Thena Finance and Solidly Forks Yield Summary
This article will delve into Thena, a native liquidity layer and automated market maker (AMM) built on the Binance Smart Chain (BNB) and forked from the Solidity protocol created by Andre Cronje. According to the Defi Llama data, Thena is currently ranked as the second-largest Solidity project with a total value locked (TVL) of $84 million, following Velodrome. While we briefly introduced Thena in our previous article titled 'Velodrome Finance and Other Solidity Forks', this time we will take a closer look at the protocol's key features.
Thena's underlying architecture is based on Solidity, but the platform brings several improvements to the base architecture. As a native liquidity layer and AMM on the BNB chain, Thena is designed to enhance the efficiency and security of decentralized financial transactions. In this article, we will discuss in detail the specific improvements that Thena has implemented to achieve these goals.
The Strategy in this Article
The strategy is providing liquidity into the stablecoin pair MAI-FRAX.
Current yield: 16.79% (25 Apr 2023)
Our risk assessment: Medium
Our yield projection based on this week's Benchmark Yield: 14.5%
The Concept and How the Protocol Works
Overview
Thena is a native liquidity layer and automated market maker (AMM) on the Binance Smart Chain (BNB) that offers a range of features that set it apart from other Solidity-based forks. One of the key upgrades that Thena has undergone is the introduction of enhanced gauges and the integration of FUSION pools.
This upgrade introduces the concept of Concentrated Liquidity (CL) and mitigates Impermanent Loss (IL). CL enables liquidity providers (LPs) to focus their funds within a specific price range, providing deeper liquidity and potentially higher trading fee earnings. IL, on the other hand, refers to the temporary decrease in LPs' asset value due to price fluctuations, but trading fees can offset this loss, ensuring profitability despite the risk.
Thena's unique FUSION innovation, developed in collaboration with Gamma Strategies and Algebra, addresses CL challenges by simplifying complexity, minimizing impermanent loss risk, adapting to market volatility, and optimizing dynamic fees. FUSION offers six LP strategies catering to different assets and user preferences, namely wide, narrow, manual, pegged price, correlated, and stable. This strategic collaboration with Three Sigma positions Thena as a market leader on the BNB Chain.
FUSION's advantages include a modular design, cost-efficiency for protocols and traders, a user-friendly platform, market-making capabilities, and dynamic fees. Thena pioneers Solidity-based automated CL with an exclusive collaboration with Gamma Strategies on the BNB Chain. Users with liquidity positions must migrate to continue earning $THE, either by transitioning to the same gauge type or a FUSION gauge, using Thena's Migration UI for guidance.
Type of Pools
There are three types of pools in Thena, stable pools, V1 pools, and Fusion pools.
Fusion Pools
These pools consist only of FUSION pools, namely V3_Narrow and V3_Wide.
Stable Pools
These pools combine both Solidly and FUSION stable pools, namely Stable and GAMMA_STABLE. Stable is a UniV2-style pool with a full range, while GAMMA_STABLE features FUSION support, concentrated liquidity, and automated LP management. This ensures all stablecoins are found in the same category.
V1 Pools
These pools only include Solidly pools with volatile tokens, which was previously known as the "Volatile" category but has now been renamed to "V1."
Fees, Incentives and Distribution
Thena's trading fees are dynamic and adjustable for FUSION and other manual range pools. However, the trading fees for V1 stable pool and V1 variable pool types are fixed at 0.01% and 0.02% respectively. To earn $THE tokens, liquidity providers (LPs) must provide liquidity and stake their LP tokens, and there are no deposit or withdrawal fees. For both FUSION and V1 pools, tokens must be added in a 50:50 ratio, while for stable pools, the UI suggests the correct ratio, which can differ from 50:50.
LPs can also earn trading fees without staking their LP tokens, but in this case, they will not earn $THE tokens, but instead will earn all of the trading fees for their proportionate share of the pool. There are no deposit or withdrawal fees, and LPs can remove liquidity at any time. The percentage of trading fees earned by LPs varies by pool type. For v1 pools, LPs earn 100% of the fees, for manual range pools, LPs earn 97% of the fees, and for FUSION pools, LPs do not earn anything if their positions are not staked.
MAI Finance
MAI is a decentralized stablecoin that natively operates on the Polygon network, which was launched by MAI Finance, also known as QiDao Protocol, in May 2021. The stablecoin is overcollateralized like DAI and is minted by depositing static tokens such as Ether and CRV tokens, as well as interest-bearing tokens like Beefy, Yearn, and Aave receipt tokens, as collateral without paying any interest back. Users benefit from yield earned on their collateral while deposited in the vaults of MAI Finance. At present, MAI stablecoin has a market capitalization of $58 million, and it is tradeable in 18 blockchains. Despite its relatively small size, the price of MAI has remained stable around $1 over the past two years, indicating a strong track record of stability.
FRAX Finance
FRAX is a fractional-algorithmic stablecoin that aims to maintain a 1-to-1 peg to the US Dollar. It was launched in December 2020 by the Frax Finance protocol, which utilizes a two-token system consisting of the stablecoin FRAX and a governance token called Frax Share. The fractional model allows FRAX to be partially backed by collateral and partially stabilized algorithmically, using a mechanism that burns and redeems Frax Shares. FRAX stablecoin can only be minted by depositing USDC and Frax Share collateral into the smart contract, and the collateralization ratio depends on the market price of FRAX. If the price of FRAX is above $1, the protocol will decrease the collateral ratio to mint more FRAX, and if it is below $1, the protocol will increase the collateral ratio to maintain the peg. The protocol incentivizes arbitrageurs to buy and redeem FRAX to restore its target price, and deep liquidity pools such as FRAX-3CRV on Curve Finance further enhance its stability. Currently, FRAX has a market capitalization of approximately $1 billion and is partially backed by 94.45% with over half coming from Curve AMO. Similar to MAI, the price of FRAX has remained stable at around $1 over the past two years, indicating its reliability and trustworthiness as an asset.
This article exclusively tackles Thena and does not encompass any comprehensive information regarding FRAX Finance and MAI Finance. For more information about the FRAX and MAI stablecoins, we recommend reading both of the protocols' documentations:
https://docs.mai.finance/introduction-1
https://docs.frax.finance/
Other Notable Solidly Forks
In addition to Thena and other forks mentioned in a previous article, there are additional Solidly forks. However, these forks are relatively new and smaller than Thena, so caution should be exercised before providing liquidity. None of these forks have any affiliation with Solidly or Andre Cronje, and all of them have at least $10 million in total value locked (TVL).
RAMSES
RAMSES is a decentralized exchange (DEX) that employs the ve(3,3) mechanism, which effectively adapts Andre Cronje's original Solidity concept. RAMSES has a renewed focus on the core principles of Community, Decentralization, and Functionality, which were once fundamental to Solidity but have since been disregarded. RAMSES is currently the most extensive Solidity fork on the Arbitrum platform, boasting a Total Value Locked (TVL) of $44 million. RAMSES has several stablecoin pools that exhibit an APR of over 10%.
Equilibre
Equilibre is an Automated Market Maker (AMM) that operates on the Kava EVM chain and is built on the design of Velodrome. The primary objective of Equilibre is to offer substantial liquidity and reduced swapping fees. As of now, the Total Value Locked (TVL) of Equilibre is $21 million.
Velocore
Velocore is a fork of Solidity that operates as a low-slippage decentralized exchange (DEX) in the zkSync era. The platform provides features such as swapping, farming, lending, launchpad, and vaults. Currently, Velocore has a Total Value Locked (TVL) of $17 million.
Velocimeter V2
Velocimeter V2 is a Solidly fork that operates on the Canto chain. Its twin-AMM design integrates StableSwap pools with Standard 'kxy' liquidity pools. All the trading fees are directed to Vote-Escrowers of the emission token $FLOW, which must be Locked to receive triple 'Bribes' from candidate pools through Trade Fee, Internal Bribes, and External Bribes. The current TVL of the protocol is $15 million.
SoliSnek Finance
Solisnek is a DEX and AMM that runs on the Avalanche blockchain. It is built upon the original Solidly vision and aims to provide innovative features to users. Solisnek has a TVL of $13 million at present.
Hermes Protocol
Hermes is a DEX based on Solidly's design and is the first DEX built on the Metis Layer 2 chain. The protocol allows for low-cost and near 0 slippage trades on uncorrelated or tightly correlated assets. Unlike other protocols that incentivize liquidity, Hermes incentivizes fees. Currently, the TVL of Hermes is $12 million.
You can find the complete list of Solidly forks at https://defillama.com/forks/Solidly
Summary of Solidly Forks Yield (27 Apr 2023)
Keep reading with a 7-day free trial
Subscribe to Serenity Research to keep reading this post and get 7 days of free access to the full post archives.