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cDAI Unipool DeFiZap Tutorial.
Generate Uniswap pool trading fees while earning interest on Compound. + Big UI Update.
As a leading DeFi company, Compound has solidified itself as one of the premier protocols when it comes to lending and borrowing popular cryptocurrencies like Ether and DAI.
For those unfamiliar with Compound, lenders receive cTokens when they supply assets to the protocol to earn interest, essentially representing a pro-rata claim over the total amount of assets in any given pool. In practice, a user will deposit DAI and receive cDAI in return. When holding cDAI, users accrue interest based on the lending rate of that asset at any given time (3.97% at the time of writing).
For those who have been keeping up with what we’ve been up to here at DeFiZap, we’re constantly looking for new ways to build on the idea of composability - or pairing different DeFi products for unique benefits.
Today, we’re happy to announce our latest cDAI Unipool Zap. Similar to the release of our most recent Chai Unipool Zap, the cDAI Unipool allows users to enter cDAI’s liquidity pool with just Ether, allowing you to earn Uniswap trading fees on top of the cDAI interest rate.
How Does it Work?
Roughly half of your ETH input is sold to DAI using Kyber Swap to mitigate slippage. From there, we take the DAI and supply it via Compound’s contracts to mint cDAI. Once we’ve acquired cDAI, we add it to the cDAI/ETH Uniswap pool to earn a portion of the 0.3% fees generated on the trading pair while still earning interest on cDAI. Here’s an illustration of what this looks like:
For a look at how this transaction is split up, please reference this example: https://etherscan.io/tx/0x91b32933ac356571f413992fe2cdadd989c6269649015d29cf62c5347b7caab6
As it stands today, the cDAI/ETH pool currently has roughly $12,500 worth of liquidity, signaling that DeFiZap has the opportunity to raise awareness about this alternative opportunity and start moving the needle to improve cDAI liquidity, similarly to how we helped Chai:
Over $16M DAI have been supplied on Compound to mint cDAI, an indicator that their contracts are currently acting as the largest pool of DAI on the market.
With our cDAI Zap, we wanted to provide a way for users to earn fees from Uniswap while also generating interest from DAI lending. At the same time helping improve liquidity within the ecosystem to encourage direct ETH<>cDAI swaps, and facilitate entirely new, yet to be built financial products.
For those of you who don’t know, we’ve registered each Zap with the Ethereum Name Service, enabling a Venmo-like experience for end users to place margin trades on Fulcrum, add liquidity on Uniswap, or generate interest on Compound all without having to leave your Ethereum wallet. (Note: just double check your gas limit has been set to 1500000)
Traders effectively enter and exit trades with one token (for now ETH), meaning it becomes that much easier to track tangible ROI. We’re also going to be adding stablecoin support, allowing you to enter Zaps with DAI. Paired with the ability to build custom Zaps, we’re here to help push the DeFi adoption envelope.
To recap, we’re extremely excited to be working with a company as strong as Compound and look forward to integrating other cTokens into our future Zaps.
For more information on all of things DeFiZap, head on over to our new Twitter or check out our tutorials on https://defitutorials.com/
CHAI Unipool Announcement on DeFi Nation:
Disclosure: This is not investment advice. Please consult your own independent investment advisor before making any investment decisions.