Major news outlets started this week off with headlines reporting Visa’s new pilot program with Crypto.com. According to Yahoo Finance, Crypto.com has traditionally sold crypto assets to settle its obligations with Visa. Instead, the 10m+ user exchange will now be able to pay directly with USDC. In yet another milestone bridging the old world of finance with blockchain protocols, Visa told Reuters that it “plans to offer the option to more partners later this year.”
Known as a “stablecoin”, USDC (USD Coin) is redeemable at a 1:1 rate for US dollars. Built on standards governed by Centre, a “membership-based consortium that sets technical, policy and financial standards for stablecoins,” USDC is fully backed by reserve assets and is issued by a variety of regulated financial institutions. By digitizing the dollar through blockchain technology, USDC offers greater transactability and smart contract functionality than its cash predecessor.
Meanwhile, China, Japan, and numerous other countries are piloting their own “stablecoins,” called central bank digital currencies, or CBDCs. According to Josiah Hernandez, head of the CBDC Group, “What has spurred interest in CBDC issuance is the realization that it offers a holistic solution for updating financial infrastructure and enables instantly settled payments at no cost to customers.” With fintech giants and central banks alike working toward greater blockchain adoption, we are excited to see what’s next.
By Nathan Frankovitz
Weekly Analyst Thoughts
Dodo is a new decentralized exchange (dex) and on-chain liquidity provider for yield farmers. Dodo enables farmers to engage in single-side liquidity instead of providing a 50-50 liquidity split between two tokens, the common requirement of decentralized automated market makers like Uniswap.
An interesting feature of Dodo is that it gives the option to pair Defi coins like Aave, YFI, and SNX with USDC, a stablecoin, which is not a function frequently offered by competing decentralized exchanges. Below, find a picture of the Dodo dex pool offerings.
The pairing of Dodo’s pools with the USDC stablecoin differentiates the platform from other dexes as it experiences half the normal volatility and provides higher risk-adjusted returns due to the lower risk of impermanent loss.
In summary, if one is looking for a new Defi yield farming opportunity with less volatility, single side liquidity, and greater risk adjusted returns, then Dodo is the place to look.
By Jacob Stelter
Weekly Analyst Thoughts
Ampleforth-USDC Smart Pool
Before Uniswap, decentralized exchanges were plagued with low liquidity and trade volumes. Decentralized exchanges had orderbooks, complicated cryptocurrency wallets and several functional problems for users. The advent of automated market making by Uniswap revolutionized decentralized exchanges. The AMM model consists of liquidity providers who provide 50% of one asset and 50% of another asset into a pool and earn a 0.3% fee anytime someone trades one asset for the other inside the pool. However, one big problem that comes with the AMM model is the impermanent loss for liquidity providers. An impermanent loss is what an LP incurs when they provide liquidity to a pool and the assets in the pool diverge from the price established when the liquidity was first provided. It is called impermanent loss because the 0.3% trading fee revenue is meant to offset the loss from providing liquidity, but in some cases where the asset price diverges too much from the other asset, the impermanent loss could become a permanent loss.
The Ampleforth-USDC Smart pool on Balancer aims to mitigate impermanent loss with a smart contract that automatically rebalances the Ampleforth-USDC pool to a 50-50 weighting based upon Ampleforth’s daily rebases. Ampleforth is an elastic cryptocurrency that has a target value of $1. As Ampleforth trades above $1, the token does an automatic rebase where it increases the AMPL supply to push the value down to $1, which signals the Balancer Smart pool to adjust the AMPL-USDC weightings to mitigate impermanent loss. In summary, if a liquidity provider is looking to mitigate impermanent loss risk and is looking for innovation in the Stablecoin pooling space, look no further than the AMPL-USDC smart pool on Balancer.
By Jacob Stelter