WrapFi Token: An Incentive for Dex Traders and Liquidity Providers
As cryptocurrency continues to alter the globe and change the future of finance, everyone, young and old, is embracing the trend to avoid being left behind. The speed with which people are educating themselves and putting in place systems to accommodate and embrace cryptocurrencies as the world moves forward demonstrates the power of financial evolution. As a result, cryptocurrencies and blockchain technology are the newest buzzwords on everyone’s lips. Indeed, this reality has made cryptocurrency diversification an enticing strategy. To carry out transactions and other cryptocurrency-related operations, Decentralized Exchange (DEX) traders and liquidity providers rely on the development of various tokens such as hybrid assets, Non-Fungible Tokens (NFTs), derivatives tokens, and Interest-Bearing Token (IBT). The quick development of Defi infrastructures that are supported and operating on the smart chain blocks is noteworthy. Lending protocols, DEXes, yield aggregators, and other Defi are examples. Nonetheless, certain aspects such as cognition, community, contract upgrades, and so on confine the current infrastructure, causing it to lag behind the rapid creation of new crypto assets.
WrapFi was created to address the difficulty that the Dex community is experiencing, with a focus on IBT in DEXes. It is maintained by the Track Market Maker (TMM) algorithm, which is an improved version of Proactive Market Maker (PMM). So, what exactly does WrapFi entail? How does it help Dex traders like IBT and others, as well as liquidity providers? Before we get into the technicalities, it’s important to understand the issues that DEXes and liquidity providers have when it comes to the DeFi protocol, as it’s critical to WrapFi’s development.
To clarify, the current DEX algorithms — Automatic Market Maker (AMM)/Proactive Market Maker (PMM) — do not reflect the benefits (beared interest) of IBT in the price traded as crypto developers. Traders and liquidity providers alike have suffered losses as a result of this. Before trading on the DEX, IBT holders must convert their IBTs to actual assets in order to trade profitably. As a result, the traders have little choice but to accept the process’s complexity and time commitment. Despite the stress, DEX traders, particularly those working with IBT, see it as a commercial opportunity. WrapFi, on the other hand, used a Tracker Market Maker — TMM algorithm. A crucial algorithm that monitors interest changes in IBT issuers’ smart contracts and incorporates interest data into price oracles. This algorithm is essential for all IBT transactions. As a result, the TMM algorithm is also known as the Price-Recorrection Mechanism (PRM).
What is Wrapped Finance?
Wrapped Finance, often known as WrapFi, is a derivative of Decentralized Finance. As much as we believe Decentralized Finance entails the management of non-custodial contracts, WrapFi, on the other hand, is an infrastructure with its own set of assets, including WBTC, WETH, and IBT. Wrapped Finance uses Defi protocols, making it an IBT as well.
In a nutshell, WrapFi’s goal is to create a global solution for all major IBT traders based on the TMM algorithm. For all IBTs, this will enable general standards, horizontally scaling solutions, and reasonable pricing as well as trading liquidity. Interest-bearing characteristics are IBT’s main advantages over spot assets. Leaving aside the security and risk issues, native tokens may not be as appealing to users as IBTs in terms of liquidity.
Wrapped Finance (abbreviated as WrapFi) seeks to become the underlying contract in Wrapped Finance, providing liquidity for IBT assets. WrapFi is now tackling the problem of standardizing the underlying technology. TMM algorithms are being developed and perfected to manage these DEX problems effectively.
Tracking Market Maker — TMM
We briefly discussed WrapFi’s operation algorithm earlier. The Tracking Market Maker (TMM) algorithm was created to help monitor and balance IBT prices while also increasing liquidity. It’s an upgraded version of DEXes’ PMM algorithm. WrapFi TMM excels in three important areas, allowing it to outperform competing algorithms.
● TMM aids in the tracking of exchange rates. This is one of the algorithm’s distinctive features. TMM keeps track of every IBT traded on WrapFi by providing a continual measure of the primary market exchange rate. It is finally written into the mechanism of discovery.
● Tracking Market Makers customize VRF Oracles that are tailored to your needs. WrapFi chains do not issue all IBTs. Since some IBT assets are released on separate community chains, some are issued on distinct community chains. WrapFi alters the trading pair’s cross chain price mechanism for each IBT.
● For each IBT trading pair, configure the cross-chain price oracle quotation technique. To ensure Oracle’s security, WrapFi will use the VRF algorithm to construct a license-free decentralized Oracle quote mechanism.
● WrapFi will use TMM to limit LP Fees. WrapFi uses TMM to regulate the commission cost in order to increase Liquidity Providers and maximize profit. This increased the amount of LP available for IBT trade.
Problems WrapFi Solves
There is little doubt that as DeFi develops, it will pave the way for the establishment of other crypto currencies, particularly Interest-Bearing Tokens (IBT). What is the reason for this? The IBTs have created a more profitable crypto currency transaction and reduced commission fees with the help of WrapFi. Despite the fact that we don’t know where they came from, the current IBT are used in the following situations:
- Proof of Stake Staking: The first and largest asset scale case for IBTs was Proof of Stake Staking. StaFi’s rTokens represented how IBTs are used in the PoS Statking, with the underpinning interest from the inflation of the PoS network.
- Borrowing; in this case, the borrower is the one who initiates the interest. The tokens are represented by Compound tokens like as ETH, cDAI, and others.
- The interest in IBt assets is generated by the Vaults; DeFi Yield Farming revenue mechanism. IBT is represented by ibETH.
Other scenarios, such as the LP token offered by DEXes and tokens like as xSUSHI generated by staked Defi governance, could potentially generate dividends, in addition to the WrapFi’s solution.
WrapFi’s relevance to the global DeFi community cannot be overstated. This is due to the fact that several cases are uncovered every day, resulting in the issuing of further IBTs. With significant expansion, the assets are gaining premium recognition. However, despite WrapFi’s efforts to achieve trade balance in both the secondary and primary markets, there is a considerable change in price impact and restricted trading liquidity. WrapFi is a work in progress as a result of this. The goal is to close these loopholes fully for the benefit of both the Dex community and Liquidity Providers.
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