These Dapps Are Taking Some Of The Risk Out Of Defi

Defi Is The Biggest Trend In Cryptocurrency

You may think that rocketing prices is the biggest trend in cryptocurrency this year but you’d be wrong, it’s defi. Rocketing prices are certainly something to get excited about but the underlying cause is defi. Defi, or decentralized finance, is still in its infancy but the money is flowing in. Worth over $25 billion at last check the rapidly growing market is still filled with risks. The two new blockchain applications we’re highlighting today aim to take some of the risk out of the market.

COTI: A Volatility Index For Cryptocurrency And Defi

Investors have long-used volatility as a means of gauging the market so it is no wonder that someone has come up with a volatility index for cryptocurrency. The enterprise-based fintech platform COTI launched what it calls the cVIX index as a means for cryptocurrency traders to assess market conditions and risk.

The index was announced in October of 2020 explicitly for the defi industry but is yet to go fully live. It is derived from cryptocurrency options prices using data provided by the Ethereum-based Chainlink network and works in much the same as the VIX. The index measures the prices of cryptocurrency options relative to the underlying asset and charts them on a graph like any other asset. When the price of cryptocurrency options begins to get high relative to the underlying market traders should assume higher implied volatility and the possibility of a large price movement.

The caveat for investors is the same as with the VIX. While rising options prices can indicate a market pullback they don’t always do so. In some cases, rising implied volatility assumes higher prices for the underlying asset and not lower, like when the market bulls are running. The cVIX not only provides a gauge of the market but also a means of trading it or hedging against it. The CVI platform connects to user’s cryptocurrency wallets and allows long and short positions on market fear.

The beta version of the CVI platform went live in early January 2021 with an expected launch of the main net sometime in the first half of the year. For those who don’t care to trade in cryptocurrency volatility, it is possible to own both the underlying COTI and the $GOVI coins. The COTI coin represents the COTI fintech platform while the $GOVI coin is the governance token for the cVIX and CVI trading platform. Holders of the $GOVI coins are allowed to vote and participate in governance issues as well as earn fees from trading on the platform.

Saddle Tackles The Stablecoin Issue

Stable-coins are tokens tied or pegged to an underlying cryptocurrency the most common peg being the dollar. While the dollar is the most common peg for stable-coins it is not the only one. There are stable coins pegged to every major cryptocurrency and even some cryptocurrencies as well. This makes for a very messy world when you have a want or a need to change from one to the next. Most exchanges support a mere fraction of the available stable-coins on the market so it can be cumbersome to make exchanges. In steps Saddle.

Saddle is an automated market maker or AMM running on the Ethereum network. The platform allows investors or stakers to form liquidity pools intended for backing instantaneous transactions between stable-coins. Investors earn fees for providing liquidity while users of the platform enjoy the ease of exchange. Where before it may take several transactions across multiple platforms to get the desired result with Saddle all transactions will be possible in a single location.

The platform went live on January 19th raising more than $4.25 million on the first day. The first liquidity pool is for exchanging tokenized Bitcoin. Tokenized Bitcoin are Bitcoin-based stablecoins issued by another defi protocol. The tokenized BTC’s represent real BTC’s that have been locked into defi and may only be useable on the parent platformwhich, in this case, is Ethereum (ETH). There are other stable-coin exchanges already but none that focus on BTC stable coins and slipplage the was Saddle does. It is not uncommon to lose 3% to 5% in value when exchanging “stable” coins across ecosystems. Saddle aims to solve the problem by providing accessibility and liquidity.