Folks Finance: looking back at 2023 and towards 2024

Despite a bearish market until winter, the year 2023 was eventful for Folks Finance with a number of launches and innovation that will doubtlessly linger in the coming year. In this article, I offer a personal view on what we have witnessed and what we should expect.

Lending Pools

Lending Pools are amazing. They allow you to lend your assets on Folks Finance while providing liquidity on a DEX; earning simultaneously lending & swap APR, plus any potential farming rewards. This unlocks capital efficiency as your assets are now working twice as much. For end-users, Lending Pools deepen liquidity, providing better trading & lending price.

What are they?

At the technical level, when lending assets on Folks, say Algo, you receive some fAssets, in this case fAlgo, as a proof of deposit. Lending pools are simply liquidity pools with a pair of fAssets, for instance fAlgo / fUSDC. Lending pool can be opened on any DEX supporting fAssets in a fully transparent way. This elegant solution showcases the potential of Algorand composability and efficiency as a blockchain. To my knowledge it exists on no other blockchain. More info on Folks Academy.

What has 2023 brought us?

Lending Pools have started in June 2023 through a partnership with Pact Finance. Lending Pools were initially limited to small number of selected assets. Helped by Folks great communication, and by consequent Targeted Defi Rewards, Lending Pools have quickly gained in popularity and have expended to a larger class of assets. As of today they account for more than $4,500,000 of TVL on the platform, with some of the pools consistently paying more than 40% APR (Swap Fees, Lending APR + ALGO rewards).

What to expect for the future?

For all the advantages they bring, Lending Pools have the potential to become the backbone of Decentralized Finance. I am counting on the Folks Finance Team to push them even further. Even if to my knowledge no official statement has been made here is a short lists of my most anticipated features for 2024 (rumored or simply dreamed by me):

1. Lending Pools on other DEXs. As explained, Lending Pools can be launched on any DEX as long as it supports fAssets. I would love to see them integrated on more platforms (Tinyman, we see you…)
2. Multi-Assets Pools. For now Lending Pools only support fAssets by pairs. For instance, if I have $ALGO, $GOLD, and $SILVER. I have to split them into two pools $ALGO/$GOLD and $ALGO/$SILVER. I would prefer to have a $ALGO/precious metal pools where I could deposit the three. This of course would require further development of Curve-like Multi-Assets Pools from Folks partners and I do not know whether we should expect it in a near future.
3. Stable Lending Pools. Nowadays, most DEXs implement different trading algorithms depending on whether the price of one swapped asset is expected to fluctuate with respect to the other. For instance, even if the goBTC/wBTC pool is unbalanced, the algorithm will try to ensure that 1 goBTC = 1 wBTC, since, in the end, they should both represent one Bitcoin. They greatly improve trade efficiency while guaranteeing less impermanent loss for Liquidity Providers. To my knowledge, the actual Lending Pools on Pact do not implement this Stable Swap Algorithm, and that would be a great addition to Lending Pools.

Cross-chain expansion

In the same way that there is not just one bank, nor just one internet provider, many blockchain experts envision a future where many blockchains coexist. Cross-chain Interoperability refers to the ability to bring liquidity from one chain to another (“bridging”), or simply to read information from one blockchain to another.

What exists?

Folks Finance actively participates in Cross-chain expansion by offering several bridged assets for Lending, Borrowing, as well as for Lending Pools. To date, Folks supports Algomint implementation of Bitcoin ($goBTC) and Ethereum ($goETH ), as well as six wrapped assets through Wormhole. This allows users from these other chains to benefit from Algorand superior tech while keeping there native assets. For Algorand users, this allows to diversify to other assets without paying stupidly large fees, or facing the risk of a slow blockchain. Traders can also buy & sell foreign assets natively on Algorand without going through a centralized exchange. As of today, more than $2,500,000 of cross-chain assets are locked on Folks, not accounting for Lending Pools.

On a different note, Folks has launched its own cross-chain asset: xAlgo on the Binance chain (BSC, native token BNB). It is a representation of $ALGO direclty on the BSC, and automatically accrues interest coming from Governance Rewards. Folks has partnered with Pancake Swap to offer incentives to users. It allows BSC users to trade or farm $ALGO directly on their chain, while hopefully attracting new users to Algorand.

What’s next?

Folks Finance has already announced the launch of xAlgo on another blockchain: Avalanche (native token AVAX). With BNB, AVAX is one of the largest market cap for a native token (#5 and #9 respctively, at the time of writing). It should offer the same features as its BSC-twin, with potential Rewards Farming and Trading use-cases. Folks has partnered with Trader Joe (one of the largest DEX), and Benqi (dApp for liquid governance) to offer the best to users, so stay tuned for details.

Needless to say, that with this second launch, Folks has clearly announced the cross-chain future they anticipate; and that we should expect more launches to come (maybe Polygon).

Real-World Assets

Real-World Assets are on-chain certificates proving ownership of a physical good, such as a Commodity (Precious Metal, Oil, Corn, and so on), Real Estate, Stocks, Bonds. Being on a blockchain, they can be traded (almost) instantly, everywhere in the world, without a middle-man.

The state of the Real-World Asset

So far, Folks has opened its protocol to $GOLD and $SILVER from Meld Gold. Each asset representing one gram of the respective metal. These coins are enabled to use for Lend, Borrow, and in Lending Pools. This allows users to benefit from a vivid defi ecosystem (Lending Pools, Governance Rewards…), while holding assets that are seen as natural store of value, but normally do not offer such interesting returns. Despite a very recent launch, these two assets account for almost $1,000,000 of TVL on Folks.

Folks also offers a varieties of Stable Coins which are on-chain representation of a fiduciary money, at the moment $USDC & $USDT (linked to US Dollar) and $EURS (linked to Euro). However, the Stable Coins do not fit exactly in the RWA category.

What to expect next?

The combination of blockchain and RWA will unlock endless potential applications: from decentralized mortgages to supply-chain transparency. However, we are still quite far from a completely integrated ecosystem. Despite not being aware of any official or unofficial news, here is a short list of what we could see in 2024.

1. More Precious Metals. This one seems the more straightforward. Precious metal certificates are not limited to Gold and Silver, and I hope we could see Meld, or another actor, extends its product to other Precious Metals (Platinum, Palladium, Rhodium…), with subsequent integration into Folks and its defi ecosystem.
2. Real Estate. The interaction of Real Estate and Blockchain is symbiotic. For instance, it allows to represent partial ownership of a Rental Property as one token that can be quickly and transparently transferred on-chain. In my opinion, the most solid Real Estate Tokenization project so far is the RealT platform (refferal link) on Gnosis Chain, and it is actually already possible to use some of their properties as collateral on the RMM to borrow Stable Coins. On Algorand, Lofty (referral link) has launched few years ago but I feel the platform needs to resolve several issues (Property Management, Renter Screening Process, Property Sourcing, Valuation of the Properties) before it reaches a stbaility that would allow for integration on Folks. Their team is however very proactive and innovative so it might still be possible to see integration before the end of 2024. I also have heared that other Real Estate platforms are launching on Algorand (Vesta, Ctrl-Alt) but have no experience with them and do not know how advanced they are.
3. Cereal Commodity. Another class of tokenizable RWA is Cereal. In partnership with Visa, Agrotoken has launched a solution for farmers to tokenize Corn, Soy, and Wheat. If so far the platform is rather used by institutional actors, we might see an opening towards retail and smaller investors with an integration in defi and Folks to follow.