LeoFinance - Terra Advancement in AMM with Astroport

Astroport's introductory staking and rewards for initial investors has closed recently and the protocol has been running for a few weeks now. What got me interested in discussing it is the current high demand of use. In less than a month the platform already has in excess of over $1 billion in TVL.

What is Astroport?

Follow the money is one way of earning more money. When Astroport started not very long ago but it has now locked up over $1.2 billion in investments. That is an insane demand considering it catapults them to third in overall TVL on the Terra blockchain. So why the demand?

When Terra blockchain began operating the first swap exchange that came out was Terraswap. Terraswap is mainly focusing on swapping assets for Mirror assets. This was so to incorporate synthetics into the Terra blockchain. However since then no other platform had direct swaps between Terra tokens until Astroport came along.

Astroport is a direct AMM for the public. Fully decentralized and designed to lower swaps slippages for Terra blockchain users. In addition it will introduce features that are not seen before in other automated market maker. The most major roll out of Astroport will be allowing investors to participate in providing liquidity in pools while also using the same liquidity to reinvest into other protocols.

Astroport has a native token that provides governance to holders. Holders can then vote on the direction/s the exchange will move forward with. Astroport will also have improve curves in swaps for reducing slippage and reducing fees.

bLuna and Luna

We can look at an example to see how much Astroport has improve the Terras token swaps. Look at Luna to bLuna for instance. For those not aware bLuna is bonded Luna on Anchor protocol. It is used as collateral on the platform to borrow UST but can be converted back to Luna after 21 days lock up period expires.

Prior to Astroport the swap between Luna and bLuna was closer to 90% - 99% depending on the price of Luna. The main reason for this was on multiple folds but essentially investors could perform some arbitrage in earning more Luna. How? simply trading Luna for more bLuna and then unstaked the bonded Luna to become Luna. This was possible as the trading was mostly lopsided towards Luna being less valued than bLuna. Astroport's new curves changed all of this.

A daily ratio of bLuna to Luna from chart above shows current ratio is very close to 1. It is because Astroport has reduced the slippage between the two tokens in when performing swap. This has reduced the profitability to do arbitrage between the two tokens, but it has made it easier for holders of bLuna to swap out of them and into liquid asset Luna. By having easier flow between the two tokens it allows locked up Terra token bLuna to still be liquid as turning into Luna incurs low fees and small slippages.

Conclusions

You may have guessed with the bLuna : Luna example doing so well why would other Terra protocols not use Astroport? Ask no more as the immediate collaborations has already started. Apollo Dao is shifting its pools into Astroport from Terraswap. While Spectrum has introduced Astroport pools to invest. Looking ahead Astroport will continue to spread its influence.

None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!