Leverage the existing derivative protocols on Algorand for seamless on-chain trading of Ethereum on Algorand, a blockchain renowned for its low transaction fees.
LoraFi aims to optimize yield generation. The EVM chains like Polygon,Ethereum,Optimism boasts a huge array of yield farming DeFi's like Aave, YearnFi, Compound, etc.
The core mission of LoraFi is to establish a marketplace where these yields can be independently traded. This innovation assists investors in strategizing and enhancing their yield accumulation.
LoraFi's structure is inspired by an existing DeFi platform named Pendle. Consider an example where an investor holds a yield-bearing token from Aave, referred to as aToken. To earn a certain yield 'r', the investor lends an amount 'x' as principal.
LoraFi introduces a concept where it converts aToken
into a new token known as SY (Standard Yield)
Token. For instance, an aToken used for lending DAI is renamed SY-aDAI
. This SY token is further divisible into two distinct tokens: PT (Principal Token)
and YT (Yield Token)
. These tokens respectively represent the principal amount and the accumulated yield. In a scenario where an investor lends $100 with an Annual Percentage Yield (APY) of 0.5%, they receive PT tokens equivalent to the $100 principal and YT tokens representing the 0.5% yield. The value of the YT tokens fluctuates in response to changes in the APY.
Constructing significant trades on Ethereum chains may not be viable, as a minimal 0.25% earning could be negated by high transaction fees. Therefore, we have opted for the Algorand chain, which is known for its low fees and rapid transaction speeds.
LoraFi includes an Automated Market Maker (AMM), which plays a crucial role in establishing a functional market for various tokens. Within this system, PT (Principal Token) can be traded for YT (Yield Token), SY (Standard Yield) Token, USDT, and other similar tokens. This feature enhances the versatility and liquidity of the trading environment.
For this prototype, we are utilizing the wormhole
protocol to facilitate the transfer of tokens from the Polygon chain to the Algorand
chain. This approach ensures efficiency and cost-effectiveness in our operations.