Final month, we introduced our investment into AlgoFi alongside USV and Pillar. The staff has been shifting at lightning pace. They launched AlgoFi — a capital markets suite together with Algorand’s first cash market and algorithmic stablecoin — on December 17th. At present they introduced a $3M liquidity mining program alongside the Algorand Foundation. In just some weeks over the vacation interval — with no rewards — AlgoFi has grown to just under $30M TVL.
The protocol started with a guarded launch. Liquidity caps had been rapidly reached. Heading into the brand new yr, the staff is now making ready to raise the gates and launch the protocol into the wild. Representing Algorand’s first capital markets protocol, AlgoFi’s rewards program is bold. It’s a sizable program for an ecosystem this early. It is usually denominated in ALGO (2M) and doesn’t embody AlgoFi’s native token rewards.
The staff has publicly said that the latter will go dwell after governance contracts are deployed to Mainnet.
That is occurring by means of the Algorand Basis’s Viridis Fund, a $300M warchest devoted to DeFi. Viridis was first introduced final summer time, with the Basis not too long ago following up with Section II of this system, Aeneas. Aeneas is targeted on bootstrapping the “three pillars” of DeFi: a sturdy bridge, AMM and capital markets protocol.
As now we have seen in different ecosystems, these first few applications are crucial. They usually knock down the dominos that finally translate into billions in TVL. Generally they’re a sluggish burn, different instances TVL rockets in a single day. As we noticed with the launch of Benqi on Avalanche earlier this yr, a cash market launch is arguably an important catalyst for a nascent DeFi ecosystem.
As soon as there’s an environment friendly marketplace for leverage, new worlds start to open up. With out borrow energy, the degens are tied to a leash. Who’re the degens? These are an important individuals in DeFi. The early energy customers who in the end outline any protocol. They’re mercenary and risk-seeking, apes which can be all the time looking for methods to juice yield. Their methods are intelligent however dangerous. They collateralize coin A to borrow coin B, deploy into the most recent farm for outlandish APYs, flip out of the farm as soon as a brand new (and probably fleeting) alternative arises, solely to lose all of it when a sudden market cascade threatens their collateralization ratios.
Our thesis is that Algorand is the assembly floor for the “degens” and the fits. In contrast to every other L1, Algorand is uniquely positioned for the convergence of DeFi and TradFi – principally as a result of the know-how can genuinely scale with out giving up decentralization.
However make no mistake: the creativity of the speculating plenty will come first. The apes are nonetheless the unsung heroes of any ecosystem. In the event that they interact, they’ll aggressively develop Algorand TVL. They’ll discover the bugs. They’ll stress-test the system. It’s their blood and tears that may get Algorand DeFi to some extent that it’s giant sufficient for outdated world capital to start deploying into DeFi. When that rain comes, it would pour; however till then it’s the crypto-native piece that may outline Algorand’s success.
The AlgoFi staff is main the cost. They’re very aggressive builders — on Twitter Areas at some point and transport a brand new characteristic (or whole product: $STBL) the subsequent. Earlier than crypto, the founders had been buying and selling rates of interest at Citadel. In some methods, they’re the “archetypal” Algorand staff: roots within the outdated world, prepared to get their arms soiled in DeFi and a imaginative and prescient in thoughts greater than simply the farmers or simply the fits.
