Impossible Finance Research Report #12 — Aurigami

The recent increase in mindshare regarding Aurora can be significantly attributed to the increase in investments that have been recently made within the Aurora and Near ecosystems. With Near announcing a $350 million grant aimed to help foster growth for DeFi projects on Near, along with key protocols such as Trisolaris and Bastion having recent fundraises from key leaders and VCs within the space, indicating a steady inflow of capital entering the Aurora ecosystem. This can already be seen within the steady increase in TVL within Aurora, from $100m in December of 2021 to over $1.3 billion in TVL on Aurora currently. Coupled with the ability to provide fast transactions with the average block time being about 1.3 seconds, along with the average transaction fee being less than $0.01, Aurora has positioned itself to continuously attract both capital and new users. Aurora Network is an EVM compatible Layer 2 built on top of Near Protocol, this enables users to easily move from chain to chain without having to worry about setting up new wallets, which can be a huge barrier to entry for users. What’s more is that Aurora allows developers who are interested in the ecosystem to be able to deploy onto Aurora relatively easily, as EVM compatible chains utilise the same language, thus removing another point of friction that makes it more difficult for non-EVM chains to onboarding developers. At Impossible, we see this as one of the main factors in a chain’s success. Developers are the cornerstone of any chain, without them innovation is stifled and development is halted, which then leads to a reduction in the number of users who would utilise your chain.

In addition, the buzz surrounding Aurora and its ecosystem players is likely to continue, with continuous introductions of various catalysts looking to help further the growth of DeFi protocols on Aurora. One example of this would be the implementation of Near’s new stablecoin, USN. USN is a decentralized stablecoin similar to TerraUSD (UST) and Frax Finance (FRAX), which are soft-pegged to the US dollar but don’t hold dollar cash reserves, with USN being able to mint by depositing NEAR as collateral. The introduction of USN into Near and Aurora’s ecosystem is likely to help further bootstrap both liquidity and growth for DeFi protocols as stablecoin usage has and always will be a key aspect of DeFi. To put into perspective as to how big the stablecoin market actually is, the market capitalization of stablecoins within the space is currently at $186 billion, and accounts for the majority of trades occurring within the cryptocurrency ecosystem. With USN, especially during the current market conditions, stablecoins are seen as a way for users to reduce exposure to highly volatile assets, most of the volume would typically go to centralised stablecoins such as USDC and USDT. The main concerns here are mainly due to the centralization of these tokens and the potential for blacklisting and/or censorship of users. As such, there has been a steady rise in decentralized stablecoins that have been trying to combat this issue and provide ways in which an over-reliance on off-chain collateral is minimised. Therefore, having USN as a product native to Aurora and Near can create an environment similar to UST and Luna, leading to eventual mass usage and adoption of USN.

As Aurora continues to expand, money markets within Aurora are certain to play a crucial role in contributing towards the growth of its ecosystem. With any new chain, the importance of a strong money market is crucial to the success of any chain. It enables a variety of different ways in which capital can be utilised and deployed. With bridge support from both non-EVM and EVM chains via the native Rainbow Bridge, Aurigami is aiming to help accelerate and play a crucial role within this, with Aurigami now offering core money market services such as deposits and collateralized lending for the 8 largest assets within the Aurora ecosystem.

Project Overview
Introducing Aurigami, a decentralised, non-custodial liquidity protocol currently native on Aurora. Since inception, Aurigami’s main objective has always been to serve as a keystone protocol of Aurora, aiming to help complement both existing and emerging protocols within the space in order to help nurture and accelerate the growth of DeFi within the ecosystem.

Aurigami can be seen as one of the main money markets that has established the core foundation of Aurora’s financial economy and its products, through spearheading the growth of the Aurora ecosystem. With each ecosystem often having its very own native lending market, the team behind Aurigami aims to continue building the foundation for a thriving DeFi ecosystem on Aurora, similar to how BenQi is to Avalanche and Solend is to Solana. This can already be seen within Aurigami’s contributions to various solutions to improve scalability within Aurora, by providing solutions that helped increase gas consumption efficiency on Aurora by twofold, along with being able to attract external liquidity to Aurora by providing a safe and secure platform for users to earn interest, as well as lend and borrow through the use of their digital assets.

Aurigami’s ecosystem revolves around depositors and borrowers, with Aurigami providing the ability and opportunity for depositors to provide liquidity to the protocol in order to earn yield on a passive income, whilst borrowers are able to gain access to liquid funds through the option to borrow in an over-collateralised fashion.

Moreover, farming rewards have been designed in such a way that it’s able to create a far more sustainable incentive mechanism and as a result, a more organic and healthy price discovery. By improving upon DeFi Kingdom’s Garden Model, Aurigami will be utilising a two-token model that essentially enables users to farm locked-PLY through PULP. By having such a model, both the project and the users are able to align long term interests, leading into the sustainability aspect that has been represented with their token design.

The deployment of Aurigami has been a massive success thus far, with Aurigami being able to attract over $500 million in TVL and more than $890 million in liquidity since inception. Aurigami has been able to position themselves as not only one of the main money markets on Aurora, but as a one-stop gateway into Aurora. With additional upcoming features such as a built-in bridge and gas faucet to provide a one-stop solution to ease onboarding and reduce barriers to entry into Aurora, all within Aurigami itself. This is significant in and of itself due to the fact that many users still experience friction when it comes to entering into a new chain. As Aurora continues to gain more traction, Aurigami aims to play a central role in advancing the ecosystem’s growth by smoothening and improving the network experience of its users.

Project Highlights

• Partners and Investors include Dragonfly Capital, Polychain Capital, Mechanism Capital, Jump Crypto, Coinbase Ventures, Alameda Research, QCP Capital, Amber, Defi Capital, Folius Ventures, Genblock Capital, Lemniscap, and D1 Ventures.
• Angel Investors include Alex Shevchenko (CEO of Aurora), Julian Koh (CEO of Ribbon), Bobby Ong and TM Lee (co-founders of CoinGecko), Matthew Tan (CEO of Etherscan), Alex Svanevik (CEO of Nansen), and Santiago R. Santos.
• Recipient of NEAR Grants

Quick Metrics

• Public Sale Token Price: 1 PLY = 0.005 BUSD
• Total Token Supply: 10,000,000,000 PLY
• Launchpad Public Sale: 600,000USD (split into three pools)*

Investment Thesis

The Papermill
The introduction of Aurigami’s Papermill implements a dual-token model in the form of PLY and PULP. PLY can be seen as the native token of Aurigami, with token utility in the form of governance and rewards whereas PULP is a maturing token, with the ability to transform into PLY after a certain period of time. To break it down, the introduction of the PLY and PULP two-token design would operate similarly to how Jewel and Locked Jewel currently operate and co-exist. PULP is the token that is linearly vested for 49 weeks, with PULP having the ability to convert into a higher amount of PLY as it continues to mature and therefore PULP can be seen as a voucher to exchange for PLY at a future date. If users exchange PULP early on, users will only be able to claim a small percentage of their liquid PLY tokens early on. The downside to this is the remaining PULP then has a longer vesting schedule in comparison to a user who decides to wait to exchange PULP for PLY as they are being rewarded with a shorter vesting schedule, enabling them to claim their share at a nearer date.

The unique system of The Papermill supercharges Aurigami’s token unlock with gamification that is centered around game theory, with PULP essentially enabling and representing liquidity for locked-PLY. Interestingly, the main improvement here is that Locked Jewel didn’t have a liquid market to exchange these tokens whereas PULP will be tradable from the get-go. This allows holders of PLY to gain unfettered flexibility and autonomy in choosing how to best strategize their assets and rewards. The introduction of this reward structure heavily incentivizes users to HODL their PULP rewards, as users will be able to eventually transform their PULP into PLY in a 1:1 ratio on the 49th week. On the other hand, paperhands will still be able to gain access to liquid funds by selling off their PULP in the early days, at the expense of the opportunity to gain further PLY as PULP continues to mature. In addition, PULP will likely be trading at a heavy discount to PLY due to its unlock model, ensuring that hodl-ing PULP for PLY will enable users to gain as much PLY as possible. Thus highlighting a further improvement to the ve model as it allows users to immediately sell their locked tokens, whereas the ve model has to force users to hold their tokens. There are merits to this but providing greater agency to users even with their locked tokens will remove the issue of mass dumping exhibited when big unlocks happen and allow more long term users the chance to accumulate discounted tokens.

Equality between VCs and the Public
Furthermore, with their seed round being the same valuation as their public valuation, it provides Aurigami’s public community the rare opportunity to participate alongside VCs. It ensures that both parties have an extremely strong alignment of incentives to guarantee that the project does well in the long-run. With public sale receiving all tokens on TGE, coupled with the vesting schedules implemented within private rounds, there isn’t a fear of VCs dumping during certain unlocks, which is extremely important as it gives users a lot more confidence to hold the token. It also provides the community with the same upside that investors will have, protecting the user and ensuring that early users are rewarded. Currently in the market, this typically doesn’t happen as valuations get more inflated day-by-day, causing steep differences between investors and the public, when it could be argued that the community is maybe more important especially in the context of community building. Leaning on this idea, the team has thoroughly thought about the game theoretical aspects of their token, with regards to the entire design, not just what occurs once tokens are public.

Aurigami’s tokenomics is optimised for a gradual, smooth release of circulating PLY, aiming to achieve long-term sustainability and healthy price discovery as more PLY is slowly released into circulation. The implementation of sustainable tokenomics in terms of PLY’s release schedule coupled with the ability to provide similar incentive alignment ensures that Aurigami is able create a scenario where long-term holding is rewarded, ensuring that basic tokenomics and price action do not ruin the ability for Aurigami to continue to innovate and progress as a project but rather work in tandem, propelling the token forward.

Future Roadmap

For the full list of future products and services by Aurigami: https://medium.com/aurigami/aurigami-our-future-8c5279f08caa

Team
Aurigami is led by Lucas Huang, with extensive experience within the cryptocurrency space, through previous leadership roles within imToken and Kyber Network. Alongside Lucas is the co-founder EY Tan, previously the Head of Digital Finance at a public listed Fintech company spearheading various blockchain initiatives. Aurigami’s team is made up of 8 members all from diverse backgrounds who are united by their passion for DeFi, with Aurigami’s developer team consisting of multiple Math and Informatic Olympiad winners. This provides Aurigami with a best of both worlds scenario, by being able to benefit from Lucas’ vast experience within the DeFi space and what it needs, along with the ability to continuously innovate and build through the strength of Aurigami’s developer team.

PLY Token Metrics

• Total Token Supply: 10,000,000,000 PLY
• Launchpad Public Sale: 550,000USD (split into three pools)*
  - Standard pool: 250,000
  - Unlimited pool: 250,000
  - Whitelist allocation: 50,000
• Token distribution: 100% distributed on day 1, airdropped directly to your Aurora wallet.
• Listing Price: USD $0.005

Risk Evaluation
Aurigami’s main risk as a money market would be smart contract risks, as Aurigami will be interacting with a number of smart contracts, all of which impose risks to users of Aurigami. This can be both known and unknown risks that could result in the failure or vulnerability of Aurigami’s smart contracts which could result in assets being locked or lost forever. However, Aurigami has ensured that smart contract risks are being mitigated as much as possible by engaging 3 different auditors for Aurigami’s smart contracts, through Watchpug and 2 anonymous whitehats. Finally, liquidation risks for assets that are deposited or borrowed on the protocol could fluctuate in value due to the systemic risks of the issuing platforms or market volatility, including the loss of peg of certain pegged assets.

About Aurigami
Aurigami is a decentralized, non-custodial money market on Aurora. The team has developed the most gas efficient lending market on Aurora through contract optimisation and deploying a proprietary liquidation engine. Aurigami now offers core money market services such as deposit and collateralized lending for 8 largest assets in the Aurora ecosystem.
Website | Whitepaper | Medium | Twitter | Telegram | Discord

About Impossible Finance
Impossible Finance is a multi-chain incubator, launchpad, and swap platform led by Ex-Binance & DeFi veterans. It offers a robust product-first ecosystem that supports top-tier blockchain projects to targeted user audiences. With extensive support from key leaders in the crypto industry, Impossible Finance simplifies DeFi for users to enjoy fairer investing, cheaper trading and better yields.
Website | Whitepaper | Medium | Twitter | Telegram

Impossible Tokens
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IF token is the core governance and fee accrual for the swap and other non-launchpad products within the Impossible family.

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• Notes: DISCLAIMERS, TERMS, and RISKS
• Risk Warning: Trading and/or generally investing in any cryptocurrency involve significant risks and can result in the complete loss of your capital. You should not invest more than you can afford to lose and you should ensure that you fully understand the risks involved. Before investing, please consider your level of experience, objectives, and risk tolerance, and seek independent financial and legal advice if necessary. It is your responsibility to ascertain whether you are permitted to use the services of Impossible Finance based on the legal and regulatory requirements of your country of residence and/or applicable jurisdiction(s)