The growth of the decentralized finance (DeFi) ecosystem in 2020 has been explosive, despite DeFi being an almost unknown concept in 2019. According to data from DeFi Pulse, while it took close to two years for DeFi deposits to reach USD 1 Billion in Total Locked Value (TVL) as of Q4 2019, it took less than six months (March to July 2020) for DeFi TVL to spike from ~USD 550 million to ~USD 4 billion (~727% increase). On 14 March 2021, the DeFi TVL saw the all-time-high at USD 45.97 billion (Source: defipulse.com).
A snapshot of Defi industry overall as on 25 March 2021:
The market cap of Proof-of-Stake (PoS) protocols as on 29 March 2021 is USD 450 billion and USD 127.66 billion locked in staking (Source: stakingrewards.com). In August 2020, it was forecasted that the value of staked assets would potentially surpass USD 100 billion in the next three — five years with the increasing adoption of PoS grows, but it was achieved within one year.
In traditional PoS staking, users are locked into contracts for a predetermined amount of time. In some cases, users must wait through an unstaking period before assets are returned to user wallets.
Currently, project token holders are faced with the daily dilemma that the token they hold might not have any yield mechanisms built into it e.g proof of stake rewards, or that the yield is not attractive enough compared to other project tokens, or if they do constant trading instead.
DeFi has successfully incentivized users to create large liquidity pools for DEXs and lending protocols for ERC20 tokens, hence making user experience as smooth as a centralized platform. Muse.Finance extends the same line of thinking into another type of yield generating assets, blockchain rewards provided by Proof of Staking (“PoS”) blockchains. The staking reward is usually a fixed percentage in terms of the number of tokens staked. This creates a stable yield for token holders, and an appreciation opportunity when token price rises.
- By enabling the illiquid staked tokens to be transferable, ensures sufficient token in circulation and efficient price discovery on DEX
- Users can trade the staked tokens to secure their profit on the spot, avoiding the 7–28 days unbounding process (this however is due to on-chain security consideration against long-range attack)
- For users to have other ways of generating financial revenue other than staking reward while receiving staking reward
- Bridge between non-ERC20 chain and ERC20 chain in the beginning, and eventually enable to connect assets to many other chains
- Lending and leverage trading opportunity while staking
As we see a number of PoS blockchains are being more accepted in the market, Ethereum, the second largest PoW blockchain has launched its PoS beacon chain, marking its shift to PoS. Other blockchains such as Polkadot, Oasis, Solana also create constant double digit returns.
Therefore, Muse.Finance is brought here to enable a liquid PoS platform which can integrate erc20 DeFi ecosystem with Ethereum 2.0, starting from Caradano and expanding to Polkadot, Solana, Oasis, Terra, Centrality, etc.
Muse.Finance will link non ERC-20 assets with ERC-20 ecosystem, allowing the owners of staked assets on platforms such as Cosmos, IRISnet, Cardano, etc. to participate in lending, liquidity mining, yield farming which will also benefit staking service providers for generating more revenue lines.
Muse.Finance is planning to issue a liquidity token called mToken (originated by Muse.Finance) to construct a pool with DEX which will allow the users to get the yield generating assets like mATOM, mADA, mIRIS, etc. carrying unit value and able to yield farming with the Muse.Finance platform.
In order to accomplish this, we will build bridges between the Ethereum network and other networks. We will then issue wrapped Token (ERC-20 token) in the Ethereum network to registered Ethereum addresses of users who stake ATOM, ADA, IRIS, etc. in each of the networks.
Let’s take a look at a particular example for Cardano Network. In order to support the conversion from ADA to mADA in the Ethereum Network, we will build a relayer and bridge modules that will handle token deposit/redeem logic (ETH Smart-Contract and Cardano relayer). This allows users to convert from ADA in the Cardano network to mADA in the Ethereum network.
mADA holders will receive a reward proportional to the holding amount of mADA and the holding duration. The reward will be paid in mADA. The system will allow users to redeem mADA at any time with minimum delay.
For the sake of clarity, and as we are to launch this product starting from ADA token, all the information below would use ADA as an example. However, as mentioned, our target is not only ADA but all PoS tokens.