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1/11 @saffronfinance_ ($SFI) is DeFi's new kid on the block with its tranched yield product that is already live with DAI on @compoundfinance. https://twitter.com/Rewkang/status/1329455109080821763
2/11 Before I continue, a few disclaimers:
- $SFI is already up 5-6x over the past few days. Please be careful – this is not investment advice.
- Saffron is currently undergoing security review, which should be completed soon, but until then (and after too), use at your own risk.
- $SFI is already up 5-6x over the past few days. Please be careful – this is not investment advice.
- Saffron is currently undergoing security review, which should be completed soon, but until then (and after too), use at your own risk.
3/11 Back to Saffron.
Though right now it's only live on Compound, the team is planning to expand to other lending/borrowing protocols (i.e. @AaveAave and @CreamdotFinance) and then AMMs like @UniswapProtocol and @CurveFinance as well.
Though right now it's only live on Compound, the team is planning to expand to other lending/borrowing protocols (i.e. @AaveAave and @CreamdotFinance) and then AMMs like @UniswapProtocol and @CurveFinance as well.
4/11 Imo, the golden egg will be vault platforms like @iearnfinance, @picklefinance, etc.
Recently, some of these higher risk platforms (e.g. @harvest_finance) have been hit with a wave of attacks.
Saffron will enable cautious investors to use these products with peace of mind.
Recently, some of these higher risk platforms (e.g. @harvest_finance) have been hit with a wave of attacks.
Saffron will enable cautious investors to use these products with peace of mind.
5/11 Right now, Saffron is bootstrapping liquidity to the senior tranche using $SFI rewards.
But as these dwindle in the coming weeks/months, the biggest challenge for Saffron will be attracting investors to this low-risk/low-return tranche.
But as these dwindle in the coming weeks/months, the biggest challenge for Saffron will be attracting investors to this low-risk/low-return tranche.
6/11 To address this, the plan is to split protocol fees between $SFI stakers and senior tranche investors.
However, I think that expanding Saffron's coverage to more risky (and higher yield) products with exotic asset options would do much to attract senior tranche investors.
However, I think that expanding Saffron's coverage to more risky (and higher yield) products with exotic asset options would do much to attract senior tranche investors.
7/11 Another smart design feature is that Saffron makes junior ("A") tranche investors stake $SFI.
This prevents free-loaders from crowding out the high yield tranche and also allows the $SFI to be used as last-resort collateral to pay out senior tranche investors if necessary.
This prevents free-loaders from crowding out the high yield tranche and also allows the $SFI to be used as last-resort collateral to pay out senior tranche investors if necessary.
8/11 There are other ways investors can protect against protocol risk in DeFi, such as by purchasing insurance through @NexusMutual or @Nsure_network.
Insurance has its own merits over Saffron's CDO-esque product (e.g. cap. efficiency), but Saffron has some distinct advantages.
Insurance has its own merits over Saffron's CDO-esque product (e.g. cap. efficiency), but Saffron has some distinct advantages.
9/11 First, senior tranche investors don't have to rely on insurance underwriters to honor claims.
Second and more important, insurance underwriters don't want to provide cover to high-risk protocols, since they're the ones who lose if the protocol goes under.
Second and more important, insurance underwriters don't want to provide cover to high-risk protocols, since they're the ones who lose if the protocol goes under.
10/11 Saffron solves this by changing the incentive scheme:
Those who want to take the risk of using a given protocol can lever up on that risk and earn greater rewards, but they're the ones who have to pay the price of protocol failure – not third party underwriters.
Those who want to take the risk of using a given protocol can lever up on that risk and earn greater rewards, but they're the ones who have to pay the price of protocol failure – not third party underwriters.
11/11 If successful, Saffron will open up and capture an entirely new, composable safety-layer for the DeFi ecosystem.
(Once again, not investment advice and use at your own risk.
Also, if you want to farm $SFI, you need to lock up tokens until the end of the two-week epoch.)
(Once again, not investment advice and use at your own risk.
Also, if you want to farm $SFI, you need to lock up tokens until the end of the two-week epoch.)
Also, disclosure, I own $SFI.
