AMA Session of CRE8R DAO & Vader Protocol
Primer: Vader Protocol aspires to offer the core decentralized stablecoin within the Ethereum ecosystem. How will they achieve their goal? In an AMA hosted by CRE8R DAO, Mervyn Chng, the community lead, speaks with CRE8Rs about how they take the best features from existing DeFi protocols to create USDV, the ultimate stablecoin.
Background
Community lead for the Vader Protocol team
Entered the cryptocurrency space in 2017
Over the past few years, he has built a staking service provider called StakeWith.Us
It is a Singapore government-backed staking service provider
Also launched a yield aggregation platform called Unagii
Involved with the Vader Protocol team for the past 18 months
Before Vader Protocol
Community wanted to distribute tokens in a fair way. They came up with the idea of Vether
Vether is a grassroots fair launch protocol where users compete in daily auctions to distribute a token called Vether by burning ETH
“So this [Vether] was the really fair distribution that modelled the way Bitcoin and Ethereum was distributed.”
- Mervyn Chng
Post-Vether
Community realized that a lot of innovative DeFi protocols were not on Ethereum
Team started researching how they could combine all the best elements of DeFi into a single DeFi application
He works closely with the core dev team
Core dev team consists of:
4 experienced Solidity devs
3 Full Stack devs
3 operational team members
Vader Protocol
Why The Name Vader?
Came from the writer of the whitepaper. Vether sounded very similarly to Vader
Meme potential around the name Vader
Vader means Father in dutch
How Does He Introduce Vader To People?
Summarizes it as a combination of Terra stablecoin, Thorchain AMM, and the bond sale mechanism of Olympus Pro
How It Works
Has an asset called VADER, which is similar to LUNA. It serves as the collateral for minting stablecoins
VADER is the variable counterpart to the stable asset USDV
Has a TWAP function that allows accurate pricing of VADER against the US dollar
Has a burn mechanism similar to how LUNA and UST works:
When USDV trades above $1, users are incentivized to burn VADER into USDV, sell it down, and capture the premium
When USDV trades under $1, users are incentivized to buy up USDV, burn it to get $1 worth of VADER
By modulating supply, VADER price increases as the demand for USDV increases
Brings in continuous liquidity pools (CLPs) that have been pioneered by Thorchain. Provides slip-based fees and IL protection
The deeper liquidity pools have a smaller fee
Thinner pools charge a larger fee
CLPs prioritizes LPs to not only earn the maximum fees, but to have IL protection as well
IL protection is paid over a 100 days
All pairs in the AMM are anchored against USDV
During DeFi summer, we have seen LPs who are very mercenary with their capital
Using the Olympus bond sale mechanism enables protocols to own its own liquidity. The protocol conducts regular bond sales to purchase liquidity positions from the market. In return, users get a discounted rate over a vesting period
What Problems Is Vader Trying To Solve?
Trying to build a truly decentralized stablecoin that is censorship resistant
Other algostables on the market have not attempted to build their own AMM, like what Vader Protocol has done
The only algostablecoin that has worked is the LUNA UST stablecoin. However, no one is trying to build it on Ethereum
The Terra blockchain is not censorship resistant as the bridge to Ethereum is mainly run by the company behind Terra
Slip-Based Fees VS Other AMMs
Slip-based fees are inherited from Thorchain’s CLP
Traders pay LPs fees based on the amount of liquidity in the pool:
More fees are paid when the pools are thinner
Less fees are paid when the pools have more depth
Most LPs on Uniswap are not actually earning a lot of fees and yet have to deal with IL
Vader is prioritizing and making LPs first class citizens
Advantages Of USDV Over Other Algorithmic Stablecoins
Compared to UST, USDV will eventually be an uncensorable stablecoin on the Ethereum blockchain
FRAX is slowly decentralizing from a majority USDC-backed model into a more reserve-backed with other kinds of stablecoins
Developing An Ecosystem Around USDV
First priority is to generate liquidity for USDV. The AMM and the Curve 3pool will be the core sources of liquidity for USDV
After establishing deep liquidity pools on top of bond sales, they plan on further driving utility and more sinks for USDV. Already in touch with partners that are planning to use USDV in their distribution models and in the GameFi space
Rationale For Issuing VADER To VETH Holders
Wanted a fair way to distribute tokens and a way to ascribe value to the initial distribution of tokens
Really valued the Proof-of-Work mining model of Bitcoin and Ethereum as the fairest distribution mechanism
Wanted to do something similar. Created Vether where users can burn ETH for VETH. The underlying concept is to transfer value from one asset to another (ETH —> VETH)
“None of these tokens has been distributed for free. Every user has paid a price and transferred the value that they burned from Ethereum into Vether, and from Vether, they are required to burn it into VADER in order to transfer the value over to VADER.”
- Mervyn Chng
Vether has a huge grassroots community rallying around it because it was fairly distributed without any being given to VCs
Team is now focusing on Vader Protocol now that the snapshot for issuing VADER to VETH holders is over
Managing Risks
Smart contract risk is the highest risk factor facing the protocol
Decided to take a phased approach to launching to ensure that each phase works well before the next phase is introduced:
VADER token is launched first to ensure price discovery, price stability, and for a community to build around the token
Deploy TWAP function before allowing users to burn VADER to USDV
Launch Curve 3pool to provide sufficient liquidity before the AMM launches
At the AMM launch, the team will be very selective about the assets selected
Gone through many design iterations and completed 2 audits with CodeArena. Will be going for another audit with CodeArena after remediating all the fixes that have been identified
Will be implementing guarded launches (e.g. 24 hour caps where the protocol can mint 10 mil USDV and slowly raising the caps as we move along)
What Stage Is The Project Development Currently In?
Already deployed the VADER and xVADER token
Intend to bolster the liquidity on Uniswap
Plan to roll out the bonds this week. Users will be able to purchase bonds for the VADER-ETH pair on Uniswap. The team will be controlling the release of VADER before USDV launches and the AMM goes live to prevent the dilution of VADER
Once audits are completed in 1-2 weeks, they should be able to deploy USDV and the necessary 3pool
A few more weeks after that, the team will deploy the AMM
Do They Plan On Going Multichain?
Observed that we are in for a multichain future
Deployed on Ethereum because they need the Curve 3pool, factory contract, and access to capital to build protocol liquidity
Once they have sufficient protocol liquidity, they can proceed to build cross-chain liquidity with EVM compatible chains
Avalanche, Fantom, and Polygon has the most user traction. Will be exploring them
What Challenges Has The Team Faced And How Did They Resolve Them?
As they are a fair launch protocol, they do not have large VCs backing them. Hence, it is difficult to get the word out about them
This is the reason they reached out to CRE8R DAO to create educational material for them and to market their protocol
Their 5-10 Year Plan
Envisions a whole ecosystem of USDV-based projects to be built out
Wants to have USDV integrated with as many different protocols as possible
Wants USDV to be the core decentralized stablecoin within the Ethereum ecosystem
Any Upcoming Events That Users Should Be Aware Of
Their upcoming bond sale which they are going to announce within the next 24 hours (as at the publishing of this summary, Vader Protocol has already launched their bonds. The first tranche sold out within 30 mins)
After that, they will be working on the launch of USDV with the Curve 3pool
Stablecoin holders will be able to join the 3pool with USDC/USDT/DAI and earn VADER
Once they have sufficient liquidity, they will start with cross-chain deployments
Where Can Listeners Find More Information About Vader Protocol?
Check out their linktree
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