How Root’s Stem Protocols Are Collaborating To Build An Ecosystem More Valuable Than The Sum Of Its Parts

TL;DR

• Even prior to Root’s launch on Saturday 28th October, the initial Stem protocols have identified opportunities for collaboration.
• Cordyceps will offer a seamless connection with Torus to deliver additional yield strategies for idle assets on the Cordyceps platform.
• Meanwhile Torus deposit receipts could be used as collateral to borrow senUSD on the Seneca protocol.
• Synergies like these will allow the Root ecosystem to be more than the sum of its parts and deliver a realistic model for capturing the whole DeFi market.

Collaboration Between Stem Protocols Is Already Underway…

The Root Token Generation Event (TGE) will be going live on Saturday 28th October. This will be the first opportunity for the public to buy & trade ROOT tokens. There will also be a phased roll-out of the dApp alongside it.

But even before launch, Root has been cultivating some exciting Stem protocols, as it builds towards its vision of creating a one-stop shop for DeFi. Not only tha but Root’s DeFi Lab, Bloomworks has already identified some exciting ways that some of the Stems can collaborate to become more than the sum of their parts.

In today’s article, we’ll take a look at a couple of Case Studies on these Stem protocol collaborations. So, firstly, let’s talk a bit about how Stem protocols operate in the Root ecosystem before diving into the case studies…

How Stem Protocols Are Born

Stems are individual protocols that Root incubates to target key high EV DeFi market inefficiencies. Funds for investing in the creation of Stems are generated by Orchard, which is Root’s omnichain governance aggregator. Orchard capitalizes on revenue opportunities offered by next-generation DEXs. These funds are then flowed into Root’s DeFi Lab, Bloomworks, which is responsible for building out the Stem protocols. The ultimate vision is then for each of the Stems to be integrated into the Sprout operating system for DeFi. Sprout is designed to create a “Robinhood of DeFi”, bringing all DeFi products and services under one roof.

But even before their integration into Sprout, some of the initial Stems being incubated by Bloomworks are laying the groundwork for collaboration. Let’s take a look at some examples currently underway…

CASE STUDY 1: Cordyceps & Torus Collaboration

The first example is the way that two of Root’s initial Stem protocols, Cordyceps and Torus, are currently working together to create mutual value in the Root ecosystem.

Cordyceps is an omnichain insurance market for pegged assets, and a speculation market for related events. It provides insurance for pegged assets like stablecoins and LSTs, allowing users to hedge their positions and mitigate potential losses.

Meanwhile, Torus is revolutionizing liquidity distribution and yield across multiple prominent automated market makers (AMMs) including Balancer, Curve, and more. Torus empowers DeFi users by driving liquidity wars, mitigating centralization, and embracing the LSDfi narrative.

Here’s how the two protocols will be working together:

Cordyceps will offer a seamless connection with Torus to deliver additional yield strategies that create value out of idle assets on the Cordyceps platform. During the course of a risk event on Cordyceps, the ETH that has been placed into the risk and hedge vaults remains dormant, meaning it is not generating any returns. However, Cordyceps’ connection with Torus provides a solution to this challenge. Users will be able to direct their dormant ETH towards Torus, where they can then take advantage of the many yield strategies that Torus offers its users. The connection means that no asset will ever remain dormant or unproductive on the Cordyceps platform, as even the ETH sitting in risk and hedge vaults can be deployed to yield additional returns.

This shows how two protocols with seemingly disparate offerings can leverage each other’s features when they are part of the unified ecosystem that Root is developing.

However, this is not the only example of this currently underway. There are also some potential synergies emerging between Torus and another Stem protocol, namely Seneca…

CASE STUDY 2: Torus & Seneca Collaboration

Seneca is an omnichain DeFi lending protocol, which provides isolated lending markets for exotic collaterals. It allows users to borrow a collateralized stablecoin called senUSD against yield-bearing assets and leverage their yield.

Seneca and Torus have identified ways in which assets from the Torus ecosystem could be used as collateral for minting senUSD on the Seneca protocol. Essentially, it would work like this:

Torus allows Liquidity Providers (LPs) to diversify across numerous AMM pools without the costly and inefficient process of manually shifting their liquidity between them. This is achieved through Torus Omnipools. These allow LPs to deposit a single asset into an Omnipool, which then distributes their liquidity across numerous AMM pools to provide the best diversified yield. When Torus users make their deposit into an Omnipool, they will receive a Deposit Receipt. They use this to redeem their deposit and any rewards Torus has accrued for them when they withdraw their funds.

Now, usually until the time that they make their withdrawal, these deposit receipts would sit idle. This is where Seneca comes in. Torus users could choose to use their deposit receipts as collateral to borrow senUSD on the Seneca protocol. This would allow them to leverage up their holdings, whilst they still continue to earn rewards on Torus. This means they can unlock additional value from their idle liquidity.

Furthermore, because Bloomworks is helping guide both Seneca and Torus to be built using similar architecture, this will allow for a smooth integration between the two protocols.

It’s another case of how the ecosystem that Root is building out builds a win-win for the Stem protocols within it, whilst capturing additional value for the ecosystem as a whole.

This Is Just The Beginning…

These are just some initial examples of Stem collaborations before Root has even been launched. But as more new Stems come online and each is integrated into the Sprout operating system for DeFi, opportunities for collaboration like this will continue to proliferate. This is what allows Root to deliver a realistic, gradual model for capturing the whole DeFi market and delivering outsized value to its stakeholders.

So, make sure you save the date of Saturday 28th October for when the Root Token Generation Event goes live and you can become a stakeholder in DeFi’s most ambitious project.

Until then, you can discover more by browsing our docs and joining the Root Discord community.