Decentralized Finance (or DeFi) has proved to be the hub of innovation in the blockchain industry. Not only has it given products after products, each surpassing the previous in multiple ways, but it has also given us a sense of wonder as to what we can expect from it in the future.
From its humble beginnings, we’ve come a long way to where DeFi is right now. And it is all due to the amazing people who have been behind the products and all those who have supported those products.
When it comes to products that have been loved by all in the DeFi space, one of the platforms that stick out is Curve Finance. Built on a simple concept, the platform took the industry by storm within weeks of its launch. As of now, it sits on its throne as one of the most respected platforms in the DeFi space.
But Curve Finance isn’t what we’re here to talk about today. We’re here to talk about its authorized fork, Ellipsis Finance. First, let’s take a quick glance at what you can expect from this article.
There’s a lot of information packed into this article and all of it is important for you to decide whether you want to go for this platform or not. If you have an understanding of the basics, such as Curve Finance and Automated Market Makers, feel free to skip directly to sections on Ellipsis Finance and EPS Tokens.
- What is Curve?
- What are Automated Market Makers?
- What is Ellipsis Finance?
- What is the EPS Token?
- How to Earn EPS on Ellipsis Finance?
What is Curve Finance?
Introduced by the Russian physicist, Michael Egorov, Curve Finance is one of the leading exchanges for stablecoins. Egorov had been playing with DeFi protocols since 2018 for two years before launching his own decentralized exchange in the January of 2020. The platform has since become one of the leading players in the DeFi ecosystem.
As Egorov describes it, the platform is an exchange for stablecoins and bitcoin tokens on the Ethereum Blockchain. Put simply, it is a protocol that enables users of the platform to swap a limited number of Ethereum-based assets.
What made the platform a huge success was the fact that it only deals with stablecoins. This way, it can offer liquidity providers almost zero impermanent loss while the traders enjoy considerably low slippage.
Curve is popular in the DeFi space for the market-making algorithm it uses. This algorithm can provide hundreds of times higher market depth (at worse) and thousands of times higher market depth (at best) for the same amount of cryptos the users lock in to provide liquidity to the platform.
The way it differs from conventional market makers is by providing liquidity to all the users that have assets backed by Curve’s markets. Conventional market makers, on the other hand, rely on their own holdings and assets provided on the exchange for providing liquidity to the market.
The platform supports a host of stablecoins such as DAI, USDT, TUSD, sUSD, BUSD, and USDC. In addition to these, it also supports BTC pairs, allowing you to trade efficiently on the platform without wasting any time.
By employing these strategies, Curve manages to provide some of the best prices for stablecoins and stable assets in the entire DeFi industry.
The way Curve manages to outperform its competitors is by automating the process of reinforcing liquidity. Yes, Curve is an Automated Market Maker (AMM). It uses market-making algorithms for controlling the prices of the stablecoins listed on the platform.
Let’s talk about automated market makers in more depth for you to properly understand what Curve is all about.
What are Automated Market Makers?
Traditional markets have relied on human beings to facilitate trade for a very long time. These markets require human beings to create order books for trade to happen.
These order books are amongst the most important aspects of these markets. It is here that the prices are entered and then publicly shown to all of the traders in the market. Once the traders learn of these prices, it is up to them to decide if they agree with the prices or not. It is only when they agree to the prices that the trade happens.
Should they decide that the price demanded by the seller is way too high for the product being sold, they can go ahead and refuse to trade with the seller. And that is something which we can say is true for all markets. Buyers always look for the lowest price possible for the products they intend to buy while the sellers try to sell their products for as high a price as the product can fetch.
Ideally, either the buyer should increase their budget to buy the said product, or the seller should reduce the price of the product to fit the buyer’s budget better. However, in reality, this rarely happens and neither the buyer nor the seller ever agrees on one price for the product.
This creates a stalemate and because of that, the trade doesn’t happen. But traditional markets are where most of the trade happens. So how do they overcome this problem?
To ensure that a stalemate such as the one we just discussed doesn’t happen, traditional markets rely on market makers.
Market markers are traders who are willing to buy or sell a few items or commodities at any quoted price. Hence the name.
Let’s get back to the stalemate situation discussed above. The reason why the trade wasn’t happening back then was because the seller had quoted a price that was higher than what the buyer (and for that reason, the rest of the traders) thought was fair and justifiable. In such a case, a market maker can intervene and offer to buy the seller’s product at the rate quoted by the seller. Likewise, if there’s a buyer wanting to purchase a product that the market maker intends to sell, they can do so.
While having humans as market makers have been largely successful for traditional markets, in this era of technology, it makes no sense to still rely on humans to be market makers. And that is just why developers in the DeFi are using lines of code called smart contracts to automate the process of making the market. These lines of code help in setting a price for the cryptocurrencies being traded on the exchange.
Since these lines of code automate the process of making markets, they are called Automated Market Makers (AMM). These AMMs paved the way for Decentralized Exchanges (DEXes) as we know them today. The DEXes in use today are not only secure but also built in such a way that they can maximize the profits that the traders on the platform get.
What is Ellipsis Finance?
Officially launched in March 2021, Ellipsis Finance is an authorized fork of Curve Finance. If you remember what we talked about while discussing Curve Finance earlier in this article, you would have no trouble understanding what Ellipsis Finance is all about.
If you’ve used Curve Finance already, you know what veCRV is. But for those of you who don’t, it is a vote locking escrow used on Curve Finance. The way it works is that CRV holders lock their CRV into the Curve DAO. In exchange for that, they are rewarded with veCRV tokens. The longer you lock your CRV, the more veCRV you receive. Vote locking also allows you to vote in governance—which is perhaps the most important use of veCRV.
Why are we talking about veCRV? Well, since Ellipsis Finance is an authorized fork of Curve Finance, veCRV holders would receive 25% of the total token supply that is going to be airdropped on a weekly basis for over 1 year.
Being an authorized fork of Curve Finance, Ellipsis Finance would be receiving support from the Curve Finance team. The Ellipsis Finance team aims to commit to the core values of Curve Finance.
What this means for you, as a user of Ellipsis Finance, is that you would enjoy the decentralized and trustless architecture you used to enjoy on Curve Finance.
Not only that, it also inherits the zero fees that you enjoyed while making a deposit or withdrawal on Curve Finance.
Additionally, you would also have no lock-ups on liquidity and would experience extremely efficient stablecoin exchanges.
Since it is just starting out, BUSD, USDC & USDT are the supported swaps on the platform. Eventually, it would expand to more pairs. But that’s something you would enjoy in the future so I would recommend you to keep an eye on the updates on the platform to know when your favorite token pair makes it to the exchange.
What is the EPS Token?
The Ellipsis token (or EPS) is the native token on the Ellipsis Finance platform. It is this token that provides value for the token holders and liquidity pools.
The EPS token is a Revenue Earning token. What this means for you is that when you stake the EPS tokens, you will earn fees from the Ellipsis Finance protocol.
As far as trading fees are concerned, the EPS stakers would receive half of the fees and the other half would be split between the Staking Pool and the Liquidity Providers Reward Pool.
Talking about the Liquidity Providers Reward Pool first, liquidity providers would have to lock their EPS in for over 3 months to receive all the rewards. Users claiming their EPS before their lock-in period ends would have to pay an Early Exit Penalty of 50% from their returns.
So where does the money from the Early Exit Penalty penalty go? To put it simply, it is distributed to the users who continue to keep their EPS locked in. This way, the maximum benefit of staking goes to the most loyal EPS holders once the vesting period of 3 months expires.
How that happens is a bit complex. Nevertheless, we have talked about it later in the article. So rest assured, you would know everything you need to know about the Ellipsis Finance platform by the time you’re done reading this article.
Coming to the staking pool, traders would receive both trading fees as well as the revenue from the Early Exit Penalty that traders claiming their EPS before the lock-in period of 3 months ends have to pay. That said, the staking pool does not have any mandatory lock-up. Traders are free to claim their EPS whenever they want to without any repercussion.
Coming back to Liquidity Provider Rewards, 20% of it would be given to EPS/BNB Liquidity Providers while the rest of it would be distributed to other liquidity providers.
How these rewards would be distributed can be a bit confusing, so read the following paragraphs carefully. Usually, such concepts are simple but for some reason, Ellipsis Finance decided to complicate things a bit. That said, this is nothing that a couple of reads can’t fix.
A total of 30% rewards would be distributed in the first year. So that would be 5% distributed in the first month, 4% distributed in the second month, 3% distributed in the third month and the remaining 18% distributed across the rest of the year. So that’s 2% every month after the third month.
For the second year, a total of 12.5% rewards would be distributed. In the third year, the traders would see a reward of 6.25%. In the fourth year, the traders would see a reward of 3.125%. And in the fifth year, the traders would again see a reward of 3.125%.
The total EPS token supply is set at one billion tokens with an emission scheduled over five years. These tokens would be distributed in multiple ways. A majority of the tokens, 55% to be precise, would be supplied in the form of Liquidity Provider Rewards that would be continuously minted over a course of 5 years as discussed earlier.
For the remaining 45% of the tokens, 25% of the total token supply would be in the form of veCRV airdrop which would be distributed on a weekly basis. And 20% of the total token supply would be vested for one year for the development fund. These funds would be released continuously.
How to Earn EPS on Ellipsis Finance?
There are multiple ways for you to earn EPS on the Ellipsis Finance platform.
To start with, you can deposit your stablecoins into a liquidity pool on the platform to receive LP tokens in return for your deposit. To keep the slippage low, the platform needs liquidity. As a user of the platform, you can help provide the required liquidity by depositing your stablecoins in liquidity pools. As the platform collects trading fees, the value of the LP tokens grows. And the growth is shared with the liquidity providers.
The second way to earn EPS on the Ellipsis Finance platform is by depositing your LP and/or EPS/BNB LP tokens. You’re probably familiar with the term liquidity mining. That is just what you need to do here to earn EPS.
All you need to do is visit the “staking” page on the Ellipsis Finance website and choose the pool you hold LP tokens for. Once done, click on “deposit” to transfer your LP tokens into the rewards contract. As soon as you do that, you would start earning EPS tokens. Each time a new block is mined, you would see an increase in your claimable balance. You can then choose to withdraw your LP tokens whenever you want.
If you provide EPS/BNB liquidity, you can earn even more EPS tokens. But that takes a bit more time and effort on your end. To start with, you would need to have EPS and BNB tokens. You would then have to visit PancakeSwap and add liquidity to the EPS/BNB pool. Once done, visit the “staking” section of the Ellipsis Finance website and deposit the LP tokens you received.
Another way to earn EPS is by claiming your vested EPS tokens. To do this, all you need to do is stake some of your LP tokens. Upon doing so, you will find an option to “Vest EPS”. Doing so would create new EPS tokens for you which would automatically be deposited into the fee distribution contract. This would give you a portion of the trade fees generated by the protocol.
Since the trade fees are split evenly (50/50) amongst liquidity providers and EPS stakers, you would end up getting a portion of the 50%. These fees are periodically transferred into the distributor contract directly from the pools and are released evenly in the seven days that follow
A thing to remember here is the fact that freshly minted EPS is always considered vested for 90 days. What this means for you is that while you can still withdraw the freshly minted EPS whenever you want, you would incur a penalty for that.
This penalty, the Early Exit Penalty, is a whopping 50%. So I would advise you to be careful while withdrawing your EPS tokens.
That said, once the vesting period of 90 days is over, your vested EPS is unlocked and you’re free to withdraw it whenever you feel the need to withdraw it.
Alternatively, you can go to PancakeSwap and purchase some EPS tokens. Once done, deposit it into the fee distributor and you’ll receive a portion of the protocol trade fees. What’s interesting about it is the fact that the EPS staked this way can be withdrawn whenever you want without paying any penalty.
Locking the EPS you have in your wallet opens up another route for you to earn more EPS—Early-Exit Penalties! While the others pay the penalty, you are rewarded for your loyalty.
Finally, you can lock your CRV on Ethereum to receive EPS tokens. As mentioned earlier, this airdrop occurs on a weekly basis. Through this airdrop, Ellipsis Finance aims to bring 25% of the total supply into the system. That’s 250 million tokens being given to the users through the airdrop!
Before You Go…
Curve Finance is a platform most people know about. And those who know about it trust it a lot—largely due to the fact that it warns you time and again about the risks you might undertake with the given investment.
Since Ellipsis Finance is an authorized fork of Curve Finance, it seems like some of that trust is going to trickle down to the platform. To add to that trust, we know that the team behind Ellipsis Finance is being supported by Curve Finance. This ensures that Ellipsis Finance imbibes the core values of Curve Finance.
That said, what happens to Ellipsis Finance in the future is something we would only get to know about in the future. For now, things look very hopeful and positive. And while that may feel good enough to put your money into it, it is highly advisable to do your own research before you invest in anything.
I’ve said this multiple times and wouldn’t refrain from saying this in every article. Do not invest in anything that you can’t afford to lose. And research carefully before investing in any product.
Be a responsible investor and enjoy Ellipsis Finance—if and when you find it to be the right platform for you!