The Internet Computer DeFi Ecosystem: How To DeFi On The IC

Almost all layer-1 blockchains have a DeFi component to them. After all, DeFi applications are one of the largest drivers of crypto and DLT adoption worldwide. In addition, there’s a ton of value to be exchanged and earned in DeFi. According to DeFi Llama (one of the most reputable DeFi ecosystem evaluators), the current total value locked (TVL) for the entire DeFi industry is $108 billion dollars. So if a popular blockchain platform doesn’t have developers, dApps, or protocols focused on DeFi, then it will significantly fall behind the competition and lose market share.

(Source: Defi Llama website homepage, which shows current DeFi TVL at over $100 billion. The top-five leading protocols in DeFi by TVL are MakerDAO, Curve, Lido, Aave, and UniSwap.)

One of the best layer-1 blockchains out there is the Internet Computer, and of course, the Internet Computer also has its skin in the DeFi game. The Internet Computer is a potential overlooked dark horse in the DeFi game, and investors and future stakeholders should keep a close eye. In this article, we’ll cover IC’s DeFi playbook as well as a few players in the DeFi ecosystem that are building on the IC.

DeFi Overview & The DeFi Industry

DeFi has already surpassed the $100 billion dollar industry achievement mark. DeFi’s an industry that’s grown tremendously since summer 2020. Having started off in only one or two sectors and use cases, such as decentralized payments and coin swapping, DeFi has transformed itself into a multi-sector industry, and now encompasses many more areas including lending and borrowing, decentralized exchanges, asset management, derivatives, margin trading, marketplaces, payments, prediction markets, stablecoins, staking, asset tokenization, yield aggregators, and yield farming. So almost 15 DeFi sub-categories alone have been created in under three years.

DeFi On The Internet Computer

The Titanium upgrade signaled the Internet Computer’s transition and development of DeFi. At the moment, the DeFi ecosystem is still growing and being developed on the IC platform, thus, there’s lots of potential for trial and error, for unique applications to come to the market, and for IC DeFi developers to take the best elements of other successful DeFi applications and implement them on the IC blockchain with additional improvements. Below I’ll highlight three DeFi applications on the Internet Computer and outline their strengths, weaknesses, and promises moving forward.

ICPSwap

ICPSwap is a hub that provides full-stack financial, market, and DAO services. ICPSwap will provide new Internet Computer DeFi projects with a complete solution to their token minting, trading, distribution, allocation, project operation, and marketing needs. This is its greatest strength, the platform’s multi-functional nature.

(Source: ICPSwap website homepage)

On ICPSwap, after the full application’s functionality gets released, which will be by Q4 2022, individuals will be able to mint tokens, interact with pools through mining and staking, participate in market making and limit orders, and do swapping and liquidity providing.

ICPSwap’s main competitors are PancakeSwap and UniSwap. The advantages of ICPSwap over these competitors are that it can do token minting, it’s speed is faster, there are stabler fees, the front-page is not centralized, it’s IDO capable, has more advanced NFT features, has DAO services, and can do limit orders. Therefore, it’s a more complete project that can simply do things that Pancake and UniSwap cannot.

But at the moment there’s some limitations, given its current development individuals can wrap tokens, there’s a marketplace for NFTs, and there’s a wallet, but functions such as swapping and liquidity are still un-released and are marked as coming soon.

In summary, the products ICPSwap offers are swap/liquidity, launchpad, farms, pools, and token mints. These products should all be fully operational by Q4 2022, anytime in the coming months to half-year. So for all you DeFi fans out there, get ready!

InfinitySwap

InfinitySwap is a next generation AMM (automated-market-maker) and platform for investors to create, stake, and swap coins on the Internet Computer. InfinitySwap seeks to be a blend of UniSwap, Balancer, and CoinMarketCap. On InfinitySwap, users will be able to swap tokens for other tokens, in particular, ERC-20 tokens with IS-20 tokens (InfinitySwap’s to-be-released token standard), users will be able to stake these tokens in a dedicated pool, and projects can create tokens using the platform (using the IS-20 token standard) and launch a pool.

Right now there’s also limited functionality on this platform, as it’s still not fully complete. So far, applications can create a pool, but other functions are still in development, and selected actors can try the demo app. But in the future, the application will be the largest AMM pool for Bitcoin, and will have a diversified offering of DeFi services such as social trading, borrowing, and lending. It too has similar functions to UniSwap and Balancer, so expect further improvements and offerings than these two competitors.

(Source: InfinitySwap website homepage)

Sonic

Sonic is the first decentralized exchange to launch on the Internet Computer, and was introduced in January 2022. Its aim is to be the DeFi hub on the Internet Computer. Sonic is composed of a collection of DeFi protocols, and enables users to issue their own tokens, trade their tokens, and earn rewards by providing liquidity. So actually, it’s quite similar to the above two platforms as well: ICPSwap and InfinitySwap. However, moving forward, Sonic will be releasing new financial primitives.

Some of these new DeFi offerings can be seen in the image below, and they include farming, token issuance, governance, and a launchpad. So similar to the other DeFi applications being built on the IC, Sonic too is in its early stages.

(Source: Sonic website homepage)

At the moment, Sonic has approximately $800,000 dollars in daily liquidity, and an average daily volume of $7,300. It features three tokens: ICP, Cycles (XTC), and WICP (WICP), and one pair pool, XTC/WICP. So it’s obvious that the decentralized exchange is in its infant stages.

(Source: Sonic DEX analytics page)

The next version of Sonic will bring in Liquidity Bootstrapping Pools (LBPs) to the protocol, which will help with launching new tokens and funding for respective projects. After this happens, investors will be able to see and trade hundreds of pairs instead of the single liquidity pool that’s available now. After that, Sonic will be adding more fungible token standards. These two additions will bring added functionality to the platform. Investors and potential stakeholders should keep their eyes out for these announcements and releases!

Conclusion

ICPSwap, InfinitySwap, and Sonic are just three DeFi applications that have been built on the Internet Computer, and all three are still in their beginning to middle-development stages. Moving forward, once these projects develop further and add new functionality and features, many investors will increase their exposure and take advantage of their benefits in relation to competitors such as UniSwap, PancakeSwap, and Balancer. The future is bright! I’ll stay tuned to give you further details and updates about how to DeFi on IC.

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- Crypto Analyst & Writer — Commenting on all things Web3 — Interested in smart contract platforms #Dfinity and #InternetComputer

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- Crypto Analyst & Writer — Commenting on all things Web3 — Interested in smart contract platforms #Dfinity and #InternetComputer

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