Equilibrium: Interview With CEO Alex Melikhov On All Things Equilibrium
These are exciting times in the ever-expanding world of Equilibrium! In order to keep you informed we bring you commentary from the top. We sat down with CEO and founder of Equilibrium, Alex Melikhov, for an interview on all things Equilibrium.
Alex touches on ecosystem developments, why Equilibrium is the right choice over rival platforms, the DEX launch, tokens, and more!
Q: What is the current state of the DotSama ecosystem? Development-wise, what are the future prospects?
A lot has been done so far both from the Parity side and from the side of ecosystem projects. We see an ongoing auction process. However the interest remains somewhat subdued compared to the first auction batch.
There could be several reasons for this, the primary one being that we’re currently in the global crypto downtrend. Hopefully with the new uptrend cycle the interest towards the ecosystem catches up as well. Core ecosystem projects received their slots and are working on integrations between each other. Everyone is actively involved in delivering on their promises!
Parity itself has done substantial work on the runtime optimization and the block time degradation issue. We should see improvements in later versions of the runtime (e.g. 0.9.21 and later).
As far as future prospects, I believe that current parachains will concentrate on finishing up their protocols and building an interconnected layer of blockchains via XCM integrations. Moreover, we will see lots of bootstrap events and community incentives to move ecosystem tokens around.
Hopefully, someone with the help (or even funding from Parity) will come up with an elegant solution to the asset unification problem across the ecosystem. In this case, light nodes, wallets, and exchanges would enjoy unified interfaces and will connect to the ecosystem as a whole, rather than to each individual parachain/project separately.
Q: How is Equilibrium positioned in the ecosystem? What are its prospects compared to similar projects?
We believe the primary product of interest to the ecosystem and beyond may be our money market. The entire system design allows us to control individual borrower portfolios and calculate interest rates per borrower.
Rather than fixing a constant interest rate applicable for everyone, this approach, along with the on-chain risk pricing, allows us to introduce higher leverage than our competitors. For example, in case of Compound or Aave the maximum possible leverage achievable is 3. In Equilibrium, on the other hand, we can work with values up to 20x.
Equilibrium also has some interesting mechanics related to the automated market maker regarding pricing xDOT wrapper tokens. We’ve created a special purpose AMM which allows us to price xDOT tokens at a discount to the current DOT price. This is given the reference interest rate which is the staking APR currently offered in the Polkadot ecosystem.
All of this reveals we’re well positioned to offer ecosystem users something unique. Therefore, in the end they will enjoy high leverage and new AMM products to expand their everyday DeFi use-cases.
Q: What comes after the DEX launch?
Next we want to add new trading pairs and primarily focus on the ecosystem projects.
For example, we’re currently working closely with Karura to set up a liquidity bootstrapping event. This will help us support the KAR trading pair on our DEX in Genshiro. We’re also looking into integration with Kintsugi to add support for the kBTC trading pair. We want our DEX to become a primary means of exchange for ecosystem users interested in more traditional speculation, rather than utilizing various AMMs.
We will definitely launch a DEX in Equilibrium as well. However the main obstacle is of course the parachain performance issue. Block times are double of what we see in standalone cases. This could degrade user experience. Therefore, we’re actively exploring options such as layer 2 solutions. We’re constantly searching for ways to optimize our code base to make the system even faster.
Additional further plans include an introduction of perpetual markets and becoming fully XCM compatible. After which, we can support as many different ecosystem assets as possible.
Q: Both Equilibrium and Genshiro have high initial circulating token supplies compared to other ecosystem projects. This poses an obstacle to token price appreciation. What ways do you consider to mitigate selling pressure from such an overstated initial supply figure?
Indeed! The way we came into the ecosystem required us to distribute a significant amount of tokens both for Equilibrium and Genshiro right away. There is ~ 30% of supply readily available as circulating to EQ holders — even more (close to 50%) in case of Genshiro.
We already reworked our farming mechanics which focus on the quantity of staked native tokens. Now we hope to mitigate the problem somewhat in this regard: the more EQ or GENS users keep in the system, the higher their effective farming reward is.
We also believe that demand for EQ and GENS will pick up the more our projects become adopted and widely used in the ecosystem. Both of these assets act as native currencies, thus are needed to pay both transaction fees and interest fees when users borrow assets on the money market or when trading on margin inside the DEX.
Since we’re pretty well positioned from the technical perspective, we believe this is something that we can easily achieve. Our business developers and marketing teams are at work on the matter!
Q: The most common desire among crypto users is to have risk-free stablecoin staking and earn rewards on them. Does Equilibrium have something to offer in this regard?
Definitely! The broad spectrum of the technologies we possess allow us to combine them in various ways to introduce products similar to the ones described by the question.
For example, we could combine our Automated Market Maker with our Money Market and offer fixed term, fixed interest rate loans to speculators who wish to trade on margin inside our DEX. In this instance EQD stablecoins could come not directly from minting them against a collateral, but rather from the AMM pool itself.
Similar things may be done with our runtime implementation of the Curve protocol. Users would bring in DAI / USDT / USDC / aUSD stable-coins, exchange them inside the curve for EQD, then use that EQD as margin inside the money market / DEX of ours.
Both of these options, however, would require us to abandon the idea of generating EQD against a portfolio of the collateral. EQD still needs to become an internal USD currency of our system which can be freely converted back and forth between most common stablecoins in the DeFi space (DAI / USDT / USDC / aUSD, e.t.c.)
Don’t forget to take part in the ongoing Equilibrium × CoinMarketCap airdrop: https://coinmarketcap.com/gravity/articles/29156
About Equilibrium
Equilibrium is a one-stop DeFi platform on Polkadot that allows for high leverage in trading and borrowing digital assets. It combines a full-fledged money market with an orderbook-based DEX. EQ is the native utility token that is used for communal governance of Equilibrium. xDOT is a liquid and tradeable wrapped DOT that unlocks liquidity of DOT locked in parachain auctions and delivers multiple crowdloan bonuses on Polkadot.
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