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DeFi on the Tezos Network: A Closer Look

Posted by
Ian Kane

Tezos looks to stake its claim in decentralized finance

DeFi on the Tezos blockchain is still in its infancy. Some DeFi platforms are gaining serious traction though, and therefore this is a good moment to take a closer look. How similar is DeFi on Tezos when compared with familiar platforms on Ethereum, Binance Smart Chain, and Polygon? Let’s find out and learn more.

Launched in 2018, the Tezos network has quickly become a popular destination for creators, developers, and corporates with over 1.3m contract calls in each of the last three months of 2021, averaging over 20% of daily Ethereum transactions and growing each day. DappRadar is excited to announce that Tezos has officially been integrated into its services, offering in-depth dapp data for the upgradable and energy-efficient network. 

A key category for applications running on Tezos moving forward is decentralized finance. Of the 26 currently tracked dapps, 12 are in the DeFi & exchange categories. Almost half. Some of these dapps are already performing quite well while others are starting to gain some traction. 

QuipuSwap

QuipuSwap is basically Tezos’s version of the Ethereum DEX Uniswap. It’s an open-source protocol that provides an interface for the exchange of Tezos-based tokens and XTZ. Liquidity providers earn from both the swap fees and bakers rewards. The solution is driven by principles of security, decentralization, and scalability and serves both as a standalone project and a tool for future solutions developed on the Tezos blockchain. 

Interestingly, the platform also has a send feature that allows users to send tokens to other wallets. Furthermore, in order to provide a better user experience and to achieve the greatest flexibility, the system design envisages the ability to exchange tokens of different standards. For more detailed information, contracts, and deeper learning please check the QuipuSwaps docs page.

Looking at the performance of QuipuSwap over the last 30 days reveals further insight into its usage. The platform has processed 32,650 transactions from 2,100 unique active wallets with a total value of over $8.8 million. This makes the average transaction around $270. These numbers are similar to several newer DEXs on Binance Smart Chain and Polygon but overall are lagging way behind the current leading finance dapps on those networks and Ethereum. 

Plenty 

Plenty is a yield farming platform on Tezos that is still in Beta. Although its functionality is mostly functional, there is a small disclaimer to approve before entering. Similar to other platforms of this nature users lock up tokens to receive PLENTY as a reward. Currently, for locking up PLENTY the deposit fee is zero and the stated APY is 45315%. The Ponds feature enables users to stake PLENTY and earn tokens for up-and-coming, potentially exciting projects. It’s very similar to the IAO or IDO we are seeing on other finance dapps on BSC and Polygon. A pond is smaller than a pool. A name the platform believes is perfect for the feature. 

Impressively the platform collected over $10 million in total value locked across all its farms and pools within just one week of its launch in June 2021. Furthermore, its smart contracts were responsible for over 125,000 operations, or 30% of all smart contract calls on Tezos in the first week of June.

Looking at the performance of Plenty in the last 30 days reveals how successful it has been since its launch. The platform has handled over 80,000 transactions generated by 1,430 unique active wallets. It certainly represents ‘one to watch’ as yield farming and passive earning continue to be the main focus of investors and dapp builders. 

Wrap 

Through Wrap, users can issue wTokens (wrapped tokens) which are representations of Ethereum based ERC20 and ERC721 tokens on the Tezos blockchain. wTokens can then be used on the Tezos blockchain, and their value is pegged to the original tokens. Wrap is a decentralized protocol and has a community of WRAP governance token holders that can vote and decide on the direction of the protocol. 

We envisage Wrap becoming an important player in the Tezos DeFi ecosystem depending on how it further expands. Users will have a need to bring in assets from other networks such as Ethereum and potentially bitcoin. This bridge will provide the means to do so. Furthermore, the platform also allows for the farming of these newly wrapped tokens. Meaning that users won’t need to take them to another protocol – such as Plenty. 

Looking at the numbers over the last 30 days shows that Wrap has processed over 14,600 transactions from 1,330 unique active wallets. A fairly strong start given the generally low numbers across dapps in the finance category of Tezos. 

Kolibri 

Kolibri is a Tezos-based stablecoin built on collateralized debt positions or CDPs, which the platform has called ‘Ovens’. Each Oven has four functions: Deposit and withdraw XTZ,borrow kUSD against the Oven using XTZ as collateral, and repay the borrowed kUSD. Kolibri uses CDPs to collateralize a soft pegged USD-stable value asset in the form of kUSD. A stability fee is applied to borrowed kUSD. It is accrued in terms of kUSD. It is a percentage-based fee applied to all outstanding kUSD (borrowed kUSD + stability fee). Interest is assessed every minute and the stability fee is adjusted via governance to increase or decrease the incentives to borrow or repay kUSD if the asset loses a peg.

The Kolibri system will prevent users from borrowing kUSD such that an oven becomes under collateralized or withdrawing XTZ to cause the Oven to become undercollateralized. However, the price of XTZ still fluctuates, which means an Oven can become undercollateralized without user action. At that point, a liquidation process kicks in to restore stability to the system.

Looking at the numbers over the last 30 days shows that Kolibri has processed over 3,780 transactions from 651 unique active wallets. As Kolibri represents the more complex side of DeFi and investing, we don’t envisage this platform’s activity to explode in the near future but rather build steadily as users come to understand the deeper mechanics of DeFi. For more detailed information, contracts, and deeper learning please check Kolibri’s docs page.

Defi on Tezos – A Summary 

There are of course many more decentralized finance apps competing for customers on the Tezos network. Some have such small user numbers that at this moment in time it’s quite hard to see which will be victorious. What we can say is the ecosystem is growing quickly and dapps here offer similar services to finance dapps found on Ethereum, Polygon, and Binance Smart Chain.

As more educational resources come online around which blockchain wallets to use with Tezos perhaps hungry yield farms will start looking outside the big three. It will be fascinating to observe how Tezos goes about attracting dapp builders and possibly enticing dapps to go cross-chain.

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