Exploring DeFi on Binance Smart Chain (BSC)
Until layer-2 solutions are fully rolled (ha ha...) out for Ethereum, Defi on the by far the largest alt-chain is going to be a plaything for whales and high net-worth individuals. Interactions with DeFi contracts is expensive at the best of times, and with spikes in gas prices due to high demand for block inclusion... well, it just isn't worth it for the regular person.
There are a number of alternative blockchains that have started to offer DeFi services, but I was most attracted to the Binance Smart Chain option. Mostly, that is to do with the fact that it is backed by a pretty large company... and it uses BNB as it's native token, which is handy as I have easy access to it already. In addition, it is already well integrated with Trust Wallet which makes it an easy to use, self contained ecosystem which utilises apps, exchanges and tokens that I am already using....
Other alternative blockchain approaches to DeFi use different apps and single use case wallets, which makes it more of a hassle to get into. Plus, their tokens don't have as much of a use case as the BNB tokens, which can be used in the Binance ecosystem for trading discounts, staking rewards and Launchpool rewards. So, a much wider and general usage for the token which makes it less of a risky purchase.
In this post, I'm just walking through the BSC DeFi projects that I have used and am interested in. There are many protocols in the BSC system, but I'm a pretty risk averse person and so I'm not really keen on many of them. They might offer stupidly great APR and all of that... but I'm wary.
The three protocols that I'm touching upon emulate similar protocols on Ethereum, which is why I'm following them. They offer a similar feeling and understanding to the DeFi protocols that I'm familiar with from the Ethereum ecosystem, so I'm happier using them. That said, there is a bit of hype still lingering around them... with weird NFTs and farming being quite prevalent. We'll see how sustainable they are after that sort of bootstrapping is finished.
Note that this is just an introductory post on these three protocols, I will do a more detailed hands-on in later posts for each of the three.
Sigh... food based DeFi... we have Sushiswap to thank for that. I really wish they didn't have that sort of name, as it can be really hard to take the projects seriously.
Anyway, PancakeSwap is a pretty comprehensive AMM (Automated Market Maker) and farming pool protocol. It emulates Uniswap on Ethereum, with liquidity pools being provided by users in the form of paired assets. Rewards in the form of CAKE tokens are paid out for providing liquidity and these tokens can be used to farm tokens in limited Syrup pools.
It's pretty easy to use from within Trust Wallet and can also be easily used from a PC with the use of WalletConnect or Metamask. So, top points for ease of use... and a DARK THEME!
Fees for contract interaction are relatively low... on the order of 5-50 cents in BNB tokens. Quite often, the pools that pay out in BNB will actually use WBNB instead, which can be easily exchanged on the WBNB/BNB pair on PancakeSwap. Still, it is a bit annoying to have a Wrapped version of the native token on the BSC chain. I do wonder about the actual reasoning for that...
So, PancakeSwap for token conversion if you can't be bothered with market order books and want just a single easy transaction to convert and purchase assets. Same as Uniswap! However, they have a larger use case for their CAKE token in comparison to the Uniswap UNI token (which doesn't have much of a use case beyond governance at the moment). It's proving to be a viable and worthwhile alternative... more to come!
Yet another meme-based DeFi protocol... with the liquidity provision being named "mooTokens". Sigh... hard to take seriously!
BeefyFinance serves as the BSC analog to YearnFinance. However, at the moment, I'm not really quite seeing the same flexibility and power that Yearn provides for the Ethereum blockchain. You can see that the Total Value Locked (TVL) is pretty small at around 17.5 million USD.
The vaults that you lock up assets in Beefy seem to be single protocol uses. So, locking up an asset means that it is deployed only on a single platform like PancakeSwap. For Yearn on Ethereum, your assets are constantly being shifted around to collect the best yield or interest across many platforms. Part of this is likely due to the smaller number of trustworthy projects, so it could be something that will develop over time... but at the moment, I'm not entirely sure that there is value in using Beefy over directly interacting with the underlying DeFi protocols.
Well... that's not totally true. There is the advantage that harvesting a claim on a particular LP or product will harvest it for everyone in the pool in exchange for a small (0.5 - 1 percent) of the total harvest. So, that does save everyone else BNB gas fees! Handy if you are a passive member of the protocols...
At the moment, I can't see the useage for the BEFI token... it appears to be only governance at the moment.
Venus is a Synethetix or Compound analog. By staking assets as collateral, you are able to mint VAI or borrow assets against your collateral. The XVS token is what originally got me interested in the Venus platform, as I harvested it as part of a Binance Launchpool for staking BNB. This gave me XVS tokens which I could stake on Venus as collateral or to use for governance voting.
It's a useful platform overcollateralized loans and liquidity providers, much in the same style as the Ethereum protocols that it emulates. I'm not really into borrowing assets, but I know that there is demand for that... I'm more than happy to provide assets for loan though, in exchange for interest.
So, more of a passive platform for my use case... which is good, as the contract interactions on Venus are significantly higher than those on the other two. On the order or 50-100 cents... sometimes more... which is still much lower than Ethereum!
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