Defrost Finance at a Glance

Why Defrost Finance?

Defrost Finance is the first DeFi stablecoin protocol native to Avalanche, offering the community H2O, a stablecoin pegged to the USD, fully collateralized by liquidity, pool tokens, and interest-bearing assets. MELT will be the platform token with utilities in governance and the distribution of platform earnings.

The platform is called ‘Defrost’ as it aims to melt the frozen liquidity on Avalanche into more liquid assets — in this case, H2O. The name of Defrost Finance gives a visualization of this economic process — to ‘DEFROST’ the frozen liquidity into ‘H2O’ and incentivize the pool with ‘MELT’.

Notice how by frozen liquidity we mean not just the LP tokens on Dexes — such as Curve and Traderjoe — but also including yield-bearing tokens such as qiDAI on Benqi.

These platforms have accumulated great depth of liquidity while providing transaction fees or interest for liquidity providers. Defrost Finance will fully utilize these idle assets to provide future leverage and rewards, just like DeFi money legos. By these means, yields can be married together.

What is the mechanism behind Defrost Finance?

Defrost Finance uses decentralized exchanges’ LP tokens as well as interest-bearing tokens for creating a new stablecoin, the H2O, to generate additional yields for users. H2O is fully backed and USD-pegged, rather than algorithmically controlled.

For maintaining the liquidity and stability of H2O, liquidity providers are rewarded with incentives in MELT, the platform token in Defrost Finance. This means that users on the one hand enjoy the yields from their LPs or interest-bearing tokens, while on the other hand, they are rewarded with MELT.

Similar to MakerDao, the stability of the H2O is maintained by monetary policy tools — like the stability fees and savings rate — which can be adjusted depending on the supply and demand.

Which projects is Defrost Finance cooperating with?

Defrost Finance is native to Avalanche and incubated by Avatar and Wanlabs. Also, Defrost Finance collaborates with Trader Joe, the chief Dex on Avalanche, Benqi, its largest lending protocol, and Curve, the main stablecoin Dex in DeFi.

We will utilize the LP tokens on these DeFi platforms for generating H2O.

Why Fair Launch?

A community-oriented project is key to long-term success. Defrost Finance was born with this belief at its very core. We do not want to see any inequality tarnishing our token distribution, either before or after the launch. There have been no pre-sales, VC investments, or pre-allocation to the team members. The only incentives the team will get come from future development and more specifically from Total Value Locked growth.

In other words, this is a true fair launch project. Apart from a minute airdrop campaign to the community, to our testnet users, and a small percentage saved for marketing events, all of the circulating MELT tokens are coming from liquidity mining, as are the rewards for contributing liquidity to H2O and MELT.

MELT is always distributed as the rewards token. That’s why Defrost Finance does not intend to raise money in the first place to do an IDO, nor to hand over a slice of the cake to VCs. The MELT total supply is 100 million and it is fixed. The token will be distributed to liquidity contributors with declining inflation. That’s how our envisioned DAO will take shape with the support of H2O and Melt liquidity contributors.

How to earn yields with Defrost Finance?

Earning yields in Defrost Finance is simple. There are three ways to do so:

  1. Contributing to the H2O liquidity
  2. Supporting the MELT liquidity
  3. Staking MELT.

1. Contributing to the H2O liquidity

Contributing to the H2O liquidity is rewarded with MELT incentives. First, you need to hold some H2O. You may either mint H2O from the Defrost Dapp using the whitelisted collaterals as mentioned above, or directly buy H2O with stablecoins from dexes, for instance from Curve’s H2O liquidity pool.

Please bear in mind that when minting H2O, the accepted LP tokens are categorized into three groups, according to risk levels. Assets with higher volatility are managed through higher collateral requirements for the protocol’s safety. Pay attention to the collateral rate when minting and preserving your H2O position.

After you possess some H2O, you can contribute liquidity into the H2O pool on Curve. The Curve LP token of the H2O pool will be transferred into your wallet once the liquidity is added.

You can then stake the Curve LP token into the mining pool from the farming page on the Defrost Dapp UI to automatically gather MELT rewards.

2. Supporting the MELT liquidity

MELT/AVAX LP contributors on Trader Joe are incentivized by MELT. By simply adding the MELT/AVAX liquidity on Trader Joe and staking them back into the mining contract from the Defrost Dapp, you will be rewarded with MELT.

3. Staking MELT

There will be a MELT staking pool where MELT stakers will collect platform revenues from stability fees and liquidation penalties, as well as staking rewards. (Again, in MELT.)

The Road Ahead

Defrost Finance will continue to deepen the integration with the DeFi platforms on Avalanche and whitelist more collaterals for minting H2O, including interest-bearing assets such as qiETH, qiAVAX, qiWBTC on Benqi, pairs on Trader Joe, and even other native yield-bearing tokens like xJOE.

Eventually, Defrost Finance plans to accept collateral from other chains as well, including LP tokens from Uniswap, Curve, etc., or from Ethereum, or Pancakeswap LPs from BSC. Cross-chain liquidity will create a more dynamic DeFi ecosystem on Avalanche, and diversify the potential risks associated with H2O.

Finally, once the H2O liquidity is sufficiently built, we will stretch our reach beyond the stablecoin basic layer to DeFi derivatives. Think of leveraged tokens, leveraged mining, and options. These DeFi products will create a full, diversified package and increase the use-cases for H2O as a DeFi stablecoin.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Defrost

Defrost

1.6K Followers

Decentralized leveraged trading on #Avalanche. Use a unique yield-aggregating supervaults to maximize the returns on liquidity and trade with ease. Coming soon.