IoV Standard Weekly
Who bought a CryptoPunk?? Exciting media + Weekly alpha courtesy of DFX Finance
first, a word from me
I don’t want my weekly pieces to be both extremely rigorous and long. But I do want them to be somewhat rigorous. I’m moving apartments this week, and so will be wrapping an exciting piece on an upcoming DeFi primitive into next week’s issue. Until then, enjoy some curated links + weekly alpha 🤙🏼
On another note, I can’t stress how exciting crypto can be sometimes. If you haven’t yet — go buy a cheap NFT, use another bespoke chain like Solana or Terra, or just maraud through some of Placeholder’s writings.
media that caught my attention last week
dune analytics dashboard of the week
my weekly alpha
DFX Finance is an exchange protocol for trading (tokenized) foreign currencies. In the last weekly alpha, I explained stablecoins and one of the most popular ways to earn yield on them. This week, I want to show off DFX, a relatively under-the-radar project with an exciting future and attractive yields. It’s actually very straightforward. Instead of trading between two assets with the same peg that traditionally happens with stablecoins, DFX trades between assets that are pegged to real world (fiat) currencies. For example, USDC (tokenized US dollars) and CADC (tokenized Canadian dollars). Since the price of the two fluctuates against one another, we need a market rather than a one-to-one swap. The secret sauce is that the DFX smart contracts reference real world fiat exchange rates. This gives the protocol an advantage in adjusting the parameters of its pools so that traders get better rates than they would trading on a naive protocol like Uniswap, while also maintaining the high level of capital efficiency that Curve does. Great, how do you participate and get (30%+ APR) yield? Choose a pool and deposit stablecoins. Then, make sure to stake your pool tokens to earn the incentive rewards. You can choose the pool that has the highest APY or the pool that has whichever stables you have already. It’s worth noting that DFX is live on both Ethereum and Polygon. I personally use Polygon because the rewards are similar, but I have peace of mind knowing that gas costs to get in and out on Polygon will be negligible. There’s two risk warnings here. First is the ever present smart contract risk that is especially important for early projects. Don’t put in what you cannot afford to lose. Second, since FX pairs aren’t one-to-one, there’s a minor risk of impermanent loss. Because you are providing liquidity to the pools, you are essentially saying “hey, I’m a market maker, and I’m willing to buy and sell these two tokens at whatever price the algorithm says.” If the prices deviate from what they were when you entered the pool, you’ll come out with a different ratio of tokens that will be worth slightly less than what you would have if you did not provide liquidity. Because FX pairs don’t move wildly, you’re fairly safe from this in something like DFX (the LP fees and rewards will easily make up for this effect). One final note, it’s up to you whether you sell your $DFX rewards or not. For such an early project, holding on for the long term is somewhat akin to making a seed investment. While the APYs look juicy, the reward of a highly successful protocol can far outweigh that.