The DeFi wave has hit the EOS community with a lot of force, and we want to shed some light on what’s in it for you with all of these applications. Every week, we will take a deep dive into one of the DeFi apps listed on Wombat to give you a detailed view of how you can earn there. This time, we’re discussing Defis.Network.
Keep in mind that this post shall not be taken as financial advice and serves introductory and informative purposes only. Before making a final decision, please do your own research.
Defis.Network is one of the first and most successful DeFi applications in the world of EOS. It was the first project supported by the Newdex EOS DeFi Special Development Fund, and has grown to over 12 million EOS locked in value on its products.
Currently, its two main live products are “Swap” (a decentralized exchange / automated market maker) and “Bank” (which provides a stablecoin called USDD), but many other DeFi dApps on EOS use Defis’ liquidity pool tokens (LPs) as a basis for yield farming. We’ll get to that in a minute, let’s first look into these two products.
Swap is the more complex of the two products. It allows you to swap one token into another at a predetermined rate. It also allows you to supply liquidity to any of the token pair pools in order to receive fee rewards, and also mine DFS tokens (the native Defis.Network token) through swapping or providing liquidity.
You can also set up your own liquidity pool to provide an exchange opportunity for tokens that are new or unknown to most people.
Bank is very simple. It used to be a bit more powerful, but right now it’s only used to lock USDT (the Tether stablecoin) to mint USDD (the native stablecoin of Defis) at a 1:1 ratio, minus a 0.3% fee when going back from USDD to USDT. It’s basically the same as if you would swap USDT for USDD or vice versa via the Swap function.
Part of the Defis.Network dApp are also other features / products which you can’t find on the official website, including short-cuts to Yield Farms, a staking rewards program called DSS, voting of liquidity mining weights, and even a Newdex-like decentralized bid-ask exchange. Parts of the frontend of these features have not been localized to English language and thus are only available in Chinese.
First and foremost, it’s important to understand what you want to earn. Mostly, people would like to earn tokens of a certain type, in our case EOS, but could also be some of the actual DeFi project tokens. If, for example, you’re looking to earn DFS tokens and you don’t care (on a short notice) whether the DFS price compared to EOS goes up or down, then you might want to look into DSS, while providing liquidity and farming yield will earn you interest in other tokens.
When you provide liquidity to a pool on Defis.Network, you receive a number of pool tokens (LP tokens). These tokens represent your share of the total liquidity in the pool, i.e. when there’s 1 million LP tokens of a given pool in total, and you hold 10000 of them, your share of the liquidity pool is 1%, no matter how much of each asset is in the pool.
Why is this important?
This is important for two reasons:
All fees accrued for this liquidity pool remain in the pool until they get withdrawn. That way, liquidity pools tend to grow if there’s a lot of trading activity on them, even without anyone putting in additional tokens
You might incur a profit or loss on top of the fees that you’re making when the price moves in one or another direction
We don’t want to go into too much detail about these additional profits or losses here as it gets really complex really fast. What’s important for you is that you need to take into account the price risk for both tokens when you provide liquidity, even if the APYs are looking really tempting. It’s good to view the promised APY as compensation for exactly this risk that you’re taking.
When providing liquidity for certain token pairs, you will be rewarded with additional tokens on top of what you’re making on fees. For example, Defis.Network itself offers rewards for users providing liquidity for the EOS-DFS swap pair at an APY of about 79% at the moment, but those rewards include quite a few other pairs, too. Tap “Pools” on the top of the screen after you’ve opened Defis.Network in Wombat to see a list of all pools that you can get DFS for.
When you tap on “Apps” in the upper right corner, you also check which other DeFi applications currently offer rewards for providing liquidity in Defis.Network, like DMD.Network. Check these out separately to see which swap pairs are the most profitable for you.
Open DFS DSS on Defis.Network to see what you can get for staking DFS tokens. The current APY here is about 17% at the time of writing. You can also lock your DFS for a certain time period to receive higher rewards. Any rewards here are paid out in DFS tokens, too.
Defis.Network is one of the pioneers of EOS DeFi and — especially in combination with partner projects like YFC and DMD — is already replicating a good portion of what’s available in the Ethereum DeFi world, only with much lower volumes. It’s a good place to explore the EOS DeFi space as you have direct access to the yield farms from Defis.Network, even though its UX is not always super straightforward. The technical setup seems to be fairly secure, and there is already quite a bit of value locked up in the smart contracts, so it’s one of the safer and more stable DeFi projects running on EOS.
There are, however, residual risks, both technical and financial, so make sure to do your own research and only invest when you feel comfortable with these risks.
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