veDAO Institute: A Brief Analysis of TapiocaDAO Solving DeFi Liquidity Fragmentation Issue

特邀专栏作者

2023-08-13 10:47 (UTC+8)

This article is about 2186 words, reading the full article takes about 4 minutes

DeFi remains the foundation of the entire industry, but the problem of fragmented liquidity is a major challenge for the current DeFi sector. To address this issue, one solution is TapiocaDAO, which is discussed in this article. TapiocaDAO has its own understanding and technological advantages for t

AI Summary

DeFi is still the foundation of the entire industry, but the problem of liquidity fragmentation is a major challenge that the DeFi sector currently faces. In response to this problem, most of the current conventional solutions adopt strategies such as cross-chain bridges, intermediate chains, and multi-chain Dapps. These strategies have good and bad qualities. In addition, there is another solution mentioned in this article: TapiocaDAO, which adopts the full-chain LayerZero solution; in fact, this solution is not the first of TapiocaDAO. Wormhole was one of the representatives of this solution before, but last year Encountered a hacker attack and the loss amounted to US$326 million.

But we should not regard the failure of Wormhole as the failure of the whole chain LayerZero solution. TapiocaDAO has its own knowledge and technical advantages for the full-chain LayerZero solution. The following is a detailed introduction to TapiocaDAO. By reading the following, perhaps we can have a clearer understanding of TapiocaDAO itself and what it wants to do.

This article comes from @DewhalesCapital, and veDAO Research Institute has obtained authorization to reprint it in Chinese.

TapiocaDAO Project Introduction

This article is divided into two parts. We’ll start with part one and dive into the details of Tapioca’s infrastructure:

Singularity
Big Bang
YieldBox
twAML
DSO
PearLayer

Remember: these are not just random terms. They are the building blocks of TapiocaDAO’s unique DeFi ecosystem, each playing a unique role in creating a seamlessly connected financial hub. TapiocaDAO aims to solve the liquidity fragmentation problem in DeFi, making it possible to lend, borrow and utilize a variety of assets on any network. This move enhances capital efficiency and increases borrowing opportunities by unifying liquidity.

The fragmentation of liquidity across chains and protocols in DeFi reduces capital efficiency. The liquidity of the same asset is not shared between two different chains, resulting in larger slippages. Thanks to LayerZero’s generalized messaging network, TapiocaDAO becomes the first “full-chain” money market protocol. The goal is to eliminate well-known bridge-related risks, including smart contract vulnerabilities and user friction.

TapiocaDAO’s unique token economy involves the $TAP, twTAP, oTAP, and $USD 0 tokens, each targeting a specific aspect of DeFi. From risk management to yield optimization, these tokens form a dynamic ecosystem designed to drive the growth of the protocol.

Lending Market: Singularity

We’ll start with Singularity, a modified version of BoringCrypto’s Kashi. Singularity serves as a lending and borrowing market, diversifying risk by isolating markets to support riskier assets without jeopardizing the entire protocol.

Compared to traditional lending protocols, all assets share a liquidity pool. This means that if one asset fails, it can have catastrophic effects on the entire system. Singularity, on the other hand, takes a different approach. It allows users to create individual lending pairs. Each lending pair is isolated from other lending pairs, meaning that if an asset fails, it will only affect that specific lending pair and not the entire pool.

Additionally, it allows for one-click leverage, automatically gaining up to 5x leverage with a single click. Its purpose is to optimize the utilization of volatile assets by sharing market liquidity across multiple chains.

Stablecoin Minting Mechanism: Big Bang

Big Bang is another Kashi evolution that uses Gas tokens as collateral to enable the minting of USD 0 stablecoins. This concept introduces the protocol for self-repaying loans. In other words, it allows users to mint USD 0 by providing accepted assets as collateral.

To ensure the stability of the protocol, Tapioca uses a mechanism called Collateral-to-Debt Ratio (CDR) to adjust the supply of USD 0 according to market demand. By adjusting interest rates, this would encourage arbitrage, providing more favorable terms to borrowers or lenders.

Permissionless Token Storage: YieldBox

YieldBox (BentoBox V2) is a permissionless token vault. Compared to BentoBox V1, YieldBox introduces upgrades, optimizes gas consumption, and simplifies the token approval process. It supports NFTs, reset tokens, and segregated policies. With segregated strategies, it allows tokens to be rebalanced between different risk-segregated reward strategies. Tapioca does this by using proxy contracts on Arbitrum outside of supported chains to pass messages between chains.

BentoBox is essentially a token vault where users can deposit tokens and use them across multiple DeFi applications without withdrawing them from the vault. YieldBox builds on this foundation, but refines and extends its functionality. It is designed to achieve the best yield on deposited assets. To do so, it utilizes a variety of strategies involving yield farming, borrowing, staking, and more.

YieldBox is constantly tracked and adjusted to maximize yield for token holders. Simply put, when users deposit tokens into YieldBox, the system will automatically use these tokens to participate in the strategy of maximizing revenue.

Economic system: twAML

twAML is an economic system that dynamically achieves maximum allocation efficiency based on economic activity. It employs game theory where users escrow commitments continually regulate AML, a consensus-driven and free-market-defined metric. In the traditional liquidity mining model, irresponsible issuance and high inflation often lead to unprofitable practices, which in turn lead to a steady decline in the value of protocol tokens, and reduced yields, user interest, and liquidity.

TapiocaDAO has published a detailed whitepaper that aims to address these challenges and improve models from OlympusDAO, GMX, Convex Aura, OLM, and Keep3r to better address their limitations.

Link:https://www.tapioca.xyz/docs/twAML.pdf

AML measures a users system impact based on the size of their contribution and the total number of participants in the interaction. System incentives can oscillate based on user behavior and system state, thus avoiding stagnation and promoting new states of growth. Tapioca’s AML is influenced by Keep 3r’s OLM (Option Liquidity Mining), which inhibits the immediate profit-making selling behavior of liquidity miners. It ensures a sustainable balance of user incentives and long-term treasury, thereby crucially creating a POL (Protocol Captured Liquidity).

DAO Call Option: DSO

DSO (DAO Call Option) is a mechanism that allows the creation of POL (Protocol Capture Liquidity), long-term TVL and twAML. This concept serves as a key building block in operating their unique economic model.

DSO allows OLM to operate efficiently. Inspired by Andre Cronjes Keep 3 r, this mechanism enables the creation of POL, long-term TVL, and twAML.

Users who provide liquidity to the credit market will receive token receipts (tOLP), which can be optionally locked for a period of time. At the end of this period, they will receive an oTAP with a specified strike price, giving them the option (not the obligation) to purchase TAP tokens at a discounted price.

The specific role of the DSO is to facilitate the creation of protocol capture liquidity (POL), encourage long-term total value locked (TVL), and support the operation of the twAML mechanism.

Tapiocas Repeater PearLayer

PearLayer is Tapiocas repeater, which uses LayerZeros Pre-Crime mechanism to support Arbitrum, Optimism, Ethereum, Avalanche, Base, Berachain, ZKSync, Starknet, Mantle Network, Cosmos, Sei, Polkadot and other chains.

With Pre-Crime, PearLayer can verify the potential outcomes of cross-chain messages before delivery, ensuring the integrity of the protocol. Tapioca’s oracle solution comes from the Chainlink price data feed.

veDAO is a decentralized investment and financing platform led by DAO. It will be committed to discovering the most valuable information in the industry, and is keen to explore the underlying logic and cutting-edge tracks in the field of digital encryption, allowing every role in the organization to fulfill their responsibilities and Get rewarded.

Website： http://www.vedao.com/

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