On March 12, 2020, TokenPocket held an AMA to discuss DeFi (decentralized finance). The AMA featured Kyle Lu the founder & CEO of dapp.com, Chao Pan, China Lead at MakerDAO and Mr. Zhang, the community manager for dForce.
Decentralized finance is a new blockchain-powered monetary system that involves financial services like trading, borrowing, and lending. It’s decentralized, censorship-resistant, permissionless, more transparent, more inclusive, easier to use, has reduced bureaucracy (this gives users more control of their funds), and so on.
The AMA was anchored by Martin from TokenPocket team. Through this article, we’ll share important insights including questions from TokenPocket community and answers from the featured guests. We have divided the AMA into three parts namely dForce, MarkerDOA, and Dapp.com.
Part One: dForce
Mr. Zhang shared some insights about dForce with the TokenPocket community during the AMA. Martin asked Zhang some questions, Zhang gave detailed answers and then Martin opened the floor to the TokenPocket community to ask their questions.
Please introduce yourself and dForce
Hello, I am Mr. Zhang. I spent 9 months traveling around the world after my graduation from Taiwan University. Inspired by the book “Mastering Bitcoin”, I became very obsessed with cryptos. My previous experience at Cybex (a DEX) and Wetez (PoS mining pool and wallet) had prepared me for a better opportunity in DeFi — I met Mindao Yang, the Founder of dForce, who impressed me with his solid understanding about blockchain and cryptocurrencies, and his vision to build a truly open finance system to empower the unbanked and bring together a unified financial market. It is great to work with an awesome team on cool ideas.
dForce advocates to build a DeFi full-stack include monetary protocols, liquidity protocols, and yielding protocols. Interoperability and programmability allow them to be layered on top of each other like Lego blocks to unveil more creative value-offerings and positive feedback loop among these protocols. Its core team members include crypto veterans, early Ethereum evangelist, Wall Streeters (Goldman Sachs, Standard Chartered, Hony Capital), with extensive crypto trading and OTC experience.
DF Token is the platform utility token that facilitates fee payment, system stabilization, governance, incentive, insurance, and reserve assets across the dForce network. The token economics should encourage positive feedback loops and facilitate sustainable and long-term incentive alignments.
What’s dForce‘s plan on 2020 and does it will be a key year for dForce？
2020 is shaping up to be a fruitful year for dForce for many reasons. We have witnessed a steep uptrend growth (especially on the lending side) over the past few months.
Holders of stablecoin USDx increased to 2,543, with a total 10,668 transfers, and transacted value in February 2020 is $2.84million.
dForce lending protocol (Lendf.Me) recorded a lock-up value of $17.0 million as the world’s 5th largest lending protocol. It is by far the largest DeFi protocol that supports USDT saving and borrowing with the best available liquidity (up to >$1 million) and competitive interest rate (i.e. 4.84% saving APR versus 6.38% borrowing APR). All assets supported can be used as collaterals to accommodate a variety of trading strategies, including imBTC, HBTC, WBTC, USDx, USDT, USDC, PAX, TUSD, DAI (DSR).
On the collateral side, we are 3rd largest holder of WETH (1.5%) (after MakerDao and dYdX), the largest holder of imBTC (49.6%) and the second-largest holder of HBTC (36.8%) in terms of lock-up value as at March 4, 2020.
With more innovations landing the DeFi land owing to the composability and programmability of smart contracts, dForce pioneered its way with the launch of the Yield Enhancing Protocol (DIP001) and a number of key releases over the next couple of months. A quick recap of our product developments and recent progress.
USDx Protocol (Stablecoin) and USR (USDx Saving Rate)
USDx is the first protocol launched by dForce Network in August 2019. It is a synthetic indexed stablecoin pegged into a basket of constituents at pre-determined weighting, which is adjustable through on-chain governance. It is also the world’s first fiat-back stablecoin with systematic interest (USDx Saving Rate, or USR) through the implementation of DIP001 (Yield Enhancing Protocol launched by dForce).
Lendf.Me (Lending Protocol)
Lendf.Me started off as a dForce ecosystem project late last year with grants from dForce Foundation. It is a decentralized lending protocol and integrated with USDx and the Yield Enhancing Protocol (DIP001). Lendf.Me now supports saving and borrowing of USDx, USDT, USDC, PAX, TUSD, WETH, imBTC (a tokenized BTC launched by imToken), HBTC (BTC of ERC-20 standard launched by Huobi Group), WBTC, with more asset integrations underway. We plan to add support to DAI (integrated with DSR) by the end of this week. It’s worth noting that all integrated assets can be used as collateral on Lendf.Me to support a variety of trading strategies.
Yield Enhancing Protocol (dForce Improvement Plan, or DIP001)
The Yield Enhancing Protocol proposes to unlock collaterals from an initiated collateralized DeFi protocol and supply those collaterals into designated yield generating protocols. It is a general framework that could be implemented in any collateral-based protocols and it is fully open-sourced. DIP001 will be firstly integrated with USDx, Lendf.Me, and the to-be-launched X-Swap and S-Swap across the dForce Network.
Please visit this link, for more introduction due to time constraints.
X-Swap is a simple toolkit that allows you to swap between stablecoins in one trade up to US$100K or above with 0% price slippage. It is currently pending for UI & UE furnishing and integration with the Yield Enhancing Protocol (DIP001) and is expected to go live by end of this month (March).
S-Swap is a Uniswap-like stablecoin-reserve-based protocol that supports instant exchanges between any ERC-20 tokens through smart contracts. We support USDx and USDT as major reserves and the protocol will be integrated with the Yield Enhancing Protocol (DIP001), where the majority of all yield-capable reserve assets will be supplied to lending protocols for yield generating. The yield will be pooled and redistributed to liquidity providers in SimpleSwap, so in addition to trading fees, liquidity providers can also earn yield from reserve assets. It is expected to be released by the end of April.
We have more value-offering DeFi protocols in our development roadmap, including more stable-assets with different design frameworks, a derivative trading platform where DF functions as collateral and incentive to boost adoption, etc.
We look forward to collaborating with a broader group of cutting-edge partners to bring DeFi to the mainstream. 🚀
What additional benefits does dForce’s USDx offer versus other stablecoin ( USDT, Dai, etc)?
There are mainly two camps of stablecoins today, fiat-backed (i.e. USDT) and crypto-collateralized (i.e. Dai) stablecoins.
Fiat-backed stablecoin is the most widely used type, including USDT, USDC and many others. As advocated by Mindao, the founder of dForce, while fiat-back is best at tackling the stability and scalability fronts, they collectively fail on fungibility, unable to create a fully permission-less, decentralized, censorship-resistant and programmable protocol. In addition, stablecoin providers make money by collecting interest from fiat reserves in the bank, while their customers (stablecoin holders) give up on the interest income in return for stablecoin service.
The most successful crypto-back stablecoin is Dai. The integration of DSR allows Dai holders to earn passive interest while retaining full control over their Dai assets. DSR is funded by stability fees paid by borrowers of Dai.
USDx harvests the best of both worlds. It’s a synthetic and indexed stablecoin that offers the simple trust model of fiat-backed stablecoins while maintaining a decent level of decentralization.
USDx, in the first place, is a synthetic indexed stablecoin pegged into a basket of fiat-back stablecoins (1 USDx = 35% USDC + 35% PAX + 30% TUSD). Anyone can use the protocol to mint USDx at pre-determined weighting, which can be adjusted by on-chain governance.
Vice versa, anyone can use the protocol to disaggregate USDx and receive a basket of constituents at pre-determined weighting. Note that 0.1% of USDx dominated in DF token will be consumed to facilitate the disaggregation.
Also, dForce is going to bring this exciting feature “USR” of USDx.
USDx Saving Rate (USR)
USDx has been integrated with DIP001 (the Yield Enhancing Protocol), which will help USDx to implement the first-ever USR as a fiat-back-like stablecoin. The majority of USDx constituent stablecoins will be supplied to lending protocols for yield generating, part of the yield will be pooled to fund the USR. A fraction of transaction fees earned by the to-be-launched X-Swap and S-Swap may also be utilized to fund the USR.
It worth noting that, given the supplied collaterals are also over-collateralized in the designated lending protocol (i.e minimum 125% CR in Lendf.Me), the collateralization of USDx actually improve from 100% CR to 115% (40%*100%+60%*125%).
As a critical feature of USDx stablecoin, USR delivers the following benefits to USDx holders:
- Simple transactions to get a systematic saving rate and holders of USDx can earn current account interest by simply supplying USDx into USR contract.
- There will be no liquidity risk to earn USR. USDx holders can withdraw at any time and interest is earned on per block basis.
- Lending protocols supporting USDx and integrated USR could deliver USDx depositors USR+USDx Supply Rate, a combined yield that could outperform most fiat-stablecoin saving rate in the market.
USDx is currently traded on Hotbit, Coinsuper, Tokenlon (built-in DEX of imToken wallet), DDEX and Uniswap. OTC service available through Bitpie and NVEX. DF token is currently traded on Uniswap and DDEX.
Right now there is a big trend towards DeFi projects, but most of them are based on Ethereum, will it have a change in the coming years?
1) DeFi protocols, if built correctly, will create strong network effects. Etheruem has by far the most robust DeFi ecosystem, from stablecoin to lending, DEX, derivatives, insurance, etc, which are inter-connected and interoperable with strong synergies.
According to DeFi Pulse, the lock-up value reached $1 billion across all DeFi protocols built on the Ethereum. It’s more friendly for developers to build something on top of the DeFi lego blocks to take advantage of liquidity, compossibility and developer mindshare.
2) Additions of a variety of ERC-BTC bridges will further fuel the growth of DeFi on Ethereum. The robust security, greater liquidity and larger market capitalization of Bitcoin will expand the reach of DeFi and help bitcoin holders to more easily monetize its holdings.
As an integrated and interoperable DeFi platform, we are keen to see more public chains explore DeFi and capitalize on the momentum, and we look forward to collaborating with a broader group of business partners and developers to further fuel the growth of DeFi.
We at dForce are building a full-stack DeFi protocol, including USDx, a meta-stablecoin and Lendf.me (currently a top 5 lending protocol) and also a trading protocol. We also have a platform and governance token (DF Token) embedded in our protocol which we believe could capture the most value when the protocol stack takes off.
Only a few people are using DApps due to hassles and other reasons. How would you address these concerns and encourage other users to use dapp?
There are tons of perfect reason to use DeFi deals. DeFi brings a unified money market, for example, you can borrow USDT for as low as 5% APR on Lendf.me, which is much cheaper to borrow than the centralized lending platform, often charging 15% APR or above.
How will CDPs change in 5 years from now ?
dForce doesn’t have CDPs feature.
But I can use maker CDP as a building block of your system, right?
Yes, dForce lending market will soon integrate DSR. So holders of Dai can deposit it and enjoy the yields.
What are the major challenges that dForce is facing and how are you tackling them?
DeFi is directly dealing with high-value transactions, the biggest challenge for us is to maintain high growth without compromising security. Security is on the top of our list, we actively engage with external auditors for our new protocol launch. We won’t push new protocol or upgrade unless we are sure of security or get audit green light.
dForce’s lending protocol Lendf.me has grown over 3x over the past two months.
Will liquidity pools be a feature of your blocks?
Yes, our lending protocol Lendf.me has pool liquidity and it brings huge benefit in terms of capital-efficiency, great rate for people to lend their stablecoin and we support USDT/USDX/DAI/USDC/PAX/TUSD etc. It is cheap to borrow. The cost to borrow is around 6% and we support all BTC collateral, wbtc/imbtc/hbtc along with ETH.
In the case of a customer’s demise, what happens to his/her funds?
DeFi is all about private key, no private key no coin. So, in the unfortunate event of someone’s demise, we can’t do anything because we don’t have their private keys. Users have 100% custody of all their assets on our platform.
How would you introduce the concept to people who have not heard of dForce before?
Unlike most DeFi platforms focusing on a specific feature, dForce presents a full stack of DeFi protocols covering stablecoins, lending markets, derivative markets, liquidity protocol, and oracles, etc. We believe that stable-assets and financial protocols are inter-connected and should be interoperable with strong synergies. dForce centers around providing a variety of use cases for stable-assets, allowing them to transact across the network with increased liquidity stickiness and solidified network effect, and ultimately, growth potential will be captured by the dForce token (DF).
Is this the same USDx that kava uses?
It is different. Only the ticker name is the same. dForce’s USDx is live, but Kava’s USDX is not.
Part Two: MakerDAO
Maker is the creator of Dai, the world’s first decentralized stablecoin on the Ethereum blockchain. It’s a digital currency that can be used by anyone, anywhere, anytime. Maker is regarded as the cornerstone of DeFi (Decentralized Finance) and there is over $500 million worth of digital assets locked in Maker protocol, comprising approximately 60% of all DeFi wealth.
Dai is soft-pegged to the dollar (1 Dai = 1 USD) and has a risk-free saving rate (DSR). Currently, the return is 8% annually. You can access Dai saving rate using TokenPocket very easily.
During the TokenPocket DeFi AMA, Chao Pan (China Lead at MakerDAO) shared some interesting insights with the TokenPocket community.
Who do you think is MakerDAO‘s biggest competitor and how do you plan to expand your market share?
One of the great advantages of Ethereum blockchain is the power of synergy. I don’t think there exist direct competitors of MakerDAO. We work with many DeFi projects and they build on our protocol too.
For Maker, the protocol is so flexible that any stablecoin or assets issued on Ethereum can technically be included in our system with proper risk assessments.
From the perspective of DeFi projects, Dai is the de-facto stablecoin and offers a very attractive return for customers, thus you see Dai integrated with almost all DeFi platforms.
How do you plan to survive and attract more people to support your project?
Maker protocol is completely self-sustainable, currently earning 13 million USD every year with just 200k USD in expenses. The income comes from users paying stability fees on their borrowed Dai. It’s a real-time cash flow.
As an open-source project, we have an engaging and creative community. They built various applications in our system.
We emphasize partnerships by working with wallet partner like TokenPocket to tap into the local markets and serve the people who need global crypto finance facilities.
To reach to mass adoption, we also work with traditional payment solutions and credit card issuers, you can send Dai directly to your account, and pay goods and services in Dai wherever it accepts Visa/Mastercard.
What’s the main challenge for the DeFi being adopted by the non-crypto users?
The challenge of bringing DeFi to non-crypto users is not on DeFi project itself but represents a general obstacle of blockchain infrastructure, for example, users don’t know how to manage and safeguard a private key themselves, confusion of gas fees in Ethereum network.
While creating a friendly UX is a must, I think bridging with existing financial services is the key. For example, Dharma is doing a great job by serving as an onramp for DeFi lending platform. Users can download a mobile app and use their credit card to convert their dollars into crypto and start earning interest. MakerDAO is working with traditional exchanges, like Coinbase and OKEx, so users can enjoy the benefit of decentralized stablecoin while staying on their trusted platforms.
In the future, other projects will follow MakerDAO’s model. So what are the advantages of MakerDAO’s competitiveness? What are the plans for MakerDAO to develop and maintain its position?
The Dai system is fully open-sourced, everyone can take the code and deploy it. The competitiveness of MakerDAO lies in the governance of MKR holders, in another word, the proper management of the system and well-established reputation, which can not be forked technically.
Part 3: Dapp.com
Dapp.com is a cross-chain platform where everyone can discover, use, and enjoy decentralized applications (DApps) with ease. It houses over 3,000 DApps built on Ethereum, EOS, Tron, Klaytn, NEO, Steem, IOST, TomoChain, etc.
The CEO of Dapp.com, Kyle Lu also shared some interesting information about Defi and Dapp.com during the AMA.
We are the largest analytics and distribution platform for DApps. We track over 3,300 DApps usages on 12 blockchains including Ethereum, Tron, EOS, Klayn, etc. (Kyle Lu)
Except for adding a list of DeFi, does dapp.com have further plans to promote DeFi projects?
First of all, we do value the transparency of DeFi. We will be supporting analytics of internal transactions of smart contracts and also ERC-20 token usage in different DApps, including DeFi project. This will help investors and users to choose products based on accurate on-chain data.
It is heard that the next phase of adoption of blockchain technology will come from the Gaming, Gambling and DeFi space. What are your views on this?
This is what’s happening at the moment — in our Annual report of 2019, the top three categories in terms of active users are gambling, DeFi (Decentralized exchanges and Finance services), and gaming.
I believe the current focus should be to generate constant awareness of what’s been happening. That’s why we are here today.
Dapp.com being more than an information centre of DApps, also issue it’s token — DApp, have you considered developing your own DeFi project?
Instead of building our own DeFi project, I see some more potential of us having partnerships with some DeFi projects to include their elements within our ecosystem. For example, integrate with Kyberswap in our product to make use of DApps with ERC-20 token easier will be an interesting option to look at.
Dapp.com’s role is always a facilitator of DApps, we help DApps to grow but we have no plans to build DApps at the moment.
Edited by tojukaka
TokenPocket is a multi-chain wallet with a powerful and secure digital asset management and DApp browser. It supports most blockchains and cryptocurrencies and it’s available on Android, iOS and Desktop.