Open Finance inevitably promises to port traditional finance to the blockchain. As it does that, the middle man, that is the expensive custodian, is eliminated. It will be interesting no doubt. And it has been interesting.
According to Defi Pulse, different open finance dApps hold as collateral over $6 billion in ETH. This is in Ethereum alone.
There are other emerging DeFi dApps in Tron—with the highlight being the recent listing of JUST stablecoin, and there are other interesting developments in periphery networks like the IOST.
Decentralization and Liquidity in DeFi
Underpinning their objectives is the community’s strong desire to create opportunities for coin and token holders to either diversify their income streams through lending and borrowing to build on more opportunities, or to build liquidity for emerging but high potential tokens.
For this to be smoothly executed, there must be a reliable platform for exchange. That is, coin holders, say ETH, can swap their tokens for others. In this case, it can be for a DEX token say Bancor or others. Over and above everything, this execution must be smooth and there must be modes through which there is liquidity for the second pair.
In DeFi, such exchanges are done via a decentralized exchange (DEX). Since the latter function without middlemen and the owner retains full control of their funds, there is security. However, the only weakness DEXes have is their liquidity which lags CEXes which are honey pots but scalable than the former which relies on the scalability of the underlying blockchain.
Most DEXes are active in Ethereum. Second, they employ different auction styles to strike a balance between incentivizing liquidity providers and to ensure transactions are executed fast without wide slippages.
Uniswap is a prime example. While it has an attractive automatic market-making (AMM) that has been a source of inspiration, there are upcoming swapping platforms that seek to change all this by changing auction styles.
Auction Types and why they are important in DeFi
Auction styles come in different flavors. A DEX can opt for the ascending bid auction—or the English auction, where the auctioneers state their bid from a reserve price (the lowest price). The highest bidder wins.
The Dutch auction is the opposite of the English auction. The Auctioneer starts at a high price and decreases their bid until a bidder calls out. This auction’s advantage is speed.
The first-price, sealed-bid auction is closed with no free flow of information. Bids are placed in an envelope, sealed, and later reopened in the presence of all bidders. The highest bid wins. The Vickrey auction is similar to the first-price-sealed-bid but instead, the item is offered at the price of the second-highest bidder.
Regardless of the auction type employed by a DEX, their overarching objective is speed and efficiency. These two determine the prevalence of arbitrage. Arbitrage, when exploited effectively is a money-making opportunity.
In DeFi, this has been the perfect fertilizer for Yield Farmers who trade between different protocols to exploit gaps, earning generous profits through protocol inefficiencies.
These differences are what make DeFi interesting, gifting the space current market capitalization.
Introducing Bounce Finance
Like auctions, swaps should be done in a competitive environment preferably with a limited supply of tokens and set time.
The Bounce Finance project wants to re-build the world of token swapping with some improved aspects borrowed from Uniswap and Yearn Finance. Its creator said the protocol is still very early days where a token will either be swapped or bounced.
How it Works
To get going, there must be a pool but the pool creator is in charge of proceedings. He/she, for instance,–and being the creator, sets operating parameters like the number of tokens to be swapped, the maximum amount of ETH—being an Ethereum-based project, accepted for the swap, the duration of the pool, and the pool type of his/her preference.
There are two types of pools in Bounce Finance.
The Fixed-ratio swap where the swap ratio between a pool’s creator tokens and ETH is fixed at all times—that is there “same swap rate across pool live time.” In this arrangement, the user will receive their bid tokens only after his/her ETH transaction is confirmed. There is no need for both parties to wait until the pool closes.
Meanwhile, in the Dynamic ratio swap, the swapping ratio depends on the amount of ETH and the number of tokens in the pool. Users and tokens receive their assets only once the pool closes. The final swap rate is determined depending on whether the bounce level is reached.
Once the pool is created, people can begin auctioning for the deposited tokens in exchange for ETH. Swapping is executed before its expiration time ends.
The swap will be successful if the accumulated ETH less or equal to the bounce level. Should the amount accumulated exceed the maximum amount of ETH collected, the extra is sent back to the sender’s address.
Competitiveness is automatically ingrained in Bounce Finance. With a predetermined pool allocation and rates depending on demand, its auction type draws speed and efficiency on a first-come, first-serve basis.
At the moment, only the Fixed-ratio swap is available. Moreover, ETH is the only supported coin meaning Ethereum-based tokens can be swapped for ETH only with a fee set at 0.2 percent per transaction.
Still, Bounce Finance remains a completely decentralized protocol where users can join any pool at their discretion and depending on their risk appetite.
Bounce Finance (BOT) Tokenometrics and Distribution
BOT is the Bounce Finance utility and governance token. Its creator said its primary function was to attract new users to the platform.
There are 500,000 BOT tokens as total supply. 94 percent of these tokens will be allocated for liquidity mining.
Here, users swapped ETH is used to calculated contribution to the pool’s liquidity. The higher the contribution (depending on the pool’s total daily ETH liquidity), the more BOT tokens earned.
Every day, 150 BOT tokens (slashed from 300 BOT) is set aside for liquidity miners until the amount set aside for liquidity mining runs out. This amount seems high but you have to remember it’s NOT FREE to create new BOT. Miners have to actually work (pay for ethereum gas and platform fees) to create new BOT tokens every 24 hours cycle and this brings a base value for every BOT to be created. If these tokens are not claimed they will be forever burned and taken out of the supply. You can compare this to mining new Bitcoins and it bring new liquidity to the market and makes this a very fair token distribution compared to most not so decentralized token launches.
The other six percent, the creator said, will be used to create different bounce token pools and bounce off some BOT tokens.
Technically, for one to create a bounce token pool, a fee denominated in BOT has to be paid (helping draw demand) but will be burnt—destroyed—once the pool closes. The extra tokens will also be used to reward the development team– co-founders Jack Lyu and Chandler Song–and those who help in the protocol governance.
This is where the fun really starts. All bounce transactions have a 0.2% fee in ETH and these will be fully put into a staking contract and divided evenly across all BOT stakers every 24 Hours.
It means BOT holders can earn very good rewards from successful token launches and fees paid on the work users have to do for liquidity mining new $BOT tokens.
The beauty is that newly minted BOT tokens have lower chance to come to market since it’s very interesting for liquidity miners to stake those tokens right away and earn even more. Read more about staking on their Medium page
Nonetheless, it has been one of the top performers. Trading at $530, the token continues to flactuate, down 39 percent from its all-time high of $869 it reached on Aug 10.
BOT is listed at Uniswap V2 and Hoo. The BOT/ETH market is liquid and worth trading.
Short Term Price Catalysts
- BOT is already up from it’s all time low of $94 and is just on the market for a few weeks now. This highlights the level of demand from the users who want to boost the liquidity of tokens—just like they would in Uniswap, but at the same time ready to pay low fees and earn extra BOT tokens. BOT is now trading at $435 with an average daily trading volume of $180,547 Coingecko.
- Over 1,265 Bounce Finance pools have so far been created. The more pools, the more activity, and the more staking rewards there are for yield farmers. Two weeks after launch, over 150,000 ETH have been swapped in over 60,000 transactions.
- BOT can be traded in Uniswap, a successful, high volume DEX. If BOT success continues and the project gains traction, a centralized exchange like Binance may list the token.
- For user experience, the development team is constantly improving its interface. Bounce Finance ‘s main-page is now multi-lingual, supporting Cantonese.
- Like Uniswap, projects are now beginning to list and distribute their tokens from Bounce Finance. The latest is the Keysians Network (KEN) which wants to financialize the blockchain network. Then there was StrongBlock (STRONG), and soon Ethereum Resonance (ETR) will distribute its token on the platform. Both tokens registered strong upward moves. At this pace and because of auction models (for individuals and projects) enabling competitive bidding, it may soon be a preferred platform for Initial DEX offerings (IDOs).
Long Term Price Catalysts
- To drive demand for BOT, users can now create pools that are only available for BOT holders.
- The co-founder–Chandler Song who is also the CEO of ANKR, is not motivated by money, but mostly wanted to see if they could build a new type of decentralized financial products. He is guided by a clear philosophy, building as DeFi scene evolves. There are no unrealistic roadmaps and he says depending on where the industry goes, Bounce Token will evolve and become more adaptable.
- There is a burn mechanism of which fees are regularly destroyed further building demand.
- Bounce Finance is on a path to change how auctions work. They are simultaneously blending features in Uniswap and other leading swapping platforms but remains decentralized and attractive to all set of participants.
- Bounce Finance is now generating revenue for BOT stakers and participants. A 0.2 percent fee for all transactions will be charged. This will then be sent to staking pools. Stake rewards will be calculated based on a cycle basis of which transaction fee from each cycle will be determined by swap demand. This incentivizes liquidity miners to immediately stake their newly mined BOT token further creating demand and more scarcity for BOT whose supply is fixed.
- Talking of auctions, and the first pool was launched by the co-founder in early Aug. He plans to introduce multiple auction models thereby increasing diversity while preventing centralization through unfair whale activities. From Aug 8, reward distribution will be based on the number of swaps instead of “ETH” quantity, deterring manipulators. To prevent scams, Pool ID was recently added as part of search.