Summary
This publication aims to provide insights into the decision to introduce $CHIPs to Folks Finance’s lend/borrow platform.
Abstract
Algorand’s highest TVL non-wrapped or stable ASA, $CHIPs, brought to you by Algorand Casino: take a look at live poker, casino/sportsbook betting, soft-staking, and weekly profit sharing. Profit sharing is particularly unique (ranging from 10-50% APY) and distributed weekly with a very high ceiling. Factoring in other farms/governance incentives, $CHIPs offers attractive APY opportunities, likely in the range of 50-70%, with an even higher ceiling. Currently, $CHIPs boasts a TVL of $1,298,164 and a market cap of $4,101,623, with a 24-hour trading volume of $5,659 (prob didn’t need including but wanted to be transparent). The token is well-established on Tinyman, but lacks liquidity on Folks Finance.
$CHIPs presents a unique opportunity for Folks Finance, as holders are exposed to multiple reward streams paid daily and weekly with competitive APY. Integrating $CHIPs onto the platform would spur a fun cat and mouse game between lenders and borrowers balancing the APY of lend/borrow against that of which is described above. Ideally FF then captures some of the 1m+ TVL $CHIPs offers.
While risk aversion is important, note that $CHIPs is far more than a coin to gamble with. One can choose to gamble (not recommended) or one can choose to invest–this is no different than fiat. AC has never received any grants or funding, and built a sustainable product from the ground up. Adding $CHIPs to lend/borrow seeks to benefit both parties. In the event that the casino is not profitable over a given week, the Casino covers losses (soft-staking mechanism anyways).
Motivation
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Attracting Capital: Adding $CHIPs will bring external liquidity to the FF platform. This could significantly impact TVL.
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Cross-pollination: This could be a catalyst for the AC community, an experienced group with a large TVL on Tinyman, to learn how to responsibly leverage FF to get the most out of their investment. It has always seemed funny to me how one-sided the liquidity is for $CHIPs despite having so much TVL–this ofc is due to their reward mechanism. Fear not, because this is a solution towards balancing TVL and expanding possibilities on Algorand!
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Use Case: One alluring use case for $CHIPs on FF (to me at least) is utilizing USDC as collateral to borrow $CHIPs. By borrowing $CHIPs, users can participate in the weekly profit-sharing (among other things). The profits earned can then be used to repay the $CHIPs loan, creating a sustainable cycle of repayment (assuming net APY > 0 which it will be so long as borrow rate not 40+% and user takes advantage of all opportunities). Assuming good loan health in this case, if $CHIPs takes a dip then take some USDC collateral to help repay loan. Nfa ofc just theory.
Specification
Ticker: chip
ASA ID: 388592191
Collateral Factor 0% (I figure it would be unpopular here to raise this haha)
Borrow Factor 100%
Liquidation Max 50%
Liquidation Bonus 10%
Liquidation Fee 10%
Collateral Cap ($) 50,000
…. Etc
Up to you guys, as I am not sure what all the values mean entirely. I would think it would be similar to how OPUL is on the platform.
Thanks for considering.
Best,
TheHolyGoat / Zach