No, it’s never too long to read. DYOR and there’s no financial advice below.
Oh yeah, if you have already known what leveraged yield farming is and what this Francium is all about. You may skip a huge chunk of parts in this article, just go check my 2 cents about what’s the difference and analytics other than the protocol itself.
Now let’s dive in.
The whole Francium product is built around Leveraged Yield Farming (LYF), to explain it a little bit(if you don’t want to read the official docs), let’s back to the basics……
Using your Web3.0/crypto wallet, you connected to an AMM protocol. ‘‘Coooool, it’s my turn to play banker.’’ you pulled out some of your token A (probably USDC) and some of your token B (maybe SOL), then ‘‘provide liquidity’’ (put some tokens into the trading pair that other people can trade with) in the trading pair with both tokens (now they are USDC-SOL), meanwhile you will get some LP(Liquidity Provider) tokens as proof representing you LP position. People who ‘‘swap’’ their USDC into SOL and vice versa on the protocol will pay a certain amount of trading fees to you (more precisely your liquidity provider position).
To furthermore encourage you to keep your liquidity providing position on the protocol. You may ‘‘stake’’(yeah, what a precise word selection we DeFi people made) your handful of LP tokens with incentives(usually tokens of that AMM platform and maybe other tokens from other incentive programs).
So yes, it’s the ‘‘Yield Farming’’. We DeFi farmers spread seeds (tokens) in the farm (the protocol) then harvest the growing yield (more tokens).
Users (farmers) borrow assets to increase yields in leveraged yield farming. The principle is simple: if you have more tokens, you will have more returns. It indicates that if you use leverage, your yield will be multiplied. Although you will have to pay interest on the borrowed assets, leveraged yield farming still has a high capital efficiency. --- Francium Official FAQ
To put it into simple words, Leveraged Yield Farming (LYF), is obviously that you put leverage under the good old yield farming positions. By how? Simply borrow more tokens to pour into your preferred trading pairs.
From SAMO to USDC, ATLAS to wbWBNB (the wrapped BNB came to Solana by Wormhole) Francium can provide up to 3X leverage (6X for the mSOL-SOL) to different assets on their platform with the help of the lending pools.
So what now? Other than the amplified risk and yield, you can use the borrowed position to further short an asset or even build a ‘‘Pseudo-Delta Neutral’’ position on-chain.
Since the birth of DeFi lending protocols (maybe since the ‘‘borrow and lending’’ exists), users borrow assets which they think are going down for the next period and trade them into other assets which will go up relatively. This way you are shorting the borrowed assets since you will gain profits from its loss of value.
Because it’s not complicated enough for our fellow DeFi users, now we will get a leveraged position within a trading pair to short our target assets.
Assets = Liabilities + Equity
Take SOL-USDC for example, you deposit $100 worth of USDC with a 3X leverage borrowing SOL, theoretically you will get $300 worth of position ($150 in SOL and $150 in USDC) while creating $200 worth of debt ($150 in SOL and $50 in USDC). While SOL goes down in a certain range (due to the nature of x*y=k pair, either side of your asset value falls too much will cause damage to your total position. Getting leverage involved won’t vanish the effect, the curve just goes relatively single-sided), 66.6% of your original debt position ($150 worth of SOL) got shrunk and your equity grows (don’t forget the farming rewards keep going in while these happening).
To make it easier to remember, in the same trading pair: ’’You are shorting what you borrowed/borrowed more.’’ If you borrowed stable coins like USDC then ‘‘You are longing what you did not borrow/borrowed less’’ could be easier to be understood in concept.
Strategies built in the Francium offer a simple and easier solution to save users’ energy clicking all around. Though now they only got two Pseudo-Delta Neutral Hedging Strategies (Both based on whETH(weETH, ETH came to Solana by the Wormhole)-USDC, one from Raydium another from Orca) on, and the ‘‘Trading Strategies’’ are still empty now.
‘‘Delta neutral is a portfolio strategy utilizing multiple positions with balancing positive and negative deltas so that the overall delta of the assets in question totals zero.’’---Investopedia
If you have ever tried to learn about the options market, you might be familiar with the term ‘‘Delta Neutral Strategy’’. Both of the Pseudo-Delta Neutral Hedging Strategies are utilizing the same formula: Deposit USDC put 25% of it in 3X whETH/USDC (borrow USDC) position, 75% in 3X whETH/USDC (borrow whETH) position. Now you get the same exposure in long and short whETH.
If the price of whETH maintains a certain range, the user can get a good amount of profit from leveraged farming rewards with moderated risk. But you know……still never underestimate the volatility in this crypto world.
The lending pools here in Francium are almost the same as other lending protocols in appearance. But unlike most of the lending protocols, Francium didn’t specify the interest parameters for different assets in official docs. Seems like every asset(token/coin) is using this interest commonly.
Lending pools are all about attracting more liquidity into the protocol. Obviously, a better ROI (APY/APR) performance is the key, but you still need a real utilization (more user borrowing) to back it up since every kind of short-term incentive program is not made for the long run.
Francium was audited by CertiK and Slow Mist. Although getting an audit report does not mean the project is completely safe from being hacked, at least they are willing to put money on it…twice.
After the Polynetwork hack and Samczsun’s rescue on MISO, the White Hats was put under the spotlight. Not only public their SDK, but Francium announced a long-lasting bug bounty activity for the latest features in December getting the community involved in the overall safety (especially for the new features).
‘‘All the team members are from leading blockchain and Internet companies. We have accumulated a wealth of algorithmic research and implementation experience. We're also among the earliest users of DeFi.’’ --- Official FAQ
Francium has been developed by an anonymous team, you do can reach them through Telegram and Discord, but at least there’s no further information on its website and docs. I’ve also tried to investigate a little bit into GitHub, but not enough evidence was found.
It’s quite subjective, yet I am ok with anonymous projects. Sure there are lots of anonymous projects that end up getting rug-pulled, But there are also good anonymous projects that made great success, and projects with people’s names on them got rekt.
Anonymous or not, it’s not a super important factor at least to me, once you can always get the team answering your questions and suggestions on social media while they seem with a certain integrity.
We have to check their works eventually.
Let’s take Tulip Protocol(used to be SolFarm) and Apricot Finance for Francium’s direct competitors on Solana. As for the other chains, Alpha Hamora and Alpaca Finance must be taken into the list. If you take other lending and yield protocols/dApps in then you will get a much longer list to compare.
Sure, Francium is scrambling for liquidity with other lending and yield protocols, especially on Solana, but saying ‘‘direct’’ competitors, I am going to put more focus on protocols providing LYF service at least in this article.
Starting from Tulip Protocol (I love how they named a DeFi project after the mighty tulip), it’s currently the biggest LYF project on Solana, not just in TVL and market cap. They also have the largest amount of followers on various Web2 social media platforms now.
Other than LYF, Tulip also has the Vaults that you can deposit your LP token from AMM protocols (e.g. Raydium and Saber. You will directly deposit tokens dual-sided into the Orca LP pairs).
Tulip Protocol’s auto-compounded time is set at 10 minutes. Is it an obvious advantage over Francium’s 15 minutes? Sure, more frequently auto-compound will squeeze out more return especially for a larger amount invested in a longer period of time.
But after you add the impact and the volatility of borrowing interest rates into consideration, the auto-compounding frequency may only make a minor difference on the return.
At the end of the day, since you are borrowing money to leverage things, the interest rates are going to make the most significant influence on your return (under the same token prices range).
As the biggest LYF protocol on Solana, Tulip has already created some first-mover advantages here, including its recent price feed integration with the well-known Chainlink. Yet they are just advantages but not a moat.
With the smallest TVL, Apricot Finance looks like Tulip with a better UI at first sight. The most stand-out feature is that it comes with the cross-margin LYF(Once again, more words were combined together, can we call it ‘‘CMLYF’’ now?).
On Apricot X-Farm, users do not need to own any amount of USDT or USDC to start farming. Instead, they can collateralize their non-stablecoin assets to borrow the stablecoins with up to 3x leverage, and start farming USDT-USDC LP right away. These stablecoins will then be auto-pooled and staked for LP tokens, resulting in 3x farming yield.--- Apricot Cross-Farm (X-Farm)
Due to its cross-margin nature, it’s more flexible for users to use (You may just deposit your SOL as collateral to operate in all kinds of pools), but also brought in more liquidation risk as another asset price volatility will get involved under this mechanism. As corresponding, Apricot has introduced in ‘‘Apricot Assist’’.
Fear not, Apricot Assist is designed specifically to help users manage their leveraged positions to reduce liquidation risks through an automated self-deleveraging mechanism.--- Apricot Assist 1.0
Unlike common stop-loss mechanisms, it won’t close the entire position when it hits the pre-set parameters. Instead, Apricot Assist deleverages the position by bringing down the Borrow Limit Used of it, you can find the overall concepts here.
This way, it will be more resilient under volitation. Once Assist 2.0, the more user-configurable version of 1.0, goes online, it does have the potential to be a game-changer while others still run non-cross-margin pools with simple stop-loss functions or even no stop-loss function.
Unlike Francium and Tulip, Apricot Finance is currently backed by a long list of VCs, so there may be more support and advice in numerous aspects (technical, mechanism designing, marketing…etc.) Apricot can seek from its investors.
Apricot Finance is just like a little brother/sister with huge resources and potentials. We should see how will it manage resources and build up its own advantage with its existing features.
Despite the attack in February, Alpha Hamora by Alpha Finance Lab is the OG LYF protocol built on Ethereum. Currently deployed V2 on both Ethereum and Avalanche, V1 on BSC.
Alpha Hamora built their leverage yield farming product upon the liquidity pools from Uniswap V2, SushiSwap, Curve Finance (currently only 3pool), Traderjoe, Pangolin, and PancakeSwap (Alpha Hamora V1 on BSC). Although the amount of pools on Alpha Hamora is not really massive, it has included the ‘‘mainstream’’ pools from mentioned DeFi protocols.
The product itself is not really much more than LYF and lending, nothing quite fancy. Deployed on Ethereum, Avalanche, and BSC also means there will be some (more or less, depending on which chain) disadvantages on the speed and gas fee side.
But since it’s the OG and it has quite some TVL (around 850M as the time writing), security and VC backed. Still need to give it some respect.
https://www.alpacafinance.org/
Currently has the largest TVL among LYF projects, Alpaca Finance does have lots of interesting progress in recent months.
Alpaca Finance is not only a fast-growing but quite a multi-functional DeFi project. Other than LYF and lending pools, it also got single token staking pools for its ibTokens (the interest-bearing tokens you will get after depositing into their lending pools), an overcollateralized auto-farming stablecoin called AUSD, integrating insurance cover with Nexus and InsurAce, and even an NFT project ‘‘Alpies’’ looking to get into the GameFi world with clear plans.
We are not going any deeper into the details of the products by Alpaca Finance, in short, they got cool UIs and good composability inside a single DeFi protocol.
Like many other interesting DeFi protocols on BSC, Alpaca Finance put cool memes and punchlines onto its website. It’s also close to its community, although I am not really an alpaca (the actual animal) guy, the way how Alpaca Finance connects to its community through original memes, awesome graphic design, and interesting events is just so cool.
Within the BSC community, Alpaca Finance is widely regarded as one of the most secure platforms because of our spotless track record of never having had a security issue, and our multi-layered security processes --- Alpaca Finance official docs
The development team does put a lot of works into the security aspect, you may still remember how crazy the flash loans attack keep happening on different projects built on BSC this year. According to its docs, Alpaca is only EOA (Externally Owned Account, the accounts owned by real humans) which means it does not allow flash loans to interact with the protocol.
Though Alpaca Finance is currently the most mature LYF featured DeFi Projects, as it only deployed on BSC now, there are still some good opportunities for the LYF projects deployed on other chains to grow, especially for those on the non-EVM compatible chains.
Other than these LYF projects which were mentioned above, there are many other ‘‘newcomers’’ and smaller projects in the sector, e.g. Eleven Finance, Kalmy, Solyard Finance, degenbanana……some of them are even only exist on papers now.
But due to space limitations, I only picked these four projects is currently online and with unique features or, you know, due to it’s OG and still breathing.
Leveraged Yield Farming (LYF), was not exactly a new thing to the DeFi world. Just on Solana, there are already many different protocols that are currently offering leveraged yield farming features. Not to mention even more in simple yield farming and lending.
Below you will see I am trying to dig into different aspects of Francium, the main focus should be on ‘‘Will it gain more users or expand into more use cases’’.
Yes, users. The final goal of this race is not about who is going to capture more liquidity into the protocol or who’s gonna have the largest TVL (Total Value Locked, which we’ve already known how overrated it is nowadays); It’s about capturing more value while the user base keeps expanding.
Fall back to the most basic question, no matter how good a DeFi project built around LYF is, there’s no point if the concept of LYF itself is not working, or generating a good amount of profit compared to other financial products (especially in DeFi).
First, for the simple and obvious ‘‘increasing capital efficiency’’ reason, LYF users can deposit less of their assets while borrowing much more proportionally than the ‘‘traditional’’ overcollateralized lending and borrowing/minting. Not only capital efficiency (and risks) is raised, but the barriers of entry are lowered significantly.
Second, why use LYF instead of leveraged spot positions, options, futures, and perpetual on DeFi or CeFi platforms? The thing is if you are betting on the wrong side of the market, the yield farming rewards are still come in and you can take it as a sort of compensation.
If you are familiar enough with the mechanisms of AMM and un-leveraged yield farming pools also well-experienced in decentralized lending/borrowing, ‘‘a DeFi veteran’’ in the other word, LYF will be a suitable way for you when looking for higher capital efficiency and you can make money either price goes up and down (also the yield farming returns will keep coming in whether your guess in direction is right or wrong).
Even if the prices don’t move much, you can still make high APY profits since you are leveraging a yield farming position. Furthermore, utilizing the strategies like a neutral hedge, your profit will keep going with moderated risk when the prices move in a certain range.
Considering the currently sky-high APYs in LYF, the numbers are really competitive compared to other types of DeFi projects. It’s being attractive to the DeFi degens.
For sure the risks from the notorious impermanent loss (IL) and liquidation are amplified too, but once with enough risk premium, it will really be worth a shot.
Generally speaking, the UI designs of different LYF protocols are usually similar, so there won’t be many fractions when you move from one to another.
UI design of Francium is quite usable and informative, especially when you compare them to Tulip Protocol and Apricot Finance. Rather than just piling up with all kinds of numbers with technical terms. With a single click on the ‘‘simulator’’ button, you will get visualized information (A chart with a curve and lines) that you can try and play with various parameter settings.
That chart doesn’t only make the user feel good (‘‘Ah…now I am a professional trader with this professional chart.’’), it delivers more confidence while you bet your assets into the pool…..at least you will get a more vivid idea about where it’s going in an up or down price trend.
Apricot didn’t have it, neither Alpha Hamora nor Alpaca Finance has built a visualized simulator into their frontend website yet (You can find a Google spreadsheet and a community-built calculator in the docs of Alpaca Finance. BTW that spreadsheet is really cool and super informative, if you got some time to go deeper into LYF you should definitely try it.).
Tulip does have converted a visualized simulator with a cool turntable on their dApp recently, but it seems to be a cruder version. Why don’t just make the full feature as the Francium one?
https://twitter.com/eirikm0/status/1471097531618799622
There is one thing I really hope could be added into Francium’s UI, which is details about the compositions forming those APYs/APRs. In the nature of a (frontend) DeFi user, I’ve already used to see the compositions in the percentage of the APYs/APRs/ROIs once I move my mouse onto it.
Most users interact with DeFi protocol by the frontend website rather than dance with the smart contract itself. So UI designs are always playing a huge role. We’ve all seen some projects with really weird UI (Like did they make it by Microsoft Word?), and it tends to make you avoid even using it.
No, you won’t become a dominating protocol only by fancy graphics and smooth interface, but at least it means the development team is aware that UI is an important factor. And maybe the advantage of better UI could be a breakthrough while there are some already bigger opponents.
Like the current growth of Orca, the idea of investing more effort into UI design really ain’t bad.
Currently, Francium got around 7,500 ish members on its Discord server, around 19k followers on Twitter, and 3.7k members in the Telegram discussion group.
After the explosion of NFTs, GameFi, meme coins, and even ‘‘DeFi 2.0’’ this year. Communities behind a project are super important to keep it on-trend and attract more users to the project.
Frankly speaking, there is really nothing impressive enough on either of Francium's social media platforms. I mean yes there’s an ambassador program, and yes inside the community there are people asking questions, answering questions, also sharing their farming strategies then discussing with each other. But couldn’t there be more?
There can be more of something as for the community building. You see, stealing from NFT projects, maybe some sort of quantitative leveling system (And how to avoid tons of ‘‘gm’’, ‘‘gn’’ after it is an art) in could be added into its discord server and migrated with the already existing user groups or even add more intermediate user groups to encourage contributions.
More frequently voice AMA sections, some ‘‘gamification’’ events, encourage group discussion, research, and study about strategies with even more various contests…etc. Alpaca Finance does have a strong community, maybe a great example that Francium can learn from.
Definitely not saying they are doing it wrong, I do appreciate the strategy-focusing atmosphere inside the community. You will see most of their events are also themed on encouraging users to share their LYF strategies and the idea behind them.
Since its core product is LYF, which will require more techniques and even trading skills to master. If the Francium community goes toward more focusing on LYF strategies and techniques sharing in the future, it may successfully build a more ‘‘professional’’ image of the community.
It’s hard to incentivize the above-mentioned community events without publishing its own token, whether fungible or non-fungible (with a successful token launch the project will get more money to spend on marketing) (and yes if the token price performed well the project itself will be put under spotlights automatically).
I do think there’s not really any strong enough reason or need that Francium should issue its token now, and it won’t make sense to do it just to ‘‘incentivize the community’’. So there will be more tactics required to make some great marketing and community-building moves.
The good news is its direct competitors on Solana are also not having a clear edge on the community aspect for now. So it still got some time to make the first breakthrough for the Francium community.
The voice of ‘‘Wen token?’’ keeps popping up in the Francium community, while the TULIP and the APT (tokens of Tulip Protocol and Apricot Finance) are already being traded for quite some time, Francium is still taking their time.
According to the current interview of the development team behind Francium by DeFi Direct, Francium has its own plan about token issuance and, of course, governance yet to be announced. Once the token is out, the tokenomics are going to have a tremendous influence on the entire protocol.
So I haven’t mentioned the tokenomics behind other projects mentioned above, I’ve decided to keep it for the day the token of Francium comes out, then the full comparison could be made.
After projects like dYdX and Paraswap brought abundant rewards to their users through an airdrop. As a ‘‘tokenless’’ project up to now, there do have some anticipations about the potential airdrop opportunity by Francium.
Considering the recent example of Paraswap, the detailed/complicated airdrop rules (which means the free lunch will be harder to get) can be excepted for future projects. More projects will tend to award its ‘‘real users’’ or ‘‘the true believers’’, airdrop hunting might get harder and harder in the future.
As the airdrop hunting without clear official hints is getting less profitable, trying to be ‘‘the real users’’ for projects you like will be a good idea. You know, like putting more effort to build a deeper understanding of the project and getting involved in its community. At least you will have some fun first, treat the airdrop as a plus.
Currently, there are some hints like contribution points (can be earned through farming strategies sharing and contest in the Francium community), if you are really into farming strategies study and enjoy contributing to the community, the potential airdrop opportunities could be a plus for you to consider.
Since the DeFi summer in 2020, lending/borrowing, liquidity providing, and yield farming have been around for quite a while, they may be three of the most familiar thing the DeFi users are used to.
LYF is like putting these three things together to create new types of DeFi products. The customers acquiring from this group of users will be easy with good marketing campaigns since those OG DeFi users/degens can quickly learn the why and how of LYF.
Yet, for those new DeFi users or those who currently only stay inside CeFi even TradFi, it’s really hard to acquire users from these user groups, due to the high-risk nature and the more complicated structures/mechanisms behind LYF.
More works will be required to acquire new users without proper DeFi knowledge background. Currently, due to the liquidity need for lending pools to be borrowed for LYF pools, some of the LYF-featured projects are developing toward multi-feature projects.
This kind of development helps capture more liquidity for their lending pools by adding more staking features, also more features you have will create more chances to attract users from different DeFi user groups.
As for Francium, the most ‘‘newbie-attractive’’ feature should be the pre-set Farming Strategies. That you can simply deposit your assets into the pre-set strategies knowing their mechanisms and expected return rates rather than build them from the very bottom.
To the users, it has some similarities with the ‘‘trading bots’’ which are widely utilized by numerous CeFi platforms (e.g. Matrixport and Pionex). Especially for the neutral hedging strategy, the theory behind it may be far from each other but to the users, they’re both pre-set strategies with adjusted risks and both easier ways to get involved.
With the built-in visualized simulation data, these preset strategies can build a huge potential to attract more and more ‘‘newbies’’ or people who are not willing to put too much energy studying into strategies to come and try.
In the other words, once the farming/trading strategies are mature enough while more and more of them go online. It’s easy to say that it’s going to bring more users on board.
According to Francium’s roadmap, oracle cooperation and robot automation will be introduced into the protocol in recent months. The former will help to build a more stable and robust environment and the latter may bring some sparks into the protocol……combining automation with complicated financial products is usually cool.
In the longer-term future, you can see the core is still about strategies development, we should see whether Francium can build up DeFi strategies-based ecosystem with abundant features; and will it be able to get the flywheel rolling?
So why waste time diving into a protocol with no token to invest? The main reason is to put it under your radar first. It's not bad to build a better understanding in advance ranter than reading the IDO rules and the white paper at the same time.
I do believe there is some real difference between Francium and other LYF protocols. When considering the essence of LYF, it really required good strategies to make enough risk premium. Francium is kept being strategies-focused and building features around it.
You won’t see this kind of culture inside the Tulip and Apricot community, nor in their design and development.
Sure Alpaca Finance is a strong competitor on BSC, regarding its well-built community, smart marketing moves, wide-ranging products, and huge TVL. But since the current cross-chain experience is mostly far from seamless, Francium may have quite enough time to build its dominance on Solana, and with the advantage of Solana, it can really put up a good fight.
Enjoy your time playing on Francium when it’s still ‘‘tokenless’’.