WARP by USTX Team - An easy to use DeFi app to maximize USDD yield

Project Name: WARP
Project Track: DeFi
Team Name: USTX Team
Team Member(s): 3, Sirluke, Benna, Aska
DevPost URL: Warp by USTX Team
Project Goal: Simplify user access to USDD DeFi yield and maximize the returns.
Project Info: WARP pitch deck
Project Website: ustx.io
Project dAPP: WARP
Project Repo: USTX on GitHub
Project Details:

What is WARP?

It’s a DeFi app, within the USTX ecosystem, that implements a pseudo delta neutral farming strategy. Mmmm… that doesn’t sound simple at all. Let me try again: it’s an app that allows the users to stake USDD and get 30%+ APR with low risk and easy access.

Background

During the last weeks the DeFi space took some serious hits, beginning with Luna-UST crash and the following down-trend of the market. In the middle of this crisis, TronDAO launched USDD, a very ambitious project to give added value to users via a decentralized, over-collateralized, algorithmic stablecoin promising very interesting yield rates (up to 30%). USDD proved to be very strong and supported by a serious and committed team. Everything looks good with USDD, it ticks all boxes: it’s decentralized, over-collateralized with great APY. But is it enough to convince users to jump on board?

Let’s look at the last part, the promised high yield, up to 30%. How easy is to get that APY? Where is it available? After a quick search everyone can see that 30% is available only on CEX, which is not great for a stablecoin that has the word “decentralized” in its name. So, what about DeFi yields? At the time of writing this is the situation:

  • 12.7% on JustLend.org
  • 16.5% on USDD/USDT (SunSwap) liquidity farming on Sun.io
  • 19% on USDD/USDT (2Pool) liquidity farming on Sun.io
  • 48.5% on USDD/TRX liquidity farming on Sun.io

So, the 30% APY is not available on DeFi, unless you choose to farm the USDD/TRX LP, which exposes your capital to TRX price fluctuation.

The second best option is farming on USDD/USDT pool, which gives you 16%-19% APY. But how easy is to do it? To enter the Sun.io LP farming you need to supply USDD/USDT liquidity to 2Pool or SunSwap and then stake the LP tokens to earn USDD while farming. If you want to exit, you need to do it all in reverse. This might seem intimidating to inexperienced users, DeFi should be accessible to as many users as possible.

Supply liquidity on JustLend.org is the simplest way to access USDD yield, but it’s also the lowest APY of the pack, less than 13%.

So we did some research and tried to find a way to offer Tron and USTX users the best USDD DeFi APY and the simplest way to access it. We worked the math, coded the smart contracts, tested them and now we present WARP, our way to simplify USDD yield harvesting.

What is a Pseudo Delta Neutral farming strategy and how is it different from farming the USDD/TRX LP pair directly?

Farming the USDD/TRX LP pair doesn’t protect the user against TRX price loss, so if you enter at a certain TRX price and after some time the price dips significantly your capital has reduced its value, even considering the high farming yield. There is a way to compensate this effect and JustLend makes it possible. If the user supplies USDD to JustLend and then borrows a part in TRX to get the USDD/TRX LP, it creates a situation where the TRX price variations are (almost) cancelled, so the name pseudo delta neutral.

How can it be? If you borrow TRX from JL and add as liquidity in USDD/TRX pool you now have two positions on TRX: the borrow and the LP value. If TRX price increases, the LP value increases, but so does your debt. On the other hand, when TRX price decreases, the LP value is lower, but also your debt position. The overall value of the user invested capital stays roughly the same (supply value— borrow value+LP value). Let’s see this in a chart.

So we’ve fixed the TRX price dependancy, but how about the yield? Can we do better than the 20% that the DeFi options are currently offering? Let’s put some real numbers and make a new chart with the APR, taking into account also the TRX price variation.

Now it looks nice, APR is about 35%. But we’re still not done yet, what is the role of USTX in all this? WARP will merge in the USTX ecosystem in two ways: to generate more buyback and to increase the APR for USTX holders.

The WARP app will distribute weekly rewards to users, but a part of the raw APR will be routed to USTX buyback. The amount of user rewards will always be at least 75% of the total rewards (hardwired in the smart contract), the rest will be used to buyback USTX tokens from the DEX and also as reserve for the WARP contract, to make sure that the overall equity level stays positive at any time (even when the blue line in the chart goes below 0).

To incentive WARP users to also buy and stake USTX tokens, they will benefit from a multiplying factor over the base APR, called Warp Factor. The user warp factor is determined by the amount of USTX the users holds in any of the locked staking options that USTX offers. Maximum warp is obtained when 20 USTX are held for every USDD deposited. At the beginning the Max Warp factor will be 5, meaning that the warp APR will be up to 50% higher than the normal APR. Let’s see the final APRs in a chart.

So, making the best use of Tron USDD DeFi options, we’re able to maximize the user rewards and simplify the overall experience at the same time. Warp users will get over 37% APR, while normal deposits still get 25% APR (these APRs will change over time and will depend on Sun.io and JustLend conditions).

Ok, what’s the catch? The deposit will be locked forever and I’ll get the rewards in anonymous token after 6 months?

Not at all! Here comes the best part. We tried to keep all the complication on our side, delivering the simplest experience from the user point of view.

  • Interface: web app accessible via browser (pc, mac, mobile)
  • Wallet: Tronlink (Math and Klever will be validated shortly after the release)
  • Deposit token: USDD TRC20
  • Rewards token: USDD TRC20
  • Deposit lock: 1 full epoch (epochs duration is 1 week, changes every Saturday)
  • Rewards lock: till next epoch transition (unlock on Saturday after the request)
  • Rewards compounding: yes, manual compounding available
  • Max Warp factor: 5.0 (+50%) if user has at least 20 USTX in locked staking every USDD deposited
  • Fees: app requires energy to operate, a portion of the rewards will be used for buyback and reserve (max 25%), balance withdraw is not taxed unless the equity ratio is below 100%. This can happen after significant changes in TRX price, but recovers naturally within a few days. The team will create a reserve in the contract to avoid equity ratio < 100%.
  • Custody: the deposits are fully managed within the contract, they will NOT be moved to team wallets. The smart contract handles all the interactions with JustLend, SunSwap, Sun.io and all other contracts required to manage the strategy.
  • Management: the team will monitor the equity level continuously and weekly will re-balance the strategy, to make sure that it stays close to neutrality.
  • APR: Warp yield will vary over time and will depend on Sun.io and JustLend conditions. The team will make sure the contract parameters are always optimized for the best yield and lowest risk.
  • Anti-whale: There is a limit on how much a single user can deposit. At launch the limit will be 1,000 USDD but it will be increased to 10,000 USDD after a few weeks.

Risks

As always, we want informed users, so here’s the risks associated with Warp:

  • smart contract risk: we carefully designed and tested the contracts on Nile and mainnet, but human error can never be excluded 100%;
  • capital risk: in case of TRX price variations, the value of the underlying assets (deposits, borrows and LP value) can go below 100%. The team will make sure that over time and adequate reserve will be created to handle these events;
  • liquidation risk: TRX is borrowed from JustLend against USDD deposits. The strategy is balanced so that if TRX price increases up to 85% there is no liquidation risk. The team will monitor the margin and act to re-balance the strategy in case of significant variation from nominal;
  • USDD price risk: the contract works with USDD, so all values are relative to USDD. If USDD price is reduced from nominal (1$), the same will happen to the deposit value. This risk is NOT strictly related to Warp, but is present every time the user holds USDD (or any other token).

This is not financial advice, DYOR.

Project Milestones: USTX Teleport application was developed and released during the first hackathon round and finished second place in the DeFi track. The team continued development and released USTX UpFolio in June, to simplify user experience and portfolio management.
WARP testifies our continuous effort in improving the user experience and build on top of Tron ecosystem. The project went through design, simulation and testnet. Now it’s in the final testing phases on mainnet, to launch before the hackathon deadline (July 25th, 2022). Here’s a preview of the app, that will have consistent look and feel to all other apps in the USTX ecosystem.

What’s next?
We are getting a lot of user requests about a TRX version of WARP. Using the same architecture we could provide a high yield version of TRX staking, providing 20+ APR on TRX deposits. Stay tuned for updates on this development.

127 Likes

USTX Project is establishing itself for what it is, a great project. Developers in step with new ideas. An illuminated vision of space. We will hear a lot about them. Happy to be part of it !!

22 Likes

Ustx is the future in DeFi world. Great team🚀

11 Likes

What to say, i think this is something that goes beyond the “simple” App of a DeFi project.
After having read this (tech) article my conclusion is that WARP is something that should be taken into serious consideration directly from Tron Foundation.
This mechanism allows to reach even higher revenews compared to the initial advertise rumored about USDD.

Well done USTX team, a new confirmation on the goodness of the project and the futuristic vision of the team

18 Likes

Warp pill #1: what happens behind the scenes in WARP?

The team effort for the WARP project has been towards simplifying the user access to DeFi opportunities, that would otherwise be to complex for most users. So we’d like to shed some light on what happens behind the scenes, inside WARP contract.

User deposit

After the user deposits USDD in WARP, the tokens are immediately supplied to JustLend, so that they immediately start generating yield. If the user has USTX in locked staking, the effective deposit will be increased depending on the warp factor (up tp +50%)

User requests balance unlock

The portion of balance selected for withdraw is moved to the pending balances. On the next epoch transition the JustLend allowance will be setup

User withdraws pending balance

The desired amount is removed from JustLend and send to the user

User requests rewards unlock

User rewards are moved from locked to pending. They will be available on next epoch.

User claims rewards

The rewards in USDD are sent to the user wallet

User compounds rewards

The user rewards are added to the user deposit balance

Before epoch transition

  • The total deposits are updated (taking into account new deposits and withdraw requests)
  • USDD balance to pay for pending rewards is moved to contract (if needed)
  • The SunSwap liquidity amount is corrected, depending on the updated total deposits and balanced for neutrality against TRX price fluctuations
  • The farming rewards are harvested and swapped is USDD (if needed)

New epoch

  • The available rewards are computed and used to calculate the last epoch APR. Contract data is updated, new epoch begins.
  • Pending rewards are now claimable
22 Likes

The only issue I am worried about this is the potential of the loan to get liquidated. This is managed manually correct? Will there need to be reserves or how exactly will that work if an event were to happen that you needed to rebalance?

12 Likes

Very good question about one of the risks associated to WARP. As you probably know a smart contract cannot do anything by itself, without a user call to a function. So it’s not possible to have a failsafe function that triggers automatically when the margin is reduced.
So, we managed this event by carefully choosing WARP parameters. With current parameters, liquidation risk occurs if TRX price increases 85% with respect to the neutral value. Historically the biggest positive daily swing has been +50%, meaning that liquidation is not something that can happen in a minute, but allows for enough time to react.
We are setting up a monitoring and management system to allow notification and fast reaction to such events.
WARP parameters are not written in stone, so if the majority of users ask for a lower risk approach, we’ll modify them.
Regarding reserves, we’ll gradually build a 2% reserve fund, to compensate fer short time TRX price fluctuations and make sure that the value of the assets inside the contract is able to cover all deposits in any condition. This reserve will also have the effect of increasing the JustLend margin and further reduce the liquidation risk.
In the near future we might add a balancing function accessible from any user, that can be triggered if the smart contract is unbalanced over a certain threshold. This will effectively make any user capable of preventing liquidation. Rebalancing is a very expensive operation in terms of energy, so we need to find a way to compensate the user for this.

22 Likes

Nice project on Tron Blockchain

8 Likes

Warp pill #2: is it really that hard to do pseudo-neutral farming? Can’t I just do it by miself?

When we say that WARP goal is to simplify something complex, we really mean it. Doing pseudo neutral farming involves making calculations and interfacing with all DeFi apps needed to move the funds around. Also you need about 1M in energy every time you need to balance. If you are willing to do all that, every week, go ahead. Otherwise, you can use WARP, deposit once and get rewards every week at the best possible APR on USDD. If you are willing to do more, you can push the Compound button, once per week and improve your APY.

Just to give an idea about the complexity of the strategy, the user needs to interact with one smart contract (i.e. WARP), while WARP interacts with 17 other smart contracts.

14 Likes

Announcement: Warp is now live!

The fully working dApp has been released today, check it out on USTX WARP
The best APR on USDD directly on DeFi.

image

18 Likes

Honestly the USTX team have done a great job so far. This project is exemplary. Milestones were hit one after another; the team continued development and they brought very nice ideas which not only benefit the project itself and the holders, but also can help Tron blockchain.

Tron should be proud of USTX.

13 Likes

Don’t forget to submit your devpost, or you won’t be entered.

5 Likes

We’re preparing the presentation video. We’ll post it in a couple of days.
Thanks for the heads up

6 Likes

Your project looks Very promising indeed ! Are you planning to go multichain as well ? keep up the good work guys

10 Likes

Thanks. We do our best to innovate and bring new opportunities for our users. USTX is already multichain (Tron, BTTC, BSC and Cronos). Regarding WARP, we’ll thing about moving to other blockchains if conditions are met. WARP needs farming and lending platforms to operate, so as USDD expands to other networks, WARP might also find its spot.

10 Likes

Thanks for your swift answer. Best of luck guys

7 Likes

Warp pill #3: are deposits and rewards locked?

We wanted warp to be as easy as possible to use and as flexible as possible. There is a lock on deposits and a minimum time to be able to claim rewards, but we kept them as short as possible. Time in Warp is tracked in epochs. One epoch lasts 1 week. Epoch transition is on Saturday.

Lock time on deposits is 1 full epoch, which means from 7 to 14 days, depending when the user requests the unlock.

Lock time for rewards is the next epoch transition, which means from 0 to 7 days, depending when the user requests the unlock.

Why do we need some time to unlock deposits? Because the user funds are all moved to other platforms to generate the yield, so before making the withdrawal possible, some time is needed to free the necessary allowance.

13 Likes

Wait, this looks REALLY promising.
I’ll read the tech side of the project but the numbers listed deserve attention.

I think TRON is pushing such good projects in the correct way, well done!

5 Likes

I was sure you guys would have returned with another great idea.
Not an easy task simplifying all the procedure behind farming among all that platforms. Really amazed

7 Likes

Despect the overall complexity of the system, not for everybody to understand, this thecnology can help everybody, even less skilled users. Justin S. , are you here? :slight_smile:

5 Likes