Crucible: Ferrum Network’s Revolutionary DeFi 2.0 Product Bringing Sustainable Rewards to the Masses
Ferrum has released its highly anticipated DeFi 2.0 product, Crucible. Find out everything you need to know here.
DeFi is an amazing spectacle that is only just beginning its quest for mass adoption. While DeFi’s value proposition is a noble cause — reshaping the current financial system by decentralizing financial instruments — there are certain elements inherent in DeFi 1.0 protocols that are hindering mass adoption of the sector.
Ferrum Network’s core mission has and always will be to “break down barriers to mass adoption.” Ferrum’s revolutionary DeFi 2.0 product, Crucible, is deeply rooted in this principle as they aim to bring this sustainable and easy-to-use product to the masses!
Identifying the Problem
In order to truly comprehend the magnitude of a product such as Crucible, one must understand the problems that Ferrum set out to solve when building it! A large portion of DeFi 1.0 protocols fail to find success due to a lack of one very important attribute… Sustainability.
Unsustainable Rewards Models
Staking is one of the most commonly used protocols in the DeFi landscape. Investors are incentivized to stake a single asset and earn rewards in that same asset. The problem is that in order to incentivize participation, projects often resort to inflationary rewards mechanisms that add an immense amount of sell pressure to the token being rewarded.
More often than not, these rewards are either baked into some inflationary tokenomics model, being sourced from treasury tokens, or taken from the marketing budget. All of these scenarios inflate the circulating supply. So while it may encourage TVL (Total Value Locked), it also drives an immense amount of sell pressure which counteracts the positive economics of these two commonly used DeFi protocols.
Depreciating Assets
The problem with tokens who’s the main purpose is to be used as a rewards token, is that their value suffers as a result of all of the selling pressure. So while APRs may be high in the beginning, they quickly dry up as more people enter the pool causing more tokens to be pumped into the circulating supply and ultimately sold.
How Does Ferrum Solve This?
Most problems are solved out of necessity. Ferrum has been one of the go-to Staking as a Service providers since 2018. While these products are alive and well, Ferrum wanted to create a solution that not only curbed token emissions but was in fact deflationary. The underlying technology of Crucible — Plasma Staking — is a proprietary set of smart contracts that does just this!
Understanding Reflection Tokens
Ferrum’s native tokens are $FRM and $FRMx. Through the Crucible dashboard, users are able to mint a wrapped version of the tokens called cFRM and cFRMx. These wrapped versions are considered reflection tokens. Reflection tokens are unique in the sense that they have transaction fees associated with them. This means that anytime someone buys, sells, or transfers the token, a small (typically between 1–4%) is taken out, similar to a tax.
Arriving at a Sustainable Rewards Model
Now we know what we’re thinking… Tax? Nobody likes taxes! However, it’s important to understand what ends up happening with these transaction fees. In the case of Crucible, Ferrum gives its holders the ability to stake cFRM and/or cFRMx. Those staking cFRM or cFRMx share 100% of all of the transaction fees generated proportional to their stake in the pool. Stakers can come in and out of the pools as they please but remember, even transfers incur a fee that will be distributed to those who remain in the pools. This incentivizes long-term holding!
The most fascinating takeaway from this model is where these rewards are sourced. Unlike is the case with unsustainable rewards models, these reward tokens are not sourced from the inflationary emissions schedules, treasury, marketing budget, or any other uncirculated token supply. On the contrary, all the rewards being generated were already a part of the circulating supply and are in fact directly correlated to the trading volume!
Appreciating Assets
If asked, most people who have a basic understanding of economics would opt to be rewarded in a deflationary asset as opposed to an inflationary one. Rewarding loyal token holders in a sustainable fashion wasn’t quite enough for Ferrum. Ferrum wanted to ensure that the asset being used to reward stakers and liquidity providers was also deflationary!
Burn Baby Burn!
One of the features of Crucible, is that a portion of the transaction fees (10%) are burned. This means that 0.2% of all trading volume is taken out of circulation thus decreasing the supply of cFRM and cFRMx and their unwrapped counterparts.
Creating a Perpetual Rewards Feedback Loop
Since the amount of rewards generated for Crucible participants is directly correlated to trading volume, the most important component to making Crucible successful is trading volume. Fortunately, Ferrum has thought of a unique way to ensure that trading volume remains consistent.
The key word here is Arbitrage. When adding liquidity, Ferrum set the price of cFRM and cFRMx to 50% higher than their unwrapped counterparts. Since users are able to mint cFRM and cFRMx in a 1:1 ratio, they are able to sell the more valuable Crucible version of the token for the unwrapped version and then take the resulting FRM and FRMx to mint more cFRM and cFRMx. Rinse. Repeat… and considering the deflationary nature of the token burns, it makes it much more difficult for the price of cFRM and cFRMx to reach a price equilibrium with FRM and FRMx. The constant opportunity for arbitrage creates a Perpetual Rewards Feedback Loop.
Access Crucible Beta
If you wish to read more on Crucible, watch these highly informative videos, listen to the Crypto at the Ferrum Roundtable podcast, and sign up to join Crucible Beta, click here. Keep in mind that Ferrum will be selecting a limited number of beta testers.
In Conclusion
What Ferrum has created with Crucible is remarkable. A truly self-sustaining economy with a perpetual rewards feedback loop is something that the DeFi landscape is in desperate need of. Ferrum will look next to bring this technology to other projects in the space as they continue with their mission toward breaking down barriers to mass adoption of blockchain technology. To find out how Crucible plans to to revolutionize DeFi 2.0, watch the video below:
About Ferrum
Ferrum is a pioneer in ushering in the era of Interoperability 2.0. Powered by the Quantum Portal, Ferrum Network’s mainnet nodes and related infrastructure will bring value, data, and functional interoperability to every chain in the industry. Utilizing the Ferrum Network, anyone can build and deploy solutions on one network and instantly enable multi-chain functionality without the burden or technical debt that comes with managing a multi-chain infrastructure for their dApps, and projects.
Ferrum also specializes as a multi-chain Blockchain as a Service DeFi company, adding deflationary mechanisms, token utility and advisory services to projects across the crypto space.
With the mission of breaking down barriers to mass adoption in mind, Ferrum empowers the industry by reducing friction and bringing startups and established networks closer together.
