Case Study — Dolomite x Arbitrum x Chainlink

Dive into what sets Dolomite apart and how Dolomite leverages Arbitrum and Chainlink

1. Name and role at Dolomite

Adam Knuckey, Co-founder and COO

Corey Caplan, Co-founder and CEO

2. What sets Dolomite apart as a platform?

Dolomite stands out from other lending protocols in both the assets it’s able to support and the features offered that let users make the most of those supported assets.

Most lending protocols currently list around a dozen assets, sometimes a couple dozen at most, often along the lines of ETH, WBTC, USDC, DAI, USDT, and a small handful of other major assets. Generally, their architecture limits the number and complexity of the assets that they are able to list. Dolomite, on the other hand, is able to list thousands of different assets, including many advanced assets that are found in the modern DeFi ecosystem.

In the early days of DeFi, when the first lending protocols were being developed, there was no need for such a wide range of asset support. It would mean supporting long-tail, low-cap assets that were very risky to list and didn’t have significant interest from the community. However, in the years since, the space has changed significantly and has grown in size and complexity to include a wide variety of assets of many kinds, built to support more complex financial behaviors. Today’s DeFi assets include staked derivative tokens, interest-bearing tokens, liquidity tokens, tokens with advanced rewards mechanisms, tokens with expiration dates, and more. Dolomite is able to list all of these assets and more, making Dolomite a lending protocol built for the next generation of DeFi, where users can tap into what would have otherwise been illiquid assets.

While there are a few other lending protocols that are able to list more complex assets, they often surrender the DeFi native rights and rewards that come with those assets, such as being able to stake, vest, or vote. Dolomite fixes this problem by listing assets while enabling users to retain their DeFi native rights. Simply put, users on Dolomite can stake, vest, and earn rewards right from Dolomite’s front end, even while borrowing against those assets or using Dolomite’s other services. Dolomite takes none of the rewards, instead passing them along to the user. This wide asset support allows users to perform more complex strategies of looping and hedging that were not possible before.

Dolomite’s architecture goes even further, enabling incredible amounts of capital efficiency that empowers users to maximize the yield they earn on their assets. Take, for example, a user coming to Dolomite with ETH and USDC. As soon as the user deposits those assets to Dolomite, they begin to earn lending interest. From there, they can add to the Dolomite ETH-USDC AMM pool, and thanks to Dolomite’s capital-efficient architecture, they will simultaneously earn trading fees from the AMM pool and lending interest from the ETH and USDC. But it goes even further. When Dolomite lists the LP token for lending and borrowing, the user will also earn lending interest from their LP token being lent out. They can then take it a step further and use the LP token as collateral (while still earning all the previously mentioned interest and fees) to borrow assets that they can use to acquire a yield-bearing asset such as GLP or jUSDC, further increasing their yield. The radical flexibility and capital efficiency enable users to maximize their yield and free up capital.

Dolomite’s unique features span beyond lending and borrowing. Built into Dolomite, and working from the same pooled liquidity, is a full spot and margin DEX. Presently, the team’s focus has mainly been on the lending features, but when the DEX is fully fleshed out it will support margin trading on a wider range of assets than found anywhere else. Additionally, Dolomite will support margin pair trading, enabling users to trade the ratio between any two assets rather than against USD values. This is also something not commonly found in the market currently and is of great interest to many advanced traders looking to execute unique strategies to play the market by trading the ratios between the tokens of two different projects.

3. What is the unique advantage of building on Arbitrum? Why did you choose to build on Arbitrum?

There are two key advantages to building on Arbitrum, one technical and one social.

For many protocols in DeFi, development is a race to the bottom, with the goal of achieving the lowest possible gas fees. Dolomite takes a different approach, instead aiming to build out as much functionality as possible. This would make running Dolomite on Ethereum mainnet essentially impossible, especially during times of high volatility. By taking advantage of the low cost and fast transactions available on Arbitrum, Dolomite is able to build out advanced functionality, unique features, and a smooth user experience that would have never been possible elsewhere.

But Arbitrum’s strengths go far beyond its tech. The Arbitrum ecosystem is thriving with cutting-edge projects, all eager to collaborate with each other and work together to benefit the space as a whole. Given that Dolomite is a protocol for borrowing, lending, and trading assets from other projects, Dolomite’s success is intrinsically tied to the strength and diversity of the other projects in the ecosystem. Dolomite’s unique features alone are worth nothing. It takes other projects with unique and interesting assets for any of those features to have any value.

We have found that the Arbitrum ecosystem is possibly the best one in all of crypto in terms of the collaborative mindset of the projects and teams building on it.

We have been able to work with so many great projects due largely to the fantastic community of projects and builders found on Arbitrum. Dolomite has greatly benefitted from the support of the Arbitrum ecosystem.

4. What are the team members’ backgrounds?

The co-founders of Dolomite have an extensive background in crypto. Adam got started in crypto in 2013 when Bitcoin hit $1,000 for the first time. A programming forum he frequented had a few members take an interest in building their own crypto project, and Adam was able to help improve the miner. From there he was periodically in and out of the space until 2017.

Corey got started in 2015 when he began accepting Bitcoin as payment after his game modding software was shut down by a payments company. He too was periodically in and out of the space until 2017.

Corey and Adam met freshman year at Lehigh University, where they were on the same floor in the same dorm. They were both in the same small program, working towards a dual degree in computer science and business. They found that they worked very well together and both had a passion for building software. Together, they worked on side projects and competed in hackathons and coding competitions.

When 2017 came around and the market started to heat up, they dove deeper into crypto together, trading at all hours of the day and night, reading countless whitepapers, and learning all the ins and outs of the space and the technology. Through their experience, they came to realize that the centralized exchanges at the time had many flaws. The exchanges were rife with hacks, fraud, and poor user experience. As a result, they started to look for alternatives and came across decentralized exchange technology.

At the time, the only decentralized exchange out there was EtherDelta, an exchange that listed assets that would have low likelihood of being listed on less widely used exchanges. The technology and interface were also very primitive, with a poor user experience that made it easy for a user to fat-finger a trade and lose significant amounts of money as a result. Nonetheless, Corey and Adam saw a lot of promise in the technology behind it.

At the start of 2018, Corey and Adam began to build on the newly created Loopring Protocol — a very early decentralized exchange protocol. They began by working on bounties and built an Android mobile decentralized exchange, the first built on Loopring and one of the first DEXs overall. The CEO of Loopring, Daniel Wang, was impressed with Corey and Adam’s work and proposed an investment into what became Dolomite. Corey and Adam began building, aiming to make Dolomite the exchange that they had always wanted to use.

Back then, the space was very different. It was a time before DeFi was a term, instead going by the name “open finance,” and cumulatively all DEXs would do maybe $5M in trade volume. The biggest struggle was explaining to people what a DEX even was, and why they would want to use one. The version of Dolomite being built at the time was a hybrid DEX, with off-chain order matching and on-chain settlement. It saw moderate success, but as DeFi grew it trended towards a different model of AMM pools and deeper interoperability. As a result, the original version of Dolomite was spun down around 2020, and Corey and Adam began work on a new version of Dolomite built for the modern DeFi ecosystem, using all the lessons that they had learned over their previous years in DeFi. This led to the creation of present-day Dolomite, which aims to push lending protocols forward into the next generation of DeFi.

5. How do Chainlink Price Feeds fit into the picture for Dolomite?

Chainlink Price Feeds are essential to the operation of Dolomite. As a lending protocol, Dolomite’s first priority is to ensure the solvency of its lenders. This is done through a number of carefully identified parameters, and most of all, a secure price oracle. This is where Chainlink Price Feeds come into the picture, offering industry-standard price data that’s been proven over the years to be secure and reliable. Put simply, Chainlink Price Feeds help Dolomite ensure stability and reliability even during volatile market conditions.

6. Why did you choose to build with Chainlink? What does Chainlink uniquely unlock for the Arbitrum ecosystem?

Currently, we use Chainlink Price Feeds within Dolomite to help monitor for liquidations and display price data across the entire Dolomite application. However, in the future, we aim to deepen our use of Chainlink across various cutting-edge Dolomite features.

The Chainlink technology stack is unmatched when it comes to reliability, security, and the breadth and depth of its services, which unlocks completely new use cases.

We think the many features that Dolomite is building in the future that rely on off-chain execution can only be made possible by Chainlink, which really exemplifies the advanced DeFi capabilities that Chainlink unlocks.

7. What specific key results have already been achieved (user growth, new markets, liquidity, total value locked, engineering time saved, etc.)?

We have hit several milestones that we are very proud of.

We closed a $2.5m seed funding round in May, led by Draper Goren Holm and NGC, with great backers including Coinbase Ventures, WW Ventures, RR2 Capital, 6th Math Ventures, and other great VCs and angel investors.

We launched some very key features, including isolation mode to support assets such as GLP. Our integration of ⚡ Zap also allows users to loop and hedge in a single click, a feature that’s not offered by any other lending protocol. We also launched Pause Sentinel, which is a first-of-its-kind feature to reduce contamination risk between assets if there’s an issue with a particular isolation mode asset on Dolomite.

Asset listings:

• Dolomite was one of the first to do a full integration of GLP, allowing for full account transfers to Dolomite and enabling the full functionality GMX offers for GLP on their site, including staking, vesting, and claiming rewards, all through the Dolomite front end.
• Listed plvGLP as collateral for borrowing, and just like GLP, users retain their ability to stake and claim rewards right in the Dolomite frontend, even while borrowing against their plvGLP.
• Listed Pendle’s PT-GLP as collateral for borrowing, a first for us as it’s an asset with an expiration date, making it something not commonly listed on other lending protocols.
• Listed several other exciting and unique assets such as jUSDC, mGLP, wstETH, and rETH, among others.

Growth:

• We’ve continued to steadily pass TVL growth milestones, even without any token incentive for users, meaning our growth has been purely organic based on the value brought to users.
• Passed $1m TVL shortly after launch in October, $4m in mid-May, and $8m in late July.
• Passed $1m borrowed 7 months after launch, then $2m borrowed only 1.5 months after that.

8. What was your experience like working with Chainlink Labs & Offchain Labs?

The Chainlink Labs and Offchain Labs teams are as professional as they come, with meticulous planning and execution of their respective projects. We’ve witnessed both organizations continuously ship industry-defining technology while offering first-party support for Dolomite to maximize its potential by integrating with each project’s technology. We are excited to bring this experience into the future and to continue to ship important features to the DeFi space with their help.

9. What are your long-term objectives for Dolomite? How does it fit into the future of Web3?

We see Dolomite as becoming a foundational part of the future of DeFi, with support for all of the most exciting assets and projects in the space, and with many other projects building on top of Dolomite.

Dolomite fits into the future of DeFi by leading the charge in supporting a very wide range of assets while letting users maintain their DeFi native rights to vest, stake, earn rewards, and perform all of the other complex activities that are central to these assets’ ecosystems. This will awaken large amounts of dormant capital in DeFi, and users on Dolomite will be able to take advantage of a wide range of features to make productive use of those assets through both simple and complex financial strategies with more ease and control than ever before. Users will take advantage of one-click looping, hedging, limit orders, and asset swaps in borrow positions, all while being able to interact with the core functions of each of the integrated assets right from the Dolomite front end.

On the trading side, Dolomite will push the boundaries of DeFi margin trading forward by offering unique margin pair trading on a wider range of assets than any other protocol, making it an essential exchange for DeFi traders. Cumulatively, this will make Dolomite a one-stop-shop for anyone looking to engage with the DeFi ecosystem, where it’s easy for users to acquire DeFi assets and take full advantage of the DeFi native rights of those assets, all while borrowing, lending, and trading in ways not found elsewhere in DeFi.

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