Algorand DeFi Deployment Updates and New Deployments

:star: Algorand DeFi Deployment Updates and New Deployments :star:

AlgoFam, I’m happy to announce that as part of the Algorand Foundation’s continued support for Algorand DeFi, we’ve received backing from the broader Algorand team to increase liquidity across the DeFi ecosystem further.

As part of the GP7 mandate (GP7 Measure #1, 98%), we will (1) continue deployments to support DeFi dapps and (2) conduct a feedback process for community members.

The framework for dApp selection for this deployment is based on the following:

  • Minimizing the risk of impermanent loss
  • Minimizing the risk of liquidation
  • Technical risk assessment
  • Regulatory, legal, and policy considerations

As the liquidity deployment is focused on the DeFi ecosystem, DeFi dApps with active TVL registered on DefiLlama were prompted to review existing and suitable pools for deployment. This process took place over the past two months, and like most major liquidity deployment options, the choices involved balancing trade-offs. We narrowed the options at this proposed deployment route, which includes a strong increase in liquidity provision as well as taking exposure to a broader set of applications.

Current deployment:

  • 5M Algo, gAlgo/Algo LP, Tinyman
  • 5M gAlgo/Algo LP, Pact
  • 30M Algo, Folks Finance
  • 2M Algo, Algo Vault, AlgoRai

Our current deployment options have worked well and have helped with general liquidity. Deployments into Folks Lending have assisted more users in achieving their leveraged governance goals, as well as borrowing and lending activities. The gAlgo/Algo pools facilitate users’ movements to and from their chosen gAlgo. Additionally, AlgoRai vaults have grown since our initial seed. To improve liquidity deployments, we aggregated feedback and identified a key improvement point among many. Algorand DeFi users desire enhanced support when interacting with Algo pairs.

To avoid confusion, the numbers shared below are inclusive of the currently deployed amount mentioned above.

Proposed deployment:

Tinyman: 9M Algo

  • 8M Algo for xAlgo/Algo LP, deployed to Folks Lending Pools
  • 1M Algo for mAlgo/Algo LP, deployed to Tinyman Farms

Pact: 4M Algo

  • 3M Algo for xAlgo/Algo LP, deployed to Folks Lending Pools
  • 1M Algo for mAlgo/Algo LP, deployed to Compx Vaults

Folks Finance:

  • 40M Algo, deployed to Folks Lending (inclusive of existing 30M Algo)

C3:

  • 1M Algo, deployed to C3 Earn

In this deployment, we aim to leverage the advancements made by our DeFi applications over the past couple of quarters. These applications have been building additional DeFi Lego layers for the Algorand DeFi ecosystem, showcasing the strength of Algorand’s instant finality and low fees. Therefore, this time, we are taking a broader approach by utilizing the products built by our builders and committing to Tinyman Farms, Folks Finance Lending Pools, and Compx Autocompounders. Additionally, we are supporting both Folks Finance’s xAlgo (gAlgo) and Messina’s mAlgo in relative proportion to the number of governors using their services.

Both Compx and C3 are new additions contributing to Algorand DeFi’s focus on enhancing Economic Transactions via Transactions Per Second (TPS). Compx has been developing its auto-compounders and currently offers over 100 active pools for users to automate their compounding. C3 has been expanding into the cross-chain space, featured as part of Wormhole’s cross-chain ecosystem, and has been facilitating transactions from traders onto Algorand as part of efforts to enhance Algorand’s utilization.

An important point to note is that projects must undergo a technical risk assessment before deployment. The Foundation will deploy into projects that do not pass this assessment. One of our primary goals is also to minimize impermanent loss and the risk of liquidation, and therefore, we are unable to support certain pairs and assets for this reason. However, we will continue refining our methodologies around liquidity within DeFi to support a better user experience for our users.

Among considerations of asset type, weight is also placed on the team’s focus on growing their projects. It’s important that the projects we deploy continue to develop products and services that users will love to use, and that they actively strive to increase adoption and utilization of Algorand.

We look forward to your suggestions and input on how we can improve this process and efficiently support both the builders and the community. Thanks for taking the time!

-DanO

6 Likes

While I can see why you might think that xALGO should get more liquidity since Folks Finance had more success with LSTs than anyone else on Algorand it’s still weird you choosing to supply way more liquidity to one LST over another one. Especially since xALGO is kinda newish to Algorand as well, since it is not a direct continuation of gALGO. The Foundation shouldn’t choose winners in the ecosystem and make sure it is a level playing field where everyone has the same chances if they put in good work.

Why do you want to increase the amount? Any specific reasons? Why is the Foundation supplying liquidity into the lending market at all?

While LSTs are very important for ecosystem, it feels weird that stuff like ALGO-USDC which plays a more essential role gets not supported by the foundation. Of course you then have to deal with IL and the foundation indirectly selling/buying ALGO by being a liquidity provider but an improvement of ALGO-USDC liquidity would be great for the ecosystem.

5 Likes

Thanks, Lobo. The feedback is helpful and will be taken up for discussion and into account.

2 Likes

And here i thought we are done with incentivizing LSTs…

I would really love to see these platforms putting their own skin in the game (launch their own token, get their own liquidity, reward with their own token… you know like the rest of the eco (whoever wasn’t already crippled by TDRs determining winners for past quarters) had to do since day 1, instead having an entire business model built on top of continuous rewards provided by AF.

Now don’t get me wrong, i’m all for supporting and incentivizing stablescoins and algo pairings, not usdc/usdt not usdc/eurs but ALGO/stablecoin pairings (algo/eurs algo/usdc …). This is actual liquidity we need imo. (i was trying to swap algo into eurs the other day, on 1k $ value i would have to lose almost 30$ due to low liquidity…that is an absurd issue, that is stuff we need to fix and not yet anotehr xyzAlgo token whose only success is the TDR it gets and siphoning algos from AF…)

As lobo stated above, if AF is picking winners before they even had their market fit confirmed what are we even doing?

My 5 cents

3 Likes

I second only supporting Algo/stable pairs. It’s the most popular swap pattern on the chain and if we’re looking to be the real world chain, we should be supporting real world tokens.

1 Like