Nereus Protocol Updates — New Markets and WXT Incentive Reallocation

The Nereus Protocol has become one of the most exciting DeFi lending Protocols on the Avalanche blockchain. The recent release of plans for the NXUSD Stablecoin, paired with Nereus reaching $50 Million in TVL have clearly demonstrated the Nereus teams’ ambition and commitment to developing a market-leading & customer-oriented Decentralised Finance Protocol. The next step towards this goal is updating Nereus’s dynamic APR asset markets, which will reinforce the participant behavioural trends observed over the prior 6 weeks and ensure that Nereus remains competitive within the Avalanche DeFi Ecosystem.

New Asset Markets

Nereus will introduce Three new Token markets within its dynamic APR product offering (Nereus Phase 1). These tokens have been specifically selected to enhance participant trends within the Nereus Protocol, providing community members with lending & borrowing markets that fit the demands of the Nereus community. These additions paired with NXUSD Stablecoin will differentiate Nereus from the crowd. The New Token Markets are:

1. JOE — JOE is the native token of the Trader Joe DEX, which currently hosts the USDC.E/WXT liquidity pool. Trader Joe is the leading DEX on the Avalanche Blockchain and provides multifaceted services which include swapping, staking, yield farming, borrowing, lending, and leverage trading. The JOE token can be utilized within many of these activities as collateral. It is a multifunctional token that, aside from the classic governance & revenue sharing properties, allows users to generate passive income from multiple avenues within the Trader JOE DEX. For instance, the Rocket Joe program is the decentralized equivalent of Initial Exchange Offerings (IEOs) that lets JOE holders participate in early DEX listings. This makes JOE an attractive token to provide lending & borrowing services upon as traders can deposit (lend) JOE within Nereus to free up capital whilst maintaining upside exposure to JOE. Alternatively, traders could leverage JOE holdings by borrowing JOE Tokens from the Nereus Protocol and employing the JOE tokens within other DeFi markets.
2. CRV — CRV is the governance token of the Curve Protocol. Curve is the largest multichain DeFi protocol with a current TVL of $20.67 Billion which provides AMM swapping of Stablecoin & wrapped assets with extremely low slippage, impermanent loss, and fees. CRV tokens are only earned via staking within Curve LP’s and can be locked to accrue voting power within the Curve Protocol. veCRV (vote locked CRV) provides holders with the ability to suggest & vote on any governance proposals within Curve, which can include increasing incentives emitted to specific liquidity pools. This fact is very important, as in prior months some of the leading DeFi protocols have been competing for CRV token deposits. These competitors lock & utilize CRVs to vote on increasing the Incentives on their own LP liquidity (the Curve Wars). CRV is an attractive token to provide lending & borrowing services upon as traders can deposit(lend) CRV within Nereus to free up capital whilst maintaining upside exposure (with redeemability) to CRV. Alternatively, traders could leverage CRV holdings by borrowing CRV Tokens from the Nereus Protocol and employing the CRV tokens within Curve to gain veCRV.
3. UST — UST is the Terra Protocols Native Stablecoin. It is the fastest-growing Seigniorage shares based Algorithmic Stablecoin of 2022 with a current market cap of $17.8 Billion. UST’s growth is attributable to the anchor Protocol on the Terra Blockchain, which provides UST stakers with 16–20% APY. As covered in our prior medium article, UST maintains its peg via frequently rebalancing the system assets (LUNA) and liabilities (UST) to parity with the US Dollar, with LUNA acting as a volatility absorber. UST is an attractive token to provide lending & borrowing services as Nereus’s current Stablecoin markets are operating at very high utilization rates, meaning that a high proportion of the deposited Stablecoin assets within Nereus are being borrowed. This fact can also be seen within the current high deposit/lending & borrowing rates on all Stablecoin markets within Nereus, as the protocols interest rate mechanisms are designed to incentivize deposits (lending) and disincentivize borrowing when specific market utilization is high. Introducing UST alongside reallocating WXT incentives should alleviate the current issues Nereus is experiencing with high utilization rates on Stablecoins by offering another market to the Stablecoin traders within the Nereus Community.

WXT Incentive Reallocation

As mentioned in Nereus’s prior medium articles, the initial Nereus dynamic APR product offering will continually adapt to the consumer activity to safeguard the protocol’s health and its long-term sustainability. As such, the Nereus Team has restructured the WXT incentive allocations to steer participant behaviour within the protocol, this will ensure that incentives are allocated to participants whose behaviours are deemed positive and constructive for the Nereus Protocol & its community.

Firstly, the allocation of WXT incentives to Stablecoin markets has been adapted to favour Stablecoin deposits over Stablecoin borrowing. As aforementioned, this action was deemed necessary as the Stablecoin markets within Nereus have been operating at very high utilization rates, which is suboptimal for both Stablecoin borrowers and the overall health of the Protocol. The Nereus team expects that the changes to the Stablecoins Allocation points from 100–100 to 150–50 that favour Lending, paired with the introduction of an additional Stablecoin market (UST), can correct the current high Stablecoin utilization rates within Nereus.

Secondly, the allocation of WXT incentives to the AVAX market will be reduced from 325–325 to 275–275. The Nereus team deems this necessary as the AVAX markets within the protocol have been operating at an efficient interest rate equilibrium. The AVAX markets within Nereus shall still offer strong WXT rewards and the deducted rewards will be re-allocated to the new asset markets: JOE & CRV. This action is in the best interest of the entire Nereus participant base, as the current AVAX markets are being excessively incentivized to the detriment of other Nereus participants.

Furthermore, 12.5% of the WXT emissions will now be allocated to the NXUSD & WXT Liquidity pools, to incentivise staking of the LP tokens of both WXT & NXUSD liquidity pools. The Nereus team has deemed this necessary as it will ensure that Primary liquidity pools of Nereus are sufficiently financed to enable participants to exchange NXUSD or WXT without incurring significant slippage. This will half the current WXT allocation of rewards to the current USDC.e/WXT LP staking within Nereus and will best serve the entire Nereus community by equally allocating WXT rewards to all Liquidity providers within Nereus.

Finally, the Nereus team is eager to hear the community’s feedback regarding the above changes to the Nereus protocol. In the coming weeks, the team will release the third article outlining the final elements of NXUSD, so stay tuned.