When it comes to crypto, a given individual has a wide variety of options. They have many variations for the function they want to use and many different platforms to execute what they want to operate.
If users would like to use a centralized platform like Crypto.com App & Exchange, they absolutely can! If a user would prefer a more decentralized option, we will be covering a promoted DeFi application that is built on Cronos Chain today.
CyborgSwap is a decentralized finance(DeFi) application that allows users to exchange tokens, lock liquidity, and stake tokens. Valuation of DeFi applications is being conducted by measuring a couple of parameters as they are displayed on the homepage of CyborgSwap. Those are TVL(Total Value Locked), Market Cap, and circulating supply.
The total value locked amount means the more funds have been invested in the platform’s smart contract, in this case, 4,620,250 dollars, the more the project is trusted. Meaning: users and investors collectively trust the platform with their over 4,5 million dollars worth of funds, whether it is locked as liquidity, staked as the native token, or staked as an NFT. Marketcap is also displayed on the homepage that informs people about the current market valuation of the native token and the circulating supply.
Trade Function: Exchanging Tokens
One of the core functions of DeFi is exchanging tokens meanwhile retaining the self-custody of the traded funds, which means that the trader does not deposit their tokens to a centralized entity. Instead, they use the smart contract function to execute a token exchange action where, as soon as the tokens they want to exchange in their wallets leave, the tokens they wish to trade with comes in. In this process, the capital value inside the user’s self-custody wallet doesn’t change because the trade execution happens in one set of actions that no funds ever being deposited to a centralized third party. The whole execution of the trade remains autonomous.
For example: When you want to exchange 1000 USDC on your metamask/Crypto.com DeFi Wallet with the corresponding amount of CRO, the moment 1000 USDC leaves your self-custody wallet, 2230 CRO comes in.
Executing trades on DeFi has a minor difference where the actions taken on the blockchain through smart contracts require transactions. These public transactions are necessary to interface with blockchain applications as they constitute the core of the decentralization function.
When exchanging a token, there are two transactions taking place. The first one is approving the token pair, and the second is authorizing the exchange execution. The feasibility of this is not always ideal in all smart contract platforms, for example, Ethereum is known for high transaction fees. Cronos Chain, as an alternative, is known for its low transaction fees that drive the cost of using decentralized applications close to zero as if they are on a centralized platform like Crypto.com App & Exchange.
Trade Function: Exchange Settings
There are two core settings for token exchange properties: Transaction speed rate measured with Gwei units and slippage tolerance.
Blockchains are maintained by the people that set up nodes to approve transactions. The incentives for those people who run nodes are fulfilled by the transaction fees of the network. Those nodes prioritize transactions that pay higher fees. Making those transactions slightly faster than the average, although the average speed of transactions on Cronos Chain is near-instant, those who would like them to be precisely instant can use this option by paying a little more than the average fee.
Slippage tolerance is similar to the market buy/sell function encountered on centralized exchanges. Slippage is the maximum price gap that a particular trade can wiggle. In other words, the difference between the expected price of a trade and the price at which the trade is executed.
When a trade is being executed price is either being pushed upwards or downwards in proportion to the amount of capital in effect. The higher the capital, the more likely the high slippage will occur. Basically, the slippage tolerance is the maximum amount of price difference the given trader is ready to pay a premium for the trade they intend to execute.
Locking Liquidity & Earning from Farms
Navigating to the Earn:Farms bar, the liquidity pools can be seen. Those live liquidity pools are building blocks of a DeFi Exchange application. Funds provided to these pools construct a healthy market for a token that has demand from the investors. For those pools to be instituted, funds must be locked in, so the liquidity pool can form a market for traders to operate.
For people to lock their tokens on a farm, the motive is generally delivered as a reward yielded by the trading fees the DeFi app is collecting from the users of the application. This way, the liquidity providers/farmers would be happy to provide their tokens to the smart contract platform. Meanwhile, the smart contract application(DeFi) can attract traders to the efficient and highly liquid market they have constituted with liquidity providers by incentivizing them.
Components of a Liquidity Pool/Farm
A liquidity farm has four core components: APR(Annual Percentage Rate), Liquidity, Multiplier, and NFT Stake.
APR(Annual Percentage Rate) is a straightforward calculation of a liquidity pool’s yearly yield. It is a projection instead of an assurance. It is calculated by the trading fees that a particular liquidity pool has yielded. Moreover, a probabilistic estimation has been made on how much it might yield in the future with the presented data gathered so far for that specific farm.
Liquidity is the quantity of how much capital has been locked in that individual farm. It signals the stability of the farm by exhibiting the demand for locked funds inside.
Multiplier is the DeFi application’s fund prioritization indicator for the respective farm. To simplify, it signals the fund allocation of the DeFi application’s reward budget for the separate farm. The higher the multiplier, the more native tokens are produced and distributed to those farms.
NFT Stake is simply an exclusive function of CyborgSwap that when the native NFT collection of CyborgSwap is staked on the pools, it raises the amount of yield that has been collected by the person who stakes both the tokens and the Cyborg NFT they own.
Adding Liquidity to Liquidity Pools/Farms
Clicking to GET CBO-CRO LP brings the user to the liquidity provision page. When someone provides liquidity, they receive LP Tokens that act as a signature for how much value is provided to the pool for later withdrawal of the funds yielded. Providing liquidity requires both tokens, in this case, CBO and CRO, to be staked as the same amount of dollar value they correspond.
For example: When 500 dollars worth of CBO is provided, 500 dollars worth of CRO should also be provided. It totals up to 1000 dollars locked in the liquidity pool. Suppose this 1000 dollars worth of liquidity is left locked for one year, with 311.25% APR. In that case, the liquidity provider will end up with 3,112.5 dollars worth of CBO tokens, excluding the principal 1000 dollars provided to the liquidity at the start.
Staking Tokens: Manual and Auto
As we explained, providing liquidity in a simple manner in the previous title of this article, it can get a little bit complicated for beginners as we mention the phenomenon of impermanent loss. It is a bit more complex subject, but for those who want to use their funds in another way without considering the complexities of impermanent loss, the staking function of CyborgSwap can be employed.
Staking pools work as follows: you buy one token that has the staking pool, lock your tokens with the corresponding pool and expect the same token to be paid to you for the period you have staked. The amount that will be received is trackable by the APY listed on the stake pool details.
The only variable that should be considered here is: would this token’s value be lower than the APY/APR it generates? If the answer is no, it is a great way to generate funds, hedge against inflation safely, and maybe make some profits along the way.