wrapped assets to get exposure and participate in another ecosystem. This novel idea would essentially allow users to lend and borrow non-compatible currencies.

Overview

Not only will Umee allow users to simply lend and borrow assets across blockchains but it will also allow users to collateralize staked assets on one blockchain (e.g. Cosmos) to borrow assets from another blockchain (e.g. Ethereum). Once the borrower deposits sufficient collateral they will be able to borrow assets from Cosmos or Ethereum blockchains. This would be done by utilizing the uToken collateral token that is used as collateral asset when borrowing on another blockchain. Similar to Aave, users will receive minted uTokens for depositing assets into the smart contract that map 1:1 with the asset deposited. The balance of the user’s uTokens will then grow as the underlying interest rate is applied to the deposits.

When assets are locked on a single blockchain, the uToken that is minted will represent the collateral and will be used to borrow assets on another blockchain. The illustration below shows how both Ethereum and Atom can be locked on their respective blockchain and its uToken is bridged over and used for borrowing the other token on their blockchain.

Source: https://www.umee.cc/umee-whitepaper.pdf

Umee also allows users to collateralize a borrow position using staked assets (meTokens). For example, a user may stake their Atoms and use their collateralized staked assets to borrow a stablecoin. The user would pay interest on their stablecoin loan while earning validator rewards from staked Atoms. Another example would be where a user would stake their Atoms and allow their staking reward to be sold for stablecoins. The user would then be able to take out a loan in the stablecoin. The interest on borrowing the stablecoin would be supplemented by the staking reward earned from their staked assets. Users will be able to liquidate their staked rewards in the tokens they prefer. This would seamlessly allow users to cancel out the interest that they would pay on the stablecoin loan utilizing the staking rewards from staked position. If the user wants to unstake, the staked borrowed positions or “meToken” would undergo a 21-day unbonding period where stake is not earned but still transferable and exchangeable. After the unbonding period, the holder of the meToken will be able to exchange it for the equivalent uToken which would then allow the user to withdraw the asset.

Another byproduct of Umee’s architecture is that proof of stake assets are automatically staked onto reputable validators that contribute Tendermint BFT consensus when they deposit assets into Umee. Importantly, the selection of validators as well as staked allocation will be determined by the governance token. The Umee protocol will include a set of relayers that pass transactions between Ethereum blockchain to the Umee network through a bridge called Gravity Bridge. Assets will also be bridged between the Cosmos ecosystem utilizing IBC to help optimize capital flow across the network. Security is critical when passing and or bridging such transactions. Therefore, the protocol has put into place robust parameters and mechanisms to track and manage various risks such as loan to value ratios, collateralization thresholds, credit ratings and interest rates. Details can be found here.

Source: https://www.umee.cc/umee-whitepaper.pdf

Tokenomics and Mechanism Design

The native UMEE token offers three utility functions. 1) The tokens provide security to the network as they are bonded to validators that stake and provide proof of stake consensus to the network 2) Network fees and rewards are earned in the token by validator infrastructure providers 3) The token is also a governance token used to facilitate on-chain governance for the protocol

The total supply of UMEE tokens is 10B, uncapped with an inflation and deflation mechanism to align long-term incentives for supporters. Based on targeted staking rate the inflation rate will be dynamic and range between 7% to 14%. This dynamic inflation and staking mechanism will be critical in helping to ensure the security of the network.

The UMEE token exists in two forms, a Cosmos version (Native UMEE) and Ethereum version (ERC-20) and can be converted to one another. The native UMEE tokens provides the utilities mentioned above while the ERC-20 tokens simply create a user friendly experience for UMEE to interact with DeFi applications on Ethereum. These tokens will help bring about capital efficiency to its users by leveraging both performance and market dominance of the two ecosystems.

Below is the distribution and release schedule for the UMEE token where significant allocations have been carved out for the community (46%), team (15%) and investors (14%).

Source: https://www.umee.cc/umee-whitepaper.pdf

Macro View

As the number of blockchains continue to increase, success for DeFi will rely on platforms that interconnect crypto markets across all chains allowing for the development of open finance. Protocols that offer decentralized validator set, utilize secure and capital efficient bridging solutions and prioritize user experience will be critical in expanding the DeFi ecosystem. Umee is interesting as it utilizes Cosmos Inter-Blockchain Communication protocol to facilitate relatively faster finanality transfers between blockchains. As a Cosmos SDK blockchain, Umee is interoperable with other blockchains in the Cosmo ecosystem and will improve latency, scalability and risks from centralized bridges assuming they successfully execute on their roadmap. Since launching on mainnet in February 2022, Umee has continued to build throughout the bear market. Following the mainnet launch, they successfully underwent a token launch, validator program launch, web app launch, and an incentivized testnet launch to build out the lending module. As the protocol continues to engage with Halborn for their security audit this month, it will be interesting to see their plans come to fruition this year.

Timeswap: A Permissionless, Oracle-less and Non-liquidable Lending Protocol

Introduction

Overview

Tokenomics and Mechanism Design

Macro View

Further Reading and Sources

Atlendis: A Lending Protocol Enabling Borrowers to Access Crypto Loans Without Collateral

Introduction

Overview

Liquidity Rewards and Payments

Tokenomics and Mechanism Design

Macro View

UXD: Algorithmic Stablecoin Backed by Delta-Neutral Position using Derivatives

Introduction

Overview

Tokenomics and Mechanism Design

Macro View

Further Reading and Sources

Cryptofunds, market makers, and trading desks can interact with these DeFi protocols with MetaMask Institutional

Found this research useful? Connect with the ConsenSys Cryptoeconomic Research team at [email protected]

DeFi Market Commentary | July 2022

Umee: A Layer 1 Blockchain for Access to Cross-Chain Leverage and Liquidity

Summary

Overview

Tokenomics and Mechanism Design

Macro View

Further Reading and Sources

Cryptofunds, market makers, and trading desks can interact with these DeFi protocols with MetaMask Institutional

Found this research useful? Connect with the ConsenSys Cryptoeconomic Research team at [email protected]