AGBuild is the Web3 Venture Capital arm of Alpha Grep, a leading quantitative trading firm.
Summary
- Bastion is a lending protocol built on the Aurora blockchain;
- The team, although completely anonymous, has displayed awareness of and expertise in the DeFi space;
- There is immense functionality built into the platform with little to no complexity overhead;
- Bastion is perfectly positioned to capture all of the liquidity that will flow to the Aurora ecosystem over the coming few quarters;
Bastion Protocol recently raised a Series A round, in which AGBuild has participated. Bastion is a liquidity protocol built on Aurora, the EVM compatible chain in the NEAR ecosystem. In the age of liquidity wars, we are of the view that Bastion provides a unique avenue to make bets on the liquidity driven to Aurora and NEAR ecosystem at large. This article will outline our thesis around Bastion and how it fits into the Aurora and NEAR ecosystems.
Breaking Down Bastion
At its core, Bastion is a lending protocol that enables Aurora users to access liquidity locked into the protocol. They have used a similar mechanism to Compound, but are built to be Aurora-native. Native projects tend to perform better than services that provide compatibility on other chains. In the eventuality that Compound decides to provide functionality on Aurora, Bastion will likely outperform Compound specific to Aurora because they were first to market, and built a loyal community who had the opportunity to realize a greater upside. Bastion also pools assets based on risk parameters into Realms, this allows a broader range of asset listing which enables liquidity to reach further into the Aurora ecosystem. They are also building out a stableswap to supplement the functionality available on the protocol. The team also has plans to integrate community NFTs into the platform, which will add another layer where community members can engage with the protocol in a meaningful way.
From the depth of Taiki Maeda’s teachings, lending protocols require two foundational pillars to be able to scale well. The first is a well functioning money market, and the second is a stableswap that enables the transfer of value between supported stablecoins on the protocol. Bastion’s money market is robust. They currently have over $800m in supplied assets, with a little over $300m loaned out. A stable base layer of liquidity on the protocol of this size will ensure that interest rates stay stable as usage scales. The stableswap currently allows swaps between collateral tokens of USDT and USDC, which seem to be the only stablecoins available on the protocol.
Bastion is currently hovering around a cool $600m TVL. This enormous value has been accrued from successful lockdrops for the BSTN token. Around $300m was raised from the first lockdrop. The lockdrop allowed users to lock their assets for anywhere between 1 and 12 months in exchange for an upfront payment in the form of BSTN and NEAR tokens. This ensured fairness of the token launch while also enabling the protocol to bootstrap a sustainable amount of liquidity. The lockdrop mechanism was novel and indicates that the team understands the important metrics for DeFi protocols to pay attention to with long-term success in mind, while also knowing when and how to be creative.
Bastion’s commitment to growing TVL on their protocol protects their ability to build innovative products. Their product pool along with their liquidity enables them to create unique offerings such as interest rate swaps and leveraged yield farming at the protocol level itself. They also have functionality on their platform that enables the bridging of assets through RainbowBridge and Allbridge, among others. In essence, all of this functionality increases composability without increasing the complexity of the protocol. Users with little to no prior experience in DeFi will be able to access the platform and all of its functionalities, taking risks as they see fit. Although the team is entirely anonymous, they have experience working in DeFi at the core level and have displayed the awareness that being a DeFi founder demands. The execution of Bastion’s go to market strategy till this stage has been near perfect. The hype for the project on CT and its TVL are a testament to this belief.
The silver bullet for DeFi protocols in this market is integrations and partnerships. The Bastion team was clearly cognizant of this, and focused on building out partnerships with major liquidity sources. They have partnerships with enabled integrations with Terra, Chainlink, and Rose on Aurora. This will add to the protocol’s composability, users will be able to use assets from various chains in various applications. The need for the hour in DeFi is providing users with avenues to gain access to earning opportunities, and Bastion is building a platform for users to gain access to this exposure, without any of the complexity that composability normally comes with.
Bastion in Aurora and NEAR
More valuable than Bastion’s protocol level functionality is its fit into the NEAR ecosystem. NEAR has a TVL of over $1.6b, of which Aurora boasts a $1.17b TVL. Most of the liquidity in NEAR is concentrated into Aurora. This is not difficult to explain, EVM functionality brings too much to the table to ignore. There are also legacy Ethereum projects like Curve and Chainlink integrating into Aurora soon, which brings more attention and liquidity to the chain. It is also important to note the USN rumors. If there is eventually an algostablecoin on the NEAR ecosystem, users will likely migrate it to Aurora to leverage its functionality. Not only is it likely that a NEAR narrative forms around this stablecoin, that likelihood guarantees a sharp growth in Aurora usage.
Bastion is uniquely positioned to capture this rotation of value. They bring most of DeFi’s functionality into one protocol. Users coming over from Terra can bridge their assets to Aurora directly through Bastion. Assets can then be supplied for yield or as collateral, and then liquidity can be accessed that is Aurora-native. Yield-focused users can utilize the leveraged yield farming functionality. More risk taking users can make leveraged trades through the riskier Realms. It isn’t difficult to envision an eventuality where Bastion grows to capture most of Aurora’s TVL, it currently has around 50% of Aurora’s TVL.
Conclusions
With the growing interest for multichain compatibility, and the existing narrative around it, we are of the opinion that an investment in Bastion provides strong exposure to the ability of the Aurora ecosystem to address the assets that will be bridged over from Ethereum and other EVM chains. Bastion has displayed their interest in capturing all of this attention, we believe in their hunger to solve composability and complexity issues plaguing DeFi today.
