Here Comes Andre and Dani's New DeFi Play

By Liam J. Kelly

Decrypting DeFi is Decrypt's DeFi email newsletter. (art: Grant Kempster)

The mad man of DeFi has done it again. Andre Cronje, the creator of Yearn Finance and several other notable DeFi projects, has announced the launch of yet another DeFi project.

He’s teamed up with developer Daniele Sestagalli, who played a key role in building out Wonderland (a fork of OlympusDAO, but on the Avalanche network) and Abracadabra (a crypto protocol for minting and managing the stablecoin Magic Internet Money). He’s also the self-described “CSO of Frog Nation,” which is the unofficial name for the collection of crypto projects and its communities led by Sestagalli.

The name of the project is Solid Swap and its token will be called ROCK, according to a recent Twitter Spaces that included Cronje and Sestagalli.

It's being pitched as a new automated market maker (AMM) built on the Fantom network. An AMM is how the popular DEX (decentralized exchange) Uniswap is designed and is an alternative to more classic order book-style exchanges like Coinbase. Instead of a market maker matching buyers and sellers, an AMM pools money from different token holders and rewards them in fees for adding their liquidity.

It essentially decentralizes the order matching process into the hands of anyone who’s interested.

It should also be said that Solid Swap will behave more like an exchange for protocols rather than an exchange for individuals, according to its creators.

This new AMM on Fantom is expected to have a lot of very interesting features, specifically its tokenomics (crypto-speak for how the project’s native token incentivizes certain behaviors).

Solid Swap looks like it has elements of OlympusDAO, Curve, and Convex. There are bribes, there’s vote-locking, and there’s a treasury-backed reserve asset that looks a bit like OHM.

The combination of all of these features is being called ve(3,3).

The “ve” portion refers to “vote escrow,” or the vote-locking feature behind Curve’s CRV token, and the “(3,3)” portion refers to the same game theory used within the OlympusDAO ecosystem to maximize the project’s liquidity while also maximizing token-holders’ gains. It’s expected that the new DEX made just for protocols will apply this new tokenomics model.

So, yeah, there’s a lot going on here. And if all that isn't enough, there are also NFTs tied in. Yeesh.

Another point to keep in mind is that ve(3,3) is a model, meaning it can be applied to other crypto projects. For example, Keep3r Network, another of Cronje’s projects, which matches people within a crypto community to execute different jobs, is also expected to implement the ve(3,3) model for its KP3R token.

So let’s sum up quickly before highlighting why this is all so interesting:

• Cronje and Sestagalli are rolling out a new decentralized exchange on Fantom.

• The AMM will be built “with protocol 2 protocol architecture in mind,” according to Cronje.

• The project will borrow and bundle token designs from several other DeFi projects.

• Add in NFTs to the mix.

The first point is pretty straightforward. Building on Fantom, a speedy, proof-of-stake blockchain network, makes sense for a project that would deal in (potentially) hundreds of thousands of transactions a day as well as more complex operations like protocol-scale yield farming.

The second point is slightly more tricky. What does it mean exactly to be an exchange focused solely on protocols?

As Cronje writes, the idea refers primarily to optimizations in the ways that current AMMs accrue fees, leverage bribes, and incentivize liquidity. Projects may use bribes to pay users for their voting rights over the operations of a protocol.

For instance, a new project trying to create liquidity for its token may set up a pool on Curve. To get people to join that pool and improve liquidity, that same project may also start buying and locking up more CRV so it can increase the rewards for that pool.

This is fine, of course, but as most of this activity is being done on Curve, the only people enjoying the fees from this activity are Curve users—rather than the project leveraging Curve for its liquidity. (As a side note: If some of the above is still a bit unclear, check our deep dives into the so-called Curve Wars and DeFi bribes.)

Cronje’s project would essentially bundle these tools all under one roof, making bribes, incentives, and fees all remain within one platform.

The third point, if it's not already clear, refers to the ways in which this protocol’s ROCK token will draw from the tokenomics of Curve and OlympusDAO.

This means that users will be able to lock their ROCK tokens to gain voting rights (understood as “veROCK”) over the project and continued token emissions à la Curve gauges.

And similar to OlympusDAO’s token, the value of ROCK will depend on the value of the protocol’s treasury.

This means that its floor price, or the lowest price of the ROCK market capitalization, will be whatever the treasury is worth. If a premium emerges above this value then more ROCK tokens will be distributed to those who have locked tokens into the protocol via an enticing APY.

Finally, the NFTs. Unlike the non-standard token format of veCRV, the veROCK token will be an NFT. This means that a secondary market can easily emerge to buy and sell users’ voting rights.

It would also appear that Cronje is already stirring up interest to create these secondary markets right away. This also opens the possibility of borrowing against these NFTs and adding even more DeFi bells and whistles to the asset.

It’s all incredibly fascinating for DeFi degens, and yet another reminder of how powerful it can be to identify a bunch of different crypto puzzle pieces and bring them all together to create something wholly new.

If the past success of Cronje and Sestagalli is anything to go by, you’ll want to keep a close eye on Solid Swap.

Decrypting DeFi is our DeFi newsletter, led by this essay. Subscribers to our emails get to read the essay first, the day before it goes on our site. Subscribe here.

Recommended News