dForce was invited to Arbitrum’s Twitter Space
On September 21st, Arbitrum invited dForce to their Twitter space to talk about DeFi, dForce, and everything in between!
Full recap of the AMA below:
1: Can you please introduce dForce to Arbitrum users?
dForce was launched in 2019, prior to the DeFi (Decentralized Finance) summer. dForce has a one-stop shop for all decentralized finance protocols, including assets, lending, and trading. Within our stablecoin protocol, we have 2 main stablecoins: USX and EUX. Each are USD and Euro denominated, respectively. We also have a multi-chain interoperable lending protocol deployed on Ethereum, BSC, Polygon, Arbitrum, Optimism, and KAVA. For example, users can deposit Matic and ETH as collateral and borrow stablecoins.
The unique value proposition of dForce lending is that there are a variety of stablecoins offered (USDT, USDC, USX, etc), thus provides users with maximum utility and capital efficiency.
2: What was the thought process between going full matrix versus building 1 product first?
Both of these methodologies work, it all depends on the understanding of the DeFi money lego. Most important factor is liquidity. If you take a look at DeFI 1.0 or subsequent defi innovations it’s all about how to actually improve the capital efficiency and liquidity fragmentation within DeFi. We’ve been through DeFi summer and the consequences of it; i.e. if you only build a lending protocol without additional features, I don’t think it’s easy to provide unique value proposition to end users. It’s very difficult to be successful by just providing one service to users in this market, that’s why we are seeing more protocols going full matrix.
3: Tell us how USX works?
USX is actually our natively built stablecoin, model of USX is quite simple over collateralized decentralized stablecoin. Basically, it’s a combination of the vault and pool-based minting. Vault base is very similar to the CDP model which was pioneered by Maker. You can use collateral supported in a vault to mint USX. The advantage of this model is that you can allow us to mitigate the risk of collateral. On Arbitrum, dForce supports Curve pool LP tokens. For example, you can use USD and USX pairs and use that as collateral and mint USX and then use that for leverage. You can leverage up to 8 times, which is huge improvement in capital efficiency. We also support stable coin to stable coin minting which means you can use USDC or DAI 1:1 mint USX. It allows USX to move across different chains without any slippage. You can also borrow USX directly from lending protocols which can be considered as cross-chain credit facility. Overall, just a huge increase in efficiency.
4: Did you plan for going cross-chain or adapted later?
Actually, we planned this from the very first time when we deployed multichain. That’s why we customized Arbitrum bridge for our stable coin. MakerDao is also trying to do that, but different protocols have different trade-offs in terms of risks and security.
Allowing for native minting is very powerful but it also comes with security trade offs which can be dangerous. Native minting is a very powerful tool to have because it can eliminate slippage. For example, one can transfer 100 million USX from Arbitrum to Ethereum — you don’t need 7 days of lock up, it is instant with some gas fees.
Cross-chain is going to be the trend for all stable coins, particularly for those who have lending protocols built on top of it. I think letting users move their borrowing capacity from one chain to another is a very powerful tool to have and that’s gonna be the future.
5: How does dForce distinguish itself from Aave and other lending protocols?
As I mentioned earlier we are not just lending protocol per se. The features that distinguish us from other competitors are:
First, we are multichain and at the moment we are deployed on 6 chains. I think only Aave can do this kind of multichain strategy. We have not only integrated a stablecoin into the lending but we allowed cross-chain credit from one chain to another by just using the native stablecoin. Essentially you can move your borrowing capacity from one chain to another without moving the asset. Another feature is that we integrated our aggregator with the trade aggregator on different chains as well. By doing this, we are facilitating cross-chain trading.
6: Would love to hear about your Layer-2 strategy.
We started on Ethereum and now we are a multichain protocol. Our strategy on Layer-2 is very simple, we believe that layer-2 is definitely the most promising scalability. The benefit of layer-2 is quite straightforward, we just inherit the security from layer-1 including the infrastructure so it makes life a lot easier for us to do cross-chain including asset bridging. We can also leverage some of the layer-1 layer-2 messaging systems that already been developed by Arbitrum and Optimism.
In our cross-chain strategy, Arbitrum definitely is the top priority. Gas fees is one of the main factors we chose to deploy on Arbitrum. On mainnet, gas fees were way too high. We can build a lot of protocols on layer2 which can be built on layer1 because of the high gas fee.
We will prioritize EVM-compatible layer2 chains.
7: Any collaborations done with DeFi ecosystem since dForce launched?
Numerous collaborations were done. We integrated with Curve finance, set up a pool there. We also integrated with DODO mainly for building up the liquidity for USX. Now we are working with saddle finance, Saddle finance is also a stable coin swap with a multichain strategy. We have integrated on Ethereum but they are also expanding to Arbitrum and Optimism. We are trying to have some co-incentive liquidity mining on Saddle finance.
Our latest collaboration is with LoopFi, which is a Vetoken liquidity solution provider it’s similar to Convex because DF has vtoken model so you can lock it up in a smart contract and gain a better yield eventually lockup longer. The unique thing about LoopFi is that it’s the first sort of Vetoken model liquidity solution provider that allows governance token on layer-2 to actually participate in the governance on layer-1. We want people to participate in governance with lower gas fee so they can lock their DF on LoopFi on Arbitrum because DF is issued on Ethereum.
8: What does dForce have in plans in the next coming months?
In the last 2–3 years we just built the core DeFI primitives, Lending, stable coin, and trading. In addition to these core features, there are a lot of extensions that we can do but the next interesting stop for dForce to explore could be NFT space because NFTs are not an asset class. Right now we are only doing ERC-20 tokens which are Fungible tokens but I think the next wave of trend is NFT because it represents consumer finance.