Exploring Liquidity Mining of Decentralised Assets on DeFiChain
Table of Contents
This article is a compilation of research about DeFi on DeFiChain.
Visit https://choose.defichain.ac/ for an interactive introduction to “HODLING with DeFiChain”.
The site was created by the team behind DeFiChain Accelerator, a community funded project to market the DeFiChain ecosystem to potential investors and developers.
Liquidity mining for decentralised assets started on 6 Dec 2021 in the afternoon, Singapore time.
As of 6 Dec 2021, decentralised assets available for:
- AAPL (Apple)
- ARKK (ARK Innovation ETF)
- BABA (Alibaba)
- GME (GameStop)
- GOOGL (Google)
- TSLA (Tesla)
- URTH (iShares MSCI World ETF)
- VNQ (Vanguard Real Estate Index Fund ETF)
Burning of fees
DeFi fee is charged for all DeFi transactions on DeFiChain regardless of operators. All fees are burned in a trackable and transparent manner.
This would make DFI scarcer over time, and increase the value for HODLers.
- The entire blockchain might go down or be exploited.
- A bug caused no new blocks being creating after decentralised assets LM started. [Dec 2021]
- A bug caused wallet to not reflect correct values; out of sync [Dec 2021]
- A bug in the Atomic Swap feature has resulted in an exploit where dBTC tokens were created out of thin air (i.e. not backed by any collateral). This has been ongoing since June 2021 and has only been discovered in January 2022. [Jan 2022]
- Post mortem discussion on DefiChain
- Impermanent loss from liquidity mining
- Mirror Protocol
DeFiChain uses token standards to bring in external tokens in a trustless manner, allowing trustless financial contracts and trading of all major crypto-asset tokens. The token standards are similar to ERC20 on Ethereum and Omni on Bitcoin blockchain. Through this standard, DeFiChain allows tokenization of any assets.
On DeFiChain the standardized tokens are called DeFi Standard Token (DST). DST tokens are of two different types: DCT, created by users of the system, and DAT, which are asset-backed tokens created with the backing of crypto-assets.
Decentralized USD (DUSD)
The DUSD relevant to DeFiChain is here. My understanding is that DUSD is minted from the vaults, which are over-collateralized.
It has also been listed on CoinGecko in March 2022.
Official page with links to download here.
DeFi Wallet desktop app
- This wallet can be used for buying vault on auctions.
- Wallet is protected by a single passphrase, there is no usual 12/24 secret keys.
- does not support vault creation yet (as of 6 Dec 2021)
- “Wallet.dat” is the backup for the DeFi Desktop Wallet
DeFiChain wallet mobile app (a.k.a Light Wallet)
This wallet operates on the DeFiChain blockchain, meaning assets that go in and out of the wallet is through DeFiChain network only.
When users receive USDC in the wallet, it will appear as dUSDC. The ’d' prefix indicates this is a wrapped USDC. Users cannot, for example, send dUSDC from within the wallet to an exchange like Coinbase which does not support the DeFiChain network yet.
Currently, it seems like the only way to get USDC in/out of the wallet is through Cake DeFi.
Some platforms that supports the DeFiChain network:
- Cake DeFi: supports various crypto assets over DeFiChain.
- KuCoin: supports DeFiChain but for DFI deposits/withdrawals only. (news release article).
DeFiChain Electrum: Multisig Wallet
DeFiChain Electrum wallet was launched in March 2022. Individual users can ignore this as they probably wouldn’t require a multi-signatory DeFiChain wallet.
One way to fund dUSDC into a DeFiChain wallet is by:
- first sending USDC into Cake DeFi, then;
- withdrawing from Cake DeFi into a DeFiChain wallet.
Withdrawal of USDC from Cake DeFi has a flat fee of 1 USDC.
When withdrawing from Cake Defi, users have to select the option to transfer over “DeFiChain”, and enter the receiving address indicated on the DeFiChain wallet.
Cake DeFi adds a couple of safety checks before allowing you to withdraw via DeFiChain. Users have to acknowledge the following:
- “I have confirmed that the application or platform I’m withdrawing to supports this DeFiChain token (DeFiChain USDC).”
- “If I withdraw my USDC to a DeFiChain address that does not support DeFiChain tokens, my funds will be lost.”
If unsure of the process, users should consider making a test withdrawal of a small amount.
Creating vault, adding collateral, liquidity mining, closing vaults etc…
Creating a vault
- creating a vault is not free. Costs 2 DFI
- a vault is created empty. Collaterals are added in later
- the collateralization ratio of the vault can be changed after creation, so there isn’t a need to ponder too much during the creation phase.
Supported assets (as of 6 Dec 2021):
Always reserve some DFI for transaction fees
Users should always reserve some DFI in the wallet for transaction fees or transactions will fail.
DUSD is not at 1 USD
Due to high demand via the DEX rather than minting from collaterals. Discussion on Github on how to resolve the issue:
Getting updates when blockchain is not functioning well
DeFiChain’s discord channel is the most active and best social media option to get updates.
Network fees are cheap
Network fees are relatively cheap in DeFiChain, so users can afford to experiment and test out strategies.
Transactions can take minutes to complete, probably due to network congestion.
Vault requires 50% of DFI to mint any tokens
The vault requires at least 50% of DFI to mint any tokens.
- assume a wallet has $100 worth of DFI and $50 worth of dUSDC. Thus, the ratio of DFI is 66.6% which is above 50%. This is fine.
- if a user deposits a further $350 worth of dUSDC into the wallet. The new DFI ratio is $100/($100 + $50 + $350) x 100% = 20%. Since the DFI percentage is below 50%, the vault owner will not be able to take any loans out of the vault even if the collateralization ratio of the vault is not breached.
Ways to get a dToken
- Minting one via vault (based on Oracle price)
- Liquidity mining rewards
- Buying via the DEX (based on market demand/supply price)
Why invest in dTokens before they even start earning block rewards?
Discussion on Reddit:
- If you get into the new LM pools very early, you get a lot of swap fees due to the high inflow at the beginning
- Fees are generally small, but can be relevant if you get a huge share until more people join the pool.
- When rewards go live, it’s possible to get thousands of percent APY initially as you are netting a huge part of the block rewards early on, until everyone notices and joins as well.
- DeFiChain Explorer: defiscan.live
- DeFiChain Official Blog
- What Are Decentralized Assets And How do They Work?
- A Step-by-Step Guide to Decentralized Assets
- Doubling Your Money With Decentralized Assets?
- Decentralized Assets like dTSLA simply explained!
- 3 Key Strategies to Maximize Your Return with Decentralized Assets
- An Intro Into The Foundational Concepts of Decentralized Loans on DeFiChain
- Upside & Risks of an Investment in DeFiChain (DFI)
- DeFiChain Reddit Community
- DeFiChain Status
- DeFiChain Youtube Channel
- defillama: DefiChain TVL
- For historical price of the dTokens
- useful site to check dStocks price premium over Oracle price
- GitHub: Pink Paper: Design, technicals and direction for DeFiChain
- Rewards Distribution Ratio
- Tracking portfolio performance: