After yesterday’s smooth and successful launch of the DeFiChain DEX, it is time to follow up with a synopsis of the first 24 hours after its genesis, as well as with a short operational handbook of the DeFiChain DEX.
If you haven’t downloaded the desktop DeFiChain App yet, then it is about time to do so, otherwise you should see exactly the same screen as shown below, after you have launched the app.
The sleek interface is basically divided into two parts – on the left side you can find all DeFiChain related dApps, while tasks related to each dApp are shown on the right side.
WalletsThe first icon, “Wallets”, basically handles your transactions: it enables you to send out your DFI tokens as well as to create as many receiving wallet addresses as you want. You can also label these addresses and use them for different purposes – i.e. use one address to receive your pay, while another one to simply receive your staked coins.
LiquidityThe second icon, “Liquidity”, is an integral part of the DEX and facilitates the exchange of coins. For providing liquidity to the protocol you get paid DFI tokens as rewards in exchange. If you want to supply liquidity, then you just have to click on the "+" or "-" sign to add, respectively to remove liquidity (see picture below).
Do note, that you always have to provide the same amount of liquidity to both liquidity pairs. If you would like to invest i.e. 1 BTC, then you also have to provide the same amount of DFI tokens. By clicking onto the "+" you will get forwarded to an interface, where you just have to select which token you would like to add to the liquidity pool and the system then automatically calculates how many DFI tokens you have to provide on top your 1 BTC.
As of writing, there is a 1.4m TVL (total value locked) in all three liquidity pools. That’s undoubtedly an impressive achievement for DeFiChain's first day in operation (currently 15.5m are locked in the 3 pools). Also, do note, that the rewards for providing liquidity are currently purposely capped at 1 DFI / 30 seconds block time. Starting December 7th 2020, for one month, the reward amount will get increased to 100 DFI / 30 seconds block time, drastically increasing the APY. After this promotional month, the liquidity rewards will get capped at 45 DFI / 30 seconds block time.
The cool thing here is, that you don’t have to do anything to claim your rewards – they will automatically and conveniently get credited to your wallet address. Unlike with other DEXs, you also do not have to pay any fees for this process.
The APY, however, is calculated by the amount of USD you provide to the total liquidity of the respective liquidity pool. Let’s assume there is 1m USD in the USDT-DFI pool and you would like to add 1,000 USD to this particular pool. By doing so, you will get issued a so called liquidity token, which represents your share of the total amount of USD in the USDT-DFI-pool. In our case, your token would represent 1/1000 of the total pool size.
Neglecting a potential impermanent loss and commission payments, you would currently get 1/1000 of 1 DFI token (=liquidity reward) automatically credited to your wallet address every 30 seconds. The USD-DFI pool has currently an astonishing 47.2% APY.
Now imagining, how much this current APY level could increase, when the promotional reward month, where a whopping 100 DFI / 30 seconds block time is paid out, kicks in. We may see APY rates well north of 3-400% in the next weeks, making DeFiChain one of the most lucrative liquidity farming places out there.
DEXThe main function of a DEX is to exchange one coin for another in a decentralized way. No KYC-checks, no personal information and no centralized architecture are the backbone of the DeFiChain DEX. You are always in possession of the private keys and should be aware of the duties which come along with that. So far, the DEX allows the exchange of the top three coins in terms of market cap – BTC, ETC and USDT.
Since there are currently only liquidity pools with DFI as second token available, you would have to always go via DFI first in case you want to exchange BTC for ETH. Yet, what would be interesting to see, though, is, how the DEX compares to a CEX like Bittrex in terms of the price of a trading pair and a potential arbitrage opportunity. Let us assume, we would like to exchange 1,000 USDT; how many DFI tokens would we then get on Bittrex (CEX), respectively on DeFiChain DEX? The current order book on the CEX looks like that:
By buying DFI worth 1,000 USDT, we would drive down the price to 0.35794 USD per DFI token; on average we would pay 0.3607 USD per token and would get 2,772.74 tokens for exchanging 1,000 USDT on Bittrex.
On the other hand though, on the DeFiChain DEX, we would get 2,747.28 DFI tokens for exchanging 1,000 USDT. At time of writing, you would currently get roughly 25 DFI tokens (roughly 9 USD) more when you would exchange your 1,000 USD on Bittrex compared to the DEX. This discrepancy may not exist for long though, since arbitrageurs will try to balance it out to earn some money.
To those among you, who are now interested in arbitraging the system, I can say, it would not really work in that example. The reason simply is: by exchanging the 2,772.74 DFI tokens, bought at Bittrex, back into USDT using the DEX would make you worse off than before (see picture below).
Anyways, this was just a snap shot and over time, with more people arbitraging the system, some more opportunities may pop up. Yet ultimately and in theory the price should converge towards an equilibrium price set by all exchanges in the ecosystem.
The last three categories are, especially from a liquidity farming perspective, at least not as important as the first ones. Hence we will cover them just briefly.
TokensBy investing 101 DFI you are able to create your own custom token. You can freely choose a name and ticker symbol for your coin; you have to provide a collateral address to be able to trade it on the DEX.
BlockchainHere you can conveniently check when a new block gets created and furthermore you are also able to directly jump into the block explorer from this interface:
MasternodeBy holding a minimum of 1m DFI tokens you can create a masternode as well. All masternodes and their respective information can be seen under the category “Masternodes”.
