If you ever encountered Cub Finance in the DeFi wilderness and didn't take the time to look into it a bit further, here is a crash course to get you started. Hopefully, it will also serve as a research guide for any other project you may want to look into.
What Is Cub Finance
Serious projects with long-term goals have detailed documents ready for consumption and hopefully linked on the front page. That is definitely the case with Cub.
In short, Cub Finance is a yield farming platform and a standalone market maker that can offer token swaps directly on the platform. This is achieved by incentivizing users to deposit funds in single staking contracts and farms. More details on how this works will be shared below.
We already mentioned incentives but we need to understand how they work. In the case of Cub Finance, users are rewarded with Cub tokens. These tokens are issued with every passing block at a rate of 1 Cub token per block. These rewards were higher for those that participated from the very beginning when the project launched in March 2021.
Week 1: 3 tokens per block
Week 2: 2 tokens per block
Week 3: 1 token per block
Unlike Bitcoin and many other "mainstream" currencies, Cub has no fixed supply. Instead, it is being "printed" at a rate of one token per block until/if a new mechanism is introduced. To keep the supply as low as possible, all sorts of token burn strategies are put into place and they range from buyback programs to token offerings that burn Cub forever.
7% management fee is collected on external platform harvests from Kingdoms - this autonomously purchases CUB on the open market and burns it
3% management fee is collected on external platform harvests from Kingdoms - this autonomously gets converted to BNB and is distributed to users who stake CUB in the CUB Kingdom
At the time of writing, the total Cub supply is sitting at 6.5 million tokens. This number is expected to be much lower once the upcoming IDO sales are completed.
What are Farms, Dens, and Kingdoms?
Those that are experienced in DeFi farming will know exactly how farming works on Cub but if you aren't familiar with the concept, here is a short summary.
As an end-user, you are incentivized to deposit two different assets on the Cub Finance platforms and be rewarded for that action. Assets are deposited at a 50/50 ratio meaning that the USD value of one asset has to be equal to the USD value of the other asset. For example, if you want to put 1 ETH in the ETH-BNB you will need to add ~8 BNB as well to match the USD price of 1 ETH.
This adds more liquidity to the Cub protocol and allows users to swap currencies at fair prices. In turn, you are rewarded with Cub tokens for as long as you keep the assets deposited in the contracts.
At current prices, the best return rate you can get is about 150% per year.
The idea behind Dens is to allow users to earn rewards for single-asset staking. Right now you can only deposit Cub at ~55% APY.
Dens are useful for those that don't want to deal with impermanent loss. Since you are only staking one asset your risk only comes from price fluctuations of that specific asset. Before Kingdoms were introduced, Dens were a go-to place for those that wanted to earn even more interest on their farmed Cub.
If you already recognized the power of compounding interest, you will recognize the importance of Kingdoms on Cub Finance. What these contracts do is compound your interest consistently and automatically. Instead of spending BNB for a few transactions every day, you can let the protocol do this for you completely free.
Kingdoms allow users to earn interest with single-asset deposits (only Cub and Cake for now) but also to auto compound their farming positions on Pancake Swap, Belt Finance and Bakery Swap.
For example, if you provided liquidity in the ETH-BNB pool on Pancake Swap and don't know what to do with the LP tokens you got, you can deposit them in Kingdoms and earn an additional 20% APY for doing absolutely nothing.
Cub stakers are also entitled to BNB Dividends.
What is the LeoBridge?
The LeoBridge works like any other bridging protocol and is limited to transactions between three blockchains - Hive, Etherum, and BSC with Matic on the way. If you ever used a bridging dapp before, navigating the LeoBridge will be as easy as it gets. On the other hand, if you are unfamiliar with the process be sure to check the in-depth Cub Finance guide from @crypto-guides.
The LeoBridge is one more income stream for Cub Finance because 0.25% of every transaction is used as a burning fee for Cub and Leo. 80% is used to burn Cub and 20% is used to burn bLeo.
What are IDOs?
Initial Dex Offerings have become a standard in DeFi and many of the biggest projects in the space raised their starting capital through these offerings. Cub Finance is built with IDOs in mind from the start. Since Cub can gather a large community and point their attention toward a specific project, that project is incentivized to use the Cub "launchpad". The inner workings of Cub IDOs are outlined in detail in the article I liked above but in short, it brings benefits for projects and investors alike.
All future fundraising events will require participants to contribute by depositing Cub tokens. This will give projects starting capital to work with but will also burn those Cub tokens and decrease the overall circulating supply. For example, if a project was to raise $1M in funds, they would need to raise 2M Cub tokens. Even if Cub Finance burned only 50% of those funds, we would still end up seeing 1M Cub tokens removed from the market completely.
In the long run, this strategy is aiming to provide a steady upward trend in price while ensuring a downward trend for the total supply of Cub.