Axly: DeFi protocol for leveraged yield farming

WavesDAO Funding Proposals
1

Axly: DeFi protocol for leveraged yield farming

Axly is a next-level DeFi protocol combining the power of AMM liquidity pools and a lending platform to maximize capital efficiency. Users can participate in Axly in two main roles:

  • Lenders can deposit one asset with no risk of impermanent loss to earn interest on targeted loans.
  • Farmers can open farming positions in liquidity pools with leverage, utilizing borrowed funds to multiply profits.

Learn more about Axly mechanics in our overview article.

Contents

Challenges

The key issues of traditional lending platforms are:

  • Loans require overcollateralization, which leads to low utilization of platform funds;
  • …and there is still a risk of bad debt as a result of manipulating the price of the borrowed and collateral assets.

The common issue of DEX/AMM liquidity pools is liquidity runaway. Liquidity providers easily switch to other farms if the yields are higher there. Pools with low liquidity have fewer arbitrage opportunities and generate fewer fees, and that’s a downward spiral.

Solution

Leveraged yield farming protocol connects liquidity pools and a landing platform into a single circuit, mitigating their flaws and leading to a synergy effect.

  • Loans are not available to outside borrowers. Assets are invested in liquidity pools under the full control of the protocol’s smart contract, which eliminates the risk of non-repayment. Price manipulations will be meaningless for attackers.
  • For the reason above, loans do not require collateral.
  • The potential profit of farmers is multiplied thanks to the leverage. By farming with x3 leverage, the farmer receives triple the rewards for each dollar invested (minus borrowing interest). x3 is the maximum leverage at the start of the project, larger leverage will be available to AXLY token stakers.

Marketing strategy

We expect to attract a wide range of DeFi investors with diverse risk profiles, from conservative to aggressive, offering them various earning strategies reasonable in various market conditions. For example:

  • Single-asset depositing to earn on safe targeted loans
  • Farming without leverage to earn auto-compounded yields without risk of liquidation
  • Farming in stablecoin pools with leverage up to x3 avoiding price fluctuations
  • In bull markets, open a leveraged farming position, providing the asset that is more likely to grow and borrowing the other asset (“long position”)
  • In bear markets, open a leveraged farming position, borrowing the asset that is more likely to lose value and providing the other asset (“short position”)

Our promotion campaign will consist of two stages.

In the 1st stage, we will reach out to Waves community, using Waves social media. Many of the Waves community members are already familiar with Swop.fi and WX Network pools. The focus of this stage is on investing in time-proven tools with multiplied returns thanks to advanced mechanics.

In the 2nd stage, we will address DeFi investors holding assets in other networks. We’ll present them key numbers achieved during the 1st stage, emphasize the advantages of joining the evolving and growing Waves ecosystem, and provide them with a smooth way to move their funds to Waves. We aim to engage influencers to spread the word about our project and post information on popular media resources.

Inspirers

In developing our product, we carefully studied similar projects in other networks:

  • Alpaca Finance with $354.24m TVL on BSC and $2.52m on Fantom
  • Francium with $15.36m on Solana

Based on these numbers, we believe that in the 1st stage we can attract 1% of the Waves network TVL, that is ~630k (as of May 2023).

Revenue model

Axly collects the following fees:

  • Opening fee based on a farming position value
  • Reinvesting fee based on farming rewards in SWOP or WX
  • Lending fee as a margin between the borrow rate and the supply rate
  • Liquidation fee based on the portion of the farming position to be liquidated if the ratio of debt to position value exceeds the acceptable level

Tokenomics

AXLY is the projected governance and utility token of Axly protocol.

Total supply: 10,000,000 AXLY

Distribution:
20% WavesDAO share (with a 3-month lock, followed by a 12-month vesting)
19% Team fund (with a 3-month lock, followed by a 12-month vesting)
15% Marketing activities: competitions, campaigns, promotion videos, blog posts
32% Partnerships: liquidity for exchanges, partnerships with other blockchains, etc.
1% Retro-drop rewarding the user activity before the token launch
10.9% Lender incentive for 24 months since the token launch
2% LP incentive in AXLY-WAVES pool for 3 months since the token launch
0.1% Initial liquidity in AXLY-WAVES pool

AXLY-WAVES pool on Swop.fi will be initialized with 0.1% of AXLY supply (10,000 AXLY) and WAVES amount equivalent to 2,000 USDT. That will set the initial price of AXLY to $0.2.

Utility for AXLY token:

  1. Staking: stakers will earn passive income, which comes from the protocol revenue
  2. Governance: stakers will gain voting power to set protocol parameters
  3. AXLY lending (i.e. depositing to Axly loan fund)
  4. Providing liquidity to AXLY-WAVES pool (with additional incentive for 3 months)

Collected protocol fees will be shared between AXLY stakers and the team. Initial ratio 70/30 can be changed later via governance.

Lender incentive

Lenders of tokens on Axly.io will be rewarded on a weekly basis for 2 years since AXLY token launch. The tokenomics defines the maximum value of these weekly rewards, but the actual rewards will be tailored in a way that APR would not exceed maximum values according to the table below. Unused part of weekly rewards will be burned.

Week Maximum lending APR
1 150%
2 120%
3 100%
4 80%
5–8 60%
9–12 40%
13–16 30%
17–20 20%
21–104 10%

LP incentive

Rewards for LPs in AXLY-WAVES pool are also defined as maximum values, the actual rewards will be calculated in such a way that APR would not exceed maximum values according to the table below. Unused rewards will be burned.

Period Maximum APR for LP in AXLY-WAVES pool
1 week 150%
2 week 120%
3 week 100%
4 week 80%
2 month 60%
3 month 40%

Integrations and partnerships

Axly enables yield farming in featured liquidity pools of Swop.fi and WX Network and contributes to increasing the TVL of these projects.

Axly loan fund is powered by Puzzle lending and liquidation protocol updated to prevent market manipulations. The fund is a protected, isolated lending market with no access to outside borrowers, so assets cannot leave the circuit. We share lending and liquidation fees with Puzzle.

Connecting users and DeFi services, Axly acts as a booster for the entire Waves DeFi ecosystem and will give it new impetus to evolution.

Roadmap
May 2023 Launch on Testnet for public testing
June 2023 Launch on Mainnet
July 2023 Add stop-loss option based on the pooled asset prices in $
Aug 2023 AXLY token launch

Proposed budget

We suggest allocating Axly 4 mln XTN.

2 Likes
2

I like the proposal in general, but think the dao should not allocate 4m XTN to an anonymous team. Its hard to hold anonymous teams accountable, so I suggest to reject the proposal until we know more about the size of the team, their track record and who is actually going to develop this.

3

This is swop.fi team

4

Is this done?
20% WavesDAO share (with a 3-month lock, followed by a 12-month vesting)
If not how many tokens to transfer?