As part of the Free TON↔Ethereum bridge, Broxus is launching an unprecedented yield program. We learned what its essence is and how profitable it is from Sergey Shashev, co-founder of Broxus.
- Please tell us, what is the goal of the unprecedented yield campaign launched by the DeFi Alliance in the Free TON ecosystem?
A lot of people from Free TON are only superficially familiar with other platforms — they do not know what works there and how, and what programs are being launched to encourage liquidity providers. Compared to Matic and TRON, Free TON is still a test program.
In other blockchains, everyone is now fighting for liquidity. When it exceeds $100 million, that’s when real life begins. This is expressed because teams come and develop protocols for lending, insurance, and derivatives trading, by analogy with the well-known protocols Compound, Curve, Balancer, etc. And then there is a reason for a dialogue with the largest protocols — for example, with the same AAVE, Tether. In the meantime, they don’t notice the Free TON. I hope we will attract FRAX, EURS, and a few other small protocols, but we need to grow up to talk to the “whales”.
Our current goal, the means of achieving which is farming, is to increase liquidity and shift some of the DEX markets from other protocols to the Free TON. After that, it will be possible to earn only on fees, as Uniswap does now. But we are still very far from its level.
- What is the role of the Free TON↔Ethereum bridge and what are Bridge Tokens for? It is known that the first pre-sale was held and the second one is planned for $4.
We have a very interesting model. I’m farming on almost every known network — Ethereum, Phantom, NEAR, Binance Chain — almost everywhere where it is possible. This allows me to understand all trends very well. The bridge trend started much later than we started doing it, and we managed to be almost six months ahead of the market.
In a fundamental sense, Bridge Token is a kind of mix of Earn Finance and renBTC. RenBTC allows to come to a decentralized network at the consensus level without KYC, and Earn Finance allows to earn on liquidity management. Liquidity will be accumulated in the Tonbridge and it should be used.
What will be sent to staking in TON (we don’t have anything else yet) and in Ether to ABC funds is just the kind of liquidity that can be directed through the consensus of the bridge relays. Relay-node owners vote on how to work with this liquidity. In fact, ETH liquidity will be 50% placed in the ABC protocol, like Compound, with a small yield of 15-20%, but with high reliability. And there are billions placed there.
So it turns out that the Bridge Token is dividend and earns on the management of this liquidity. That is why the first round was so easy for us, and probably the second one too because institutional players came there. They get into this story, and then they show interest in Free TON as well. This affects the life of the ecosystem as a whole. So the main task we are solving is to involve reputable market professionals in the network.
- You have already experimented a few times with the farming program. Can you tell us what their essence is and what results have been achieved?
The first experiment — farming was launched only on Uniswap (we did not have tonswap.io back then). It was interesting to see what players will come from outside the DeFi Alliance, what is their percentage. For example, in the first experiment, about 25-30% is the market, the rest is the DeFi Alliance. Of those who came (about 100 people), 80 are from our community, and 20 are those who follow early projects on Uniswap and invest in farming in small amounts. There were bots as well.
The second and third experiments were identical in structure. Farming took place at both Uniswap and Tonswap at the same time. It was much more interesting, it was interesting to track the dynamics. The number of farming participants exceeded 400. About $1 million in liquidity came from the Free TON community alone. It turned out that the community is not as poor as we thought (smiles).
From Uniswap, only 2-3 people switched to Tonswap and started trying to farm directly from Ether. And Tonswap has mostly members from the Free TON community. Obviously, they are more interested in this, because they were involved in the work of the network, so there were significantly more of them than people from Uniswap.
- There was information in the chats that you are planning to attract $20 million in liquidity. Is that true?
The goal of 20 million has already been reached. I’m always on the phone! (smiles)
- Negotiations with investors?
No, there are different groups. For example, funds and different types of farmers from the Ether network, Binance network. All of these audiences are the target. The Free TON community, of course, will go by itself, because it is already aware. But it is interesting to involve new people and their money.
Now we talk a lot with influencers among farmers, with foundations. Although the funds are not yet ready to work closely together, they are waiting for the bridge to enter full DAO mode, and then they will become more active. Plus, they still need various official papers…
- Which could show the technological advantages of the platform?
Yes, there are a lot of different blockchains now, and I don’t have enough time to study them all. And so they already have a Relay-node bridge and after that, they begin to understand the network.
- How much more profitable is it to be a TON Bridge validator compared to the Free TON mainnet validation?
At a rough guess, about 20 times.
- Will there be an option for custom bridge staking based on the DePool principle?
I really hope that the community will do it (smiles).
Now that liquidity has increased and the AirDrop series is planned, the community can organize a multisig, accumulate funds and launch 1-2 Relays. And then something like DePool suggests itself. If we have resources available in the near future, we’ll do it.
- Can a custom staking option be developed through a contest?
Let’s put it this way: prepare a contest and launch it! Decentralization is not when everyone expects someone to do something, but everyone does something.
- How will your program affect the price of TON Crystal?
The token rate has already increased. Of course, this is a complex work that is aimed at this program. After all, to farm, you need to have tokens. If you don’t have them, you need to buy them.
- Where are the funds from Bridge Token presales planned to be used?
Most of it will be as liquidity in Tonswap. The rest is for further development.
- How would you compare your farming program to existing offers on the global DeFi market?
The serious farming market has the following structure: if you are in a clear network, for example, Ethereum and all your software have been audited, and the company is registered in a recognized jurisdiction, then you get on the lists of American funds, and then your annual yield is 15-25%. The percentage is low, but it’s reliable!
If you’re in Ethereum, and you have something that’s not as described above, but you own 100 million + TVL, then the yield is 35-40%. More serious interest is associated with greater risks of impermanent loss and possible losses.
If you are not in Ethereum, then we should start with the bad news (smiles). To attract liquidity, you need 600% per annum at the start in the same Matic. A lot of projects are launched in Binance Chain — some completely unclear, some at least partially clear — there can be up to 1000%. Since the risk of Impermanent loss in these projects is absolute, then it is tried to compensate by distributing LP tokens. If you look at Phantom, which I hope we will soon surpass both in TVL and capitalization, it is now 250-300%. But again, Phantom is at a big impermanent loss.
According to our research, the rate of yield at which new users stop joining is from 110 to 120%. In this case, the risk assessment of possible losses is higher than the income from farming.
So our yield percentage is stabilizing at about 150. But as you can see, it is still over 300% in some places, so liquidity will proceed quickly. This is how the market assesses new technological risks.
- Tell us about DeFi Free TON ecosystem products, which ones have already been developed, and which ones are planned?
The first is the Free TON↔Ethereum bridge. This is probably the most architecturally and technically difficult project we have ever done. It has already taken over six months of work and is still in progress. And with a fairly large team. And, perhaps, when we finish, it will be exactly a year.
There will also be a bridge with BNB — there is a very interesting niche there that justifies this project. Next is our DEX — Tonswap. There will be other DEXes in Free TON, they will soon approach the release stage and will be included in the ecosystem. Next, lending services will be created so that it will be possible to take a loan secured by TON Crystal and other currencies, to make deposits. And, of course, a huge amount of Stablecoins.
Currently, there is only one type of stablecoin in the ecosystem — wrapped USDT, USDC, etc. Soon, other stablecoins will slowly start joining the network as well. For example, FRAX is a fairly large and well-known algorithmic stablecoin. And after that, stablecoins will be used as payment methods instead of Ether.
But, again, to work with them, we need to become a little bigger than we are now. You’ll probably hear about some pilots in August, though.