Deep Dive: product matrix of APY Swap

Design layers

As already mentioned in the previous article, the product matrix of APYSwap consists of three layers. Let us take a closer look, starting with the ground layer — the Vault Contracts. These vaults, also called APYSwap Vaults, can be owned by multiple parties and easily transferred peer-to-peer via the process of tokenization. This allows DeFi portfolio managers to create portfolios with specific combinations of LP, YF and other tokens, in addition to other synthetic instruments and divide them into shares, transferrable to other parties.

Users are then able to trade these shares of APYSwap Vaults, while the assets within the vaults remain locked in staking, lending or pooling. While the shares are traded, they retain the benefits provided by locked assets and do not suffer the penalties tied to lock-up periods in some projects. APYSwap Vaults are also more flexible than index funds or other asset baskets, since they can interact with any trustless service on the Ethereum, Polkadot, Huobi ECO Chain and Binance Smart Chain networks, governed from the specific addresses. This also allows them to take part in governance and other functions.

The second product layer is the APYSwap Vault Marketplace. The marketplace is comprised of smart contracts, a regular backend and a web application with orderbook and matching done on-chain. This is where the portfolios and shares of APYSwap vaults, containing the mix of LP, YF and Ethereum blockchain tokens, are traded. This eliminates the friction, intermediates and costly GAS fees. Layer 2 solutions such as Chromia blockchain can be used to transfer or trade shares in APYSwap Vaults with assets remaining anchored to the Ethereum network. This enables users to trade tokens on Chromia 2 layer using pooled assets and AMM, thus reducing the transaction times and further minimizing the GAS fees.

APY Mask is the final layer in APYSwap’s product matrix. It interacts with DeFi apps via the APYSwap Vaults. There are multiple features available such as creating and managing vaults, signing marketplace transactions and transfer the shares ownership. Finally, the APY Mask can be used to store the APY tokens.

APYSwap implements a cross-chain support for Ethereum, Polkadot, Huobi ECO Chain and Binance Smart Chain due to multiple base layer blockchains, offering DeFi services. This could later be expanded if more public blockchain will support DeFi applications. For Ethereum and Binance Smart Chain, the cross-chain support is currently implemented using layer 2 protocols as a bridge. After different vaults are generated they will be listed on layer 2 Marketplace for trading and then registered on the initial public chain.

In Polkadot’s case it is possible to use virtual machines to connect to Polkadot’s ecosystem, compatible with Ethereum-based smart contract. This ensures the most effective performance and cost, since most of the assets are issued on Ethereum. Finally, The Huobi ECO Chain integration is currently in development.

Key features and competitors

APYSwap creates flexible “Delegates” or “Vaults” which can be used to work with any Ethereum contract, acting as a user’s proxy. These delegates can be “tokenized” by users, issuing a standard ERC20 token with the value of 1 (100% ownership). The amount of ownership tokens is a share of all the liquidity shareholders can withdraw from the delegate and other tokens can no longer be minted.

In the case of Set Protocol, a “Token Set” is created, which is a predefined combination of tokens in a particular proportion. These sets are ERC20 tokens and those “Set Tokens” are minted when a proportion of component tokens are deposited to the set. This way token portfolio can be easily managed in a certain proportion (by trading different set tokens). Enzyme Finance (formerly known as Melon Protocol) creates vaults to interact with DeFi services. Portfolio managers are operating these vaults and users can trade vault shares.

However, unlike Enzyme, APYSwap is able to cover all solidity blockchains by using layer 2, representing assets from layer 1. A cross chain portfolio can be created for any solidity blockchain, specifically Ethereum, Polkadot, Binance Smart Chain and Huobi ECO Chain, connected by Ethereum smart contracts. Therefore, these blockchains can be actively for trading, providing a universal and cheaper solution to users with a low barrier to entry.

In addition, compared to its competitors, APYSwap provides a better user experience by offering a marketplace, where users are able to delegate their assets. Portfolio managers can actively trade on user’s behalf to generate yields. APY wallet provides a convenient interface to interact with the APY Vault’s functions and engages users to interact in APY ecosystem’s governance.

Use cases

APYSwap targets two groups of users — experienced crypto traders interested in creating portfolios and crypto asset holders who can purchase said portfolios to generate passive income.

Delegated Asset Management

There is a wide variety of products available for managing crypto holdings in the current DeFi market including lending, liquidity protocols and derivatives. However, compared to the fiat investment portfolios’ ease of purchase, cryptocurrencies hold a significant entry barrier from a technological perspective. A typical crypto investor may find it difficult to keep track of these services, let alone study the intricacies of every available protocol. APYSwap offers a solution to this problem. It recreates the traditional FinTech user experience, simplifies yield farming and reduces its cost without sacrificing the decentralization of assets’ ownership.

Financial Product Issuance

APYSwap offers portfolio managers a wide range of tools for financial product design. It simplifies the user experience, as they do not need to take care of technical development. APYSwap’s vault level can support the most popular DeFi protocols on Ethereum, Polkadot, Huobi ECO Chain and Binance Smart Chain. This is very beneficial to portfolio managers, since they are able to use the protocol they are already accustomed to. Finally, by leveraging lending protocols, they can also create a DeFi index fund, generating dividends.

Delegated Governance

Token holders are incentivized to participate in the delegated governance by means of token rewards. They may delegate their voting power to whitelist new DeFi projects on the platform. In addition, there are also incentives to participate in voting regularly and long-term, since the token’s vote value is influenced by the historic voting activity of the user, as well as the period the token was held for. Therefore, the longer you hold the token and the more often you vote — the larger voting power you have.