October 19, 2020 View Online
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DeFi protocols have entered a Halloween war of transfusion, sucking the liquidity out of one another. Is this innovation or is the capital just going in circles?

In today’s edition: learn how to farm everything with Dracula, understand DodoEx’s market making algorithm, explore dForce DeFi yield markets and decentralized option trading with Hegic.

What is Dracula Protocol? One Tool To Farm Everything

what is dracula protocol? one tool to farm all the ecosystems
Dracula Protocol is a DeFi farming protocol that enables users to capture value from liquidity mining programs on other popular platforms. Team Dracula refers to this as the Victim list, which currently comprises: Uniswap, Pickle, SushiSwap, Value Liquid, and LuaSwap. Essentially, Dracula Protocol unifies all of the yield farms under a single smart contract, accessible via one web interface.

What is Dracula Protocol? Dracula Protocol aims to provide a yield farming operation that is sustainable long term, bringing stability to the DeFi ecosystem. The team achieves this by providing proxy staking pools that automatically transfer funds into targeted pools through different adapters.
What is dracula protocol? Ecosystem overview
Furthermore, users receive Dracula Tokens (DRC) as rewards for staking in the platform’s pools. The team notes that many farming protocols are at risk of long-term inflation. Thus causing a vicious circle of whale farmers dumping their tokens on retail investors. However, DRC’s tokenomics is deflationary by design to avoid the common over-emission problem.

Additionally, Dracula Protocol mitigates this risk with its unique drain feature. It automatically claims rewards from the victim’s pool and sells it for ETH.
Screenshot of dracula protocol's victum list.
The protocol then performs a buyback-and-burn strategy from the DRC-ETH pool.

Lower Transaction Costs. Given the protocol’s design, users lower their overall gas costs. Because, if they were farming in the victim’s pools directly they would need to manually claim rewards. As a result, staking in the DRC pools generally returns a higher profit than staking in the victim’s pool directly.
  • The easiest way to think of Dracula Protocol is to see it as a Layer 2 solution for farming protocols. Essentially, the platform is acting much like a Vault from Yearn Finance but for liquidity provider tokens. It automatically auto compounds your rewards to absorb all the APY from the DeFi ecosystem into DRC token.
Lower APY, higher ROI… Another unique approach is farming is slower. The minting of DRC token is capped to 90% of the victim’s pool APY. This choice aim is to provide permanent value accumulation. Meaning users do not have to immediately claim their DRC and sell their rewards. Ending in a more sustainable farming experience and attractive token for retail investors!

What is DODO? Meet The Proactive Market Maker

dodo decentralized exchange with PMM algorithm
DODOEx is a decentralized exchange deployed on Ethereum. It feels much like using Uniswap, however, there are some notable tweaks to achieve more efficient usage of capital. Uniquely, users can provide single asset liquidity and there is no impermanent loss. Team DODO claims that liquidity providers can receive up to 40% APR on their deposits, and that is without factoring in any liquidity mining rewards.

What is DODO? At its core, Dodo is an on-chain liquidity provider that acts much like Uniswap, Mooniswap, or Value Liquid. The key difference is DODO uses an alternative approach to automated market making. Referred to as being a Proactive Market Maker (PMM), DodoEx uses price oracles to copy the behavior of real human traders & market makers.
What is DODO? DEX with PMM algorithm.
Essentially, the algorithm checks the prices of assets allocating funds to proactively increase liquidity near the market price. And it rapidly decreases liquidity if it gets further away from the market price. By following a proactive approach to using its liquidity, the protocol makes capital usage more efficient. As a result, you find a high level of liquidity which reacts more like a centralized exchange.

The innovative pricing formula enables liquidity providers to deposit a single asset instead of both crypto assets. When a trade happens, PMM dynamically adjusts the price to attract arbitrage trading to rebalance the liquidity provider’s portfolio. This is an idea to mitigate the dreaded issue of impermanent loss that we find on many AMMs.

How to use DODO exchange? Traders can swap between two tokens by using the DODO Exchange, note you will need to be comfortable using a dApp browser such as MetaMask. One thing to know is that you can’t trade tokens against each other, all pairs are with USDC.
what is dodo exchange
Currently, trading is live for many mainstream tokens such as ETH, WBTC, LEND, SNX or YFI. For liquidity providers, you can use the Pool tab to easily add or remove liquidity via the dashboard - along with claiming any DODO rewards. The DODO protocol is in a beta phase, though it has been audited by PeckShield and Trail of Bits.

Hegic brings Liquidity Mining to DeFi Options Trading

Hegic Protocol offering DeFi options on puts and calls for ETH and WBTC
Following a security audit from Peckshield, the decentralized options platform Hegic launched its beta mainnet. Hegic v888 features the much-awaited transition to bidirectional liquidity pools for ETH and WBTC. As a result, the protocol’s liquidity providers and option holders will start earning rewards through the new HEGIC liquidity mining programs.

What is Hegic? Hegic is an options trading protocol built on Ethereum. The protocol enables the creation of options with customized strike prices and expiries - entirely on-chain, permissionless, and non-custodial. Users can then buy or sell calls and put options for ETH or WBTC using Hegic. Options are seen as an integral part of traditional financial services because they allow traders to implement powerful risk management strategies.
Hegic options trading for WBTC
With Ethereum’s DeFi stack growing bigger every week, a true solution for creating and trading options looks like a necessity. Hegic finds competition in the form of Yearn Finance insurance and Opyn.

However, this will be the first decentralized options protocol rewarding its users which may give Hegic the edge. In total, 1,650,000 tokens have been allocated towards Hegic's phase one of its liquidity mining program.

Popular options contracts… The v888 launch added support for Bitcoin through WBTC. Given that Ethereum and Bitcoin are the most popular option contracts on centralized platforms such as Deribit, this is a great move by Hegic for future growth.
  • Molly Wintermute, the project’s anonymous creator, has reminded everyone that the smart contracts are still in beta: use with caution!
Why v888… A lucrative staking reward is also available for Hegic token holders with a balance of over 888,000 - roughly $70,000 at the time of writing. They can stake their holdings in lots, and lot owners will earn 1% in fees on all the options sold through the protocol. In return, these stakers are responsible for protocol governance.

dForce’s Yield Markets Explained

dForce yield markets explained
After dForce suffered a notorious hack of around $25 million, dForce went back to the drawing board. After several security audits before re-launching, dForce is starting to make a comeback into decentralized finance (DeFi). Here we will take a look at their Yield Markets and Liquidity mining programs.

A DeFi Aggregator with a twist. Mindao Yang, co-founder of dForce, believes that standalone DeFi protocols such as Aave or Maker do not have the competitive edge. Meaning they cannot capture all the ecosystem's rewards for their users. The future belongs to platforms providing aggregation and matrix products, that users can easily access.
We have all watched the summer craze of YFI and SUSHI cause a huge demand for DeFi tokens from investors.

However, the problem with being a simple DeFi aggregator is that they can be easily cloned and copied. Just take a look at Dfi Money, xFinance, Harvest Finance - the list goes on. As a result, dForce is on a different path for aggregation. Essentially, the idea is to not simply be a aggregator as a service but as an asset protocol.

Aggregation as an asset? By becoming a decentralized finance aggregator of the aggregators liquidity providers will remain loyal to using dForce. Currently, we see many users who move on to Curve as soon as the potential rewards are better.

With dForce the approach is to integrate all DeFi protocols vertically and horizontally.
dForce yield markets diagram
Essentially, users can earn value from all of the rewards on offer around the ecosystem. We find similar innovations happening in platforms like Value DeFi or Dracula Protocol.

Key Features
  • dForce offers risk-adjusted yield farming as deposits will be pooled across multiple DeFi stacks. Thus, less risk if a protocol such as Compound collapses and you only have cTokens.
  • All governance tokens are automatically harvested and compounded into the underlying yield.
  • No impermanent loss risks, as dforce's yield markets do not feature any AMMs.
  • Built for maximum Gas efficiency. The protocol includes an internal buffer for users depositing and withdrawing. Therefore, it does not need to interact with the underlying protocol on each action.
dForce yield markets
Additionally, when a user deposits funds they are given the corresponding dToken in return. All dTokens follow the ERC20 standard. As a result, they are compatible with Balancer pools for liquidity and support quick stablecoin swaps.

Also take note

  • DC Comics: Batman digital art will soon be on Ethereum in the form of a non-fungible tokens.
  • Binance Smart Chain: Announced their first $100M accelerator seed fund for six projects, including PancakeSwap.
  • MetaMask: Token swaps are now available from inside your wallet, currently live for all extension users. The upgrade will come to mobile users at a later date.
  • Numerai: Introduced a competitive market for stock market signals, called Numerai Signals. It aims to make it possible for small players to compete with established hedge funds.
The information provided on this email should not be taken as investment advice, financial advice, trading advice, or any other sort of advice. dExplain does not recommend the use of any decentralized application nor that any cryptocurrency should be bought, sold, or held by you. You should do your own research and consult a financial advisor before making any investments.

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