Dive into yield derivatives and build the next generation of DeFi services
Radix wants to innovate even more in the world of DeFi, and invites developers for the Scrypto Yield Derivatives Challenge. Developers can for example build a project around yield stripping, yield swapping or interest rate swaps. The deadline for the challenge ends on 3 May 2024.
Radix sees yield derivatives as one of the areas in DeFi where they can still innovate a lot more. The Radix ecosystem already enjoys native liquidity pools, and therefore taps strongly into the field of decentralized finance. With the Scrypto Yield Derivatives Challenge developers can win $15,000 in XRD tokens, an honorary Scrypto OG NFT, and potentially a Radix Booster Grant to actually launch the project on Radix.
What are yield derivatives?
Yield derivatives are financial instruments that get their value from the yield of the underlying asset. These yield bearing assets are then basically split into two parts: a Principal Token (PT) and a Yield Token (YT). With these tokens you can claim either the locked assets, or the yield these have generated. This means that traders can either bet on the staked assets, or invest in the yield it generates. Therefore, these financial systems make assets more liquid, flexible and accessible.
Bringing yield derivatives to Radix
Radix features various native building blocks to shape DeFi, which enhances security and reduces the risk of security vulnerabilities. In addition, developers don’t need to manually program the logic of tokens, because this is built in the Scrypto programming language itself. Overall, this streamlines development, allowing developers to innovate.
Within the Radix ecosystem, validators issue liquid staking units (LSUs) to individuals who stake their XRD tokens with them. Developers can apply yield derivatives to those LSUs. Furthermore, the native liquidity pools of the Radix ecosystem can also become a playground for developers who like to experiment even further.
Ideas for yield derivatives
Yield Stripping
By splitting future yield from the staking pool, developers can introduce a Principle Token and a Yield Token. This would allow users to manage liquidity needs, while potentially retaining exposure to future earnings.
Interest Rate Swaps
The moment a platform has accurate information about interest rates, it can facilitate efficient and transparent rate swaps. This will allow users to swap their expected yields based on different interest rates. This then would enable investors to manage their exposure to the interest rate, and perhaps provide more price stability in a volatile DeFi market.
Yield Swapping Platform
Once you’ve stripped the PT and the YT form each other, it could allow traders to specifically swap their yield derivatives. It would allow users to trade yield from different DeFi products, which could cover both fixed and variable yields. Again, a way for investors to diversify and hedge against the exposure from the yield.
Examples
Below we’ve listed a couple of examples you can look into before developing your own platform.
- Pendle Finance, allows users to sell or trade yield tokens.
- Notional Finance, allows users fixed rate lending, while they can maximize returns using Leveraged Vaults.
- Tranche Finance, is a building block for DeFi platforms that supports fixed and variable interest rates.
- IPOR, provides reliable references rates for yield across chains and platforms. This paves the way for advanced financial services that for example manage yield risk.
Evaluation and prizes
Every project is judged by senior members of the RDX Works team, and they evaluate your project based on the quality of asset-oriented programming, functionality, creativity, quality of documentation, and usage of the frontend Javascript SDK and the transaction manifest.
Every participating developer will receive an NFT to commemorate their commitment and achievements in the Radix ecosystem. But for the top 3 projects there will be a $15,000 prize pool, shared as follows:
- $8,000 in XRD
- $4,500 in XRD
- $2,500 in XRD
Each of the winners also has a change to get a Radix Booster Grant.
The Radix Booster Grant allows individual developers or development teams to build a dapp on Radix, and then apply for one of two possible grants at the time.
- MVP Booster of $5,000 in XRD, for projects that are still building on testnet
- Launch Booster of $10,000 in XRD, for projects that are ready to launch on mainnet.
Interested? Sign up now!
The Scrypto Yield Derivatives Challenge is now open to all developers. Those who are looking for team members can find like minded people in the Radix Discord. Teams have until 3 May 2024, 15:00 UTC to submit their project. After submitting teams need to make sure to make a Pull Request to the official repository on Github, and fill in the submission form.
Don’t forget that your submission must be a Scrypto package. This package must contain blueprints which implement a way to create or trade yield derivatives. Every project must utilize the Radix Dapp Toolkit in their frontend. To ensure clean coding, the team recommends using Scrypto testing or Testrunner, while a Readme file would be nice to explain your project.
