Potential Project: Value Analysis of Fixed Rate Lending Protocol Element Finance
1. Project introduction
Element Finance is a decentralized financial protocol that helps users seek high and stable returns in the DeFi market, allowing the principal and interests to be traded at any time without any liquidation risk.
Element Finance separates the principal and interest of users into two separate, transactable tokens, Principal Token and Yield Token. Liquidity pools are also provided for these two tokens, allowing the sale of outstanding principal and variable interests in AMM. Moreover, it enables users’ access to ETH, BTC, USDC, and DAI at discounted prices. Liquidity pools also allow discounted assets to be exchanged with the underlying assets at any time. Additionally, fixed interest income can be obtained by exchanging any major underlying asset.
When staking in the DeFi protocol, the user receives another kind of token that can be redeemed as the initial token, as well as the yields from staking. For example, users can obtain LP when providing liquidity mining. However, the yield is unstable because it is based on real-time changes in market transactions. The user will not be able to determine the final value until the LP is redeemed. Moreover, during staking, the assets are locked. Although assets belong to the user, the user will not be able to use them elsewhere during staking.
Element Finance is essentially designed to address these two issues, stabilize yields and lock-in. It distinguishes the return from the principal and ensures the liquidity of the assets between the principal and yield. At the end of a fixed period (for example, 6 or 12 months), each Principal Token is converted to a percentage of the initial capital, while a Yield Token is converted to the yield earnings generated at the same time.
For example, if a user stakes 1000 USDC on Element Finance and chooses a one-year period, the average annual interest rate is 10%. After that, 1100 USDCs is expected to be available. If you want to trade USDC halfway, you can sell 1000 USDC principal at a discount. There may be someone in the market willing to purchase your 1,000 USDCs at 950 USDCs to get a fixed yield of 5%.
At the same time, yield tokens provide users with great flexibility. Users can sell Principal Tokens and retain Yield Tokens. Alternatively, they can sell Yield Tokens and retain Principal Tokens to advance interest earnings for tomorrow. Of course, both principal and yield can be sold. Users can also stake the principal twice to obtain leveraged yield benefits.
In Apr 2021, received $4.4 million USD in funding, led by a16z and Placeholder
In May 2021, Element Finance Testnet went online
In June 2021, Element Finance Mainnet went online
In July 2021, Element Finance launched crvTriCrypto
In October 2021, received $32 million USD in round A of financing led by Polychain Capital
Sign in: https://www.element.fi/
- Click “Fixed Rated”
There are currently ten major pools available for main tokens purchase.
2. Click “Mint&LP”
There are currently 14 pools to choose from, either single token or LP to stake.
3. Click “Pools”
The summary can be seen, and transactions can proceed.
In April 2021, received $4.4 million USD in funding, led by a16z and Placeholder, with participation from Joseph Lubin, co-founder of Ethereum and ConsenSys, Fernando Martinell, co-founder of Balancer, Stani Kulechov, co-founder of Aave, Robert Leshner, co-founder of Compound and more.
In October 2021, received $32 million USD from round A of financing led by Polychain Capital, with participation from A16z, Placeholder, A_ Capital, Scalar Capital, Advanced Blockchain, Republic, Rarestone, Yunt Capital, P2P Validator, Ethereal Ventures, and its limited partners, Femboy Capital, MakerDAO founder Rune Christensen, Aave founder and CEO Stani Kulechov. This round resulted in Element Finance reaching an estimated value of $320 million USD.
The core of Element Finance protocol is that users can split the underlying assets that generate revenue into two independent tokens through Ethereum contract: PTs-deposit pass and YTs-yield pass. (Take note that neither of these two tokens is the mainnet token of Element Finance). This splitting mechanism allows users to sell their principal in a fixed interest rate income position, further leveraging or increasing exposure to interest without any liquidation risk.
Element Finance has not issued a token yet. This information will be update after official announcement.
3、 Project value analysis
Project value and expectation
1. At present, the project that is under the fixed interest rate protocol that belongs to a new area. Element Finance has involved investors such as Polychain and a16z. Priority can be given to the major projects of the area.
2. Element Finance can improve the capital efficiency of user’s deposited income position. By discounting assets, risk-averse users can adopt safe and guaranteed investment strategies without worrying about fluctuation of market interest rate. The liquidity and tradability of yield tokens can also increase the liquidity opportunities of users’ positions. As a result, Yield Tokens can reduce the cost of users’ transferring positions and obtain more opportunities on Defi.
3. dYdX that is invested by a16z is a latest and well-deserved major project. The airdrop of dYdX also has made a lot of money for the users involved in the early stage. It is suggested that Element Finance can participate, and perhaps have token airdrops.
4. The investment line-up is relatively luxurious. In addition to Polychain and a16z, there are leadingDeFi projects such as Balancer and AAVE that support Element Finance
This project is still at an early stage and has not issued token yet. The value of Element Finance project has reached $320 million USD. Interested users can try to register several more addresses for interaction and fight for airdrops.
Note: This article does not represent any investment recommendation, nor is it responsible for any investment results.