The DeFi wave has hit the EOS community with a lot of force, and we want to shed some light on what’s in it for you with all of these applications. Every now and then, we will take a deep dive into one of the DeFi apps listed on Wombat to give you a detailed view of how you can earn there. This time, we’re discussing Defibox.
Keep in mind that this post shall not be taken as financial advice and serves introductory and informative purposes only. Before making a final decision, please do your own research.
What is Defibox?
If you’ve read our post on Defis.Network, many aspects of Defibox will immediately sound familiar to you. However, it’s the nuances that make this hub stand out, and we will make sure to cover all of the essentials below.
Defibox offers two main products: USN and Swap.
USN is a stablecoin that you can mint by staking EOS. Each USN is supposed to be roughly valued at 1 USD. With a circulating supply of over 3m USN it’s currently the second largest EOS-based stablecoin according to bloks.io.
Swap is a decentralized exchange/automated market maker (AMM — just like Defis.Network’s Swap product) and it’s currently the largest AMM in the EOS space in terms of both value locked (TVL) and transaction volume.
These two products are also seamlessly integrated into Newdex. If you go to “Exchange” in your Wombat wallet, you’ll see a “Swap” item in the bottom navigation, which directly brings you to the Defibox Swap product.
Now, let’s have a more in-depth look at the two.
On the USN product, you can stake your EOS to mint USN. The USN tokens are stable and can be used to get out of the volatility that is usually part of the deal when handling cryptocurrencies like EOS. You can only get your EOS back once you repay the respective amount of USN, plus some interest, to the smart contract.
To mint some USN, head over to the USN section of Defibox and you’ll see a screen like this:
When staking, you can also check how stable the current EOS collateral situation is (the “Average staking rate”) and how much interest you need to pay when repaying your USN loan.
When you go to “Generate USN”, you’ll be taken through a relatively simple process of staking EOS as collateral to get more EOS. The most important parameter here is your staking ratio, meaning how much of the value (in USD) you want to lock in EOS as compared to the amount of USN you’re getting. A higher percentage is always less risky, but will also give you fewer USN that you can work with.
Swap allows you to swap one token into another at a predetermined rate. You can also supply liquidity to any of the token pair pools to receive rewards in the form of swap fees and extra LP tokens — BOX. These tokens are also awarded for swapping. The Defibox interface is pretty convenient and provides you with a lot of information about your earning potential and the activity on individual liquidity pools.
You can also set up your own liquidity pool to provide an exchange opportunity for tokens that are new or unknown to most people.
One of the coolest features of Defibox Swap is the multi-path swap — even if there is no liquidity pool set up for a given token pair, Defibox might still offer this swap through a chain of other swaps between other tokens. On top of that, it will always offer you the swap chain with the most favorable swap rate even if the direct pair is also available.
How you can earn with Defibox
When you provide liquidity to a pool on Defibox, you receive pool tokens (LP tokens). These tokens represent your share of the total liquidity in the pool. For example, if there are 1 million LP tokens of a given pool in total, and you hold 10000 of them, your share of the liquidity pool is 1%, no matter how much of each asset is in the pool.
Why is this important?
This is important for two reasons:
All fees accrued for this liquidity pool remain in the pool until they get withdrawn. That way, liquidity pools tend to grow if there’s a lot of trading activity on them, even without anyone putting in additional tokens
You might incur a profit or loss on top of the fees that you’re making when the price moves in one or another direction
If you want more in-depth information about these losses, check out our piece on impermanent loss.
Defibox will reward you for providing liquidity on certain pools with BOX tokens. Make sure to check the current list by tapping on the “Swap mining weight” line on the Swap screen.
Just like Defis.Network, Defibox offers a landscape of staking applications that let you farm additional tokens for providing liquidity. In most cases, you will have to stake your LP tokens to receive rewards, like on Coral.network. If you stake your LP tokens, it means that you’re kind of renting out the rights to withdraw your liquidity to the platform. However, you can typically reclaim your LP tokens at any time if you want to get your liquidity back.
BOX tokens are the governance tokens of Defibox. If you stake them in the BOX DAO (the decentralized autonomous organization of Defibox), you’ll have a say in future decisions that impact where the development of Defibox is headed.
On top of your voting rights, you’ll receive a portion of the fees accrued from trading and USN interest as a reward for staking your BOX tokens into BOX DAO.
You might wonder how you can earn something by staking your EOS to mint USN. There are no direct earning mechanisms implemented into the USN part of Defibox, so you would have to rely e.g. on providing liquidity for USN-based pools or stake your USN to other yield farms outside of the Defibox ecosystem.
Wrapping it up
Defibox offers one of the best experiences in the overall DeFi space (including Ethereum-based DeFi) and has a wide range of features which keep providing new opportunities on an ongoing basis. Even if actually providing liquidity or minting USN may feel too complex or risky for you, make sure you at least try out swapping some tokens for one another, and also check the multi-path swaps.
There are, however, residual risks, both technical and financial, so make sure to do your own research and only invest when you feel comfortable with these risks.