Aptos has been at the forefront of innovation and true value accumulation in the Move ecosystem. Through efforts of the indefatigable Aptos core developers; both Aptos labs and open source contributors in the ecosystem, the chain has consistently striven to be amongst the top players among existing L1s. Although less than a year old, the chain has made a name for itself through incredible partnerships in different aspects of web3, particularly, Decentralized Finance. Aptos-based dApps like Liquidswap, Tsunami Finance, Baptswap, Thala labs and a host of others set the precedent for the DeFi landscape of Aptos and Move ecosystem at large. In this article, we shall be providing an overview of the DeFi Ecosystem on Aptos.
Decentralized Exchanges: Liquidswap, Tsunami and BAPTSwap
To begin our discussion, let us dive into the primary means of exchange within the world of DeFi, Decentralized Exchanges commonly known as DEXes. Talking about decentralized exchanges on Aptos without mentioning the first Aptos-native DEX, Liquidswap, would be a disservice to the guys at Pontem. From the project’s docs, Liquidswap is the first AMM (Automated Market Maker) on the Aptos blockchain, created to enable safe and decentralized token swaps. The protocol uses smart contracts developed by the Pontem Network team, written in the Move language, and published on the Aptos mainnet. Automated Market Maker are smart contracts that hold liquidity pools that can be traded against.
With a total trading volume of over $12m, Tsunami Finance is another DeFi protocol with an integrated Decentralized exchange. It doubles as both a margin trading platform and a spot exchange. Tsunami is built with traders in mind. According to the information on the Tsunami documentation, it provides a way to trade with 0% price impact, known exit liquidity, low funding fees, a low spread, and collateral that grows in value over time while Tsunami Seasons offers incentives for loyal and active traders, based on tokens and NFTs offered by Tsunami. Everyone loves freebies, and Tsunami sure promises that at some point.
Our final mention under DEXes would be BAPT Labs' prestigious swap, Baptswap. Although not gaining much attention at this point, Baptswap’s simple UI and a committed team would, most likely, work the project into the limelight in the coming months. They are one of the early players in Aptos’ DeFi ecosystem. Designed to capture the value generated in the ecosystem, the BAPT token powers the BAPTSWAP ecosystem.
Lending: Thala
Being one of the first players in the Aptos DeFi ecosystem, Thala enables seamless borrowing of Move Dollar. The protocol has two main products which are Thala Swap and Move Dollar. On Thala, users can deposit collateral into smart contracts to borrow Move Dollar, MOD, to repay the loan at a later date. These collateralized debt positions are known as vaults.
Flash loans:
Thala implements flash loans in its protocol. With Flash Loans, one can borrow assets without needing collateral, as long as liquidity is repaid within the same transaction. To initiate a Flash Loan, you create a contract that requests the loan, and this contract must complete the specified actions and repay the loan along with fees in a single transaction. Thala charges a 1bps flash loan fee. There are more details on this in the Thala docs.
Risks:
Thala recognizes different kinds of risks; smart contract risk, counterparty risk, centralization risk, liquidity risk, volatility risk, and oracle risk. They also proposed different measures to mitigate these risks.
Oracles:
One of the ways the Thalalabs team decided to limit the risks associated with supplying information from Orcales is to implement a tiered Oracle design. Having a primary oracle and a secondary oracle is similar to having plans A and B to cushion the effects of unforeseen circumstances, peradventure any of the price and data sources fail. While Pyth and Switchboard serve as the two options for the primary oracle, the protocol utilizes scheduled tasks to retrieve prices from other DEXes and price API providers. It is worthy of note that the secondary oracle only comes into effect when Plan A fails.
Liquid Staking: Ditto and Tortuga
The challenge with conventional staking in the Proof-of-Stake ecosystem is that staked assets cannot be used for other purposes like lending. To circumvent this obstacle, liquid staking was introduced. Liquid Staking is the process of converting staked tokens into a liquid form, allowing token holders to use their assets as collateral for other financial activities within a blockchain.
Ditto is a pioneer of liquid staking on Aptos. On Ditto, once APT is staked, the user receives stAPT tokens in exchange. These stAPT tokens are almost valued as APT. To further secure and decentralize the network, the users’ staked APT is delegated to one of Ditto’s validators on the Aptos blockchain.
Delegating your APT to Ditto yields a whopping 7% per annum in APT. Also, the Ditto protocol has a discount token, DTO, which can be redeemed after the Ditto token launch. This discount token allows users to buy DTO at half its original price at any instance; similar to share option allocation and redemption in TradFi. What a great concept! In the end, stakers and Ditto win.
Tortuga on the other hand, boasts of a zero % fee at this point with a future possibility of the protocol’s governance to determine a protocol commission which is securely saved in Tortuga’s treasury. This is a known source of revenue for DeFi protocols across multiple networks.
tAPT is the liquidity token of the Tortuga ecosystem. That is the token you get for delegating your APT to validators on Tortuga. It is tradeable on different DEXes native to the Aptos blockchain through some simple steps. To exit tAPT, users can do either of the following, trade it for APT or unstake from Tortuga. While trading tAPT directly for APT can be done immediately, unstaking from Tortuga could take up to 30 days and that’s because Aptos has a 30-day lockup period. The APT issuance APY on Tortuga is 7%, similar to Ditto’s.
As seen in Tortuga’s docs, When a user unstakes from Tortuga, they instead receive a Ticket. This Ticket is claimable for APT as it becomes available from the validator. Unstake to get a Ticket, then claim a Ticket to get APT. Tickets are processed in first-in-first-out order and never expire. When a user unstakes from Tortuga, 0.3% of the unstaked tAPT is burned (this number is controllable by governance). This is not a protocol fee. Instead, the APT associated with the burned tAPT is claimable by everyone else holding tAPT. This is to dampen volatile periods with large unstaking.
Summary
Dissecting each DeFi protocol on Aptos would be a herculean task that might require more weeks or months to completely unravel. This is the reason we tried touching on vital aspects of each DeFi protocol. It is worthy of note that all aforementioned protocols have intertwined utilities. Together with all mentioned protocols, other protocols like Abel Finance, Aries Markets, Aptin Finance, Argo, Cetus, etc all have an approximate aggregated $54m TVL.
Why not fold your sleeves and get your hands dirty farming some produce on the Aptos network DeFi ecosystem? It’s sure going to be a win-win for every stakeholder.