PANews Editor's Note: WAVES is a Russian public blockchain. At the beginning of the Russian-Ukrainian war last year, the Russian ruble depreciated sharply. In this panic, Russian investors chose to buy WAVES for risk hedging, which caused its token price to soar. The same story happened again. The Russian private armed group Wagner "rebelled", the ruble depreciated again, and the price of WAVES tokens soared again. This article is a repost of an old article, first published on March 30, 2022. This article will explain in detail the WAVES public chain, known as the "Russian Ethereum".
Author: TinyHand
Source: Y2Z Capital
Preface
1. Origin
2. Market value and price
3. Stablecoin USD-Neutrino (USDN)
1. Market value and distribution
2.Stablecoin system design
3.How does USDN maintain stability?
4. How to solve the impact of reserve asset price fluctuations on USDN
5. The impact of USDN on reserve asset prices
6. Risks and solutions
7. Summary
4. Waves Ecosystem and Main Applications
1. Basic Introduction
2. Distribution of Waves locked assets
3.WavesEnterprise
4.Vires Protocol
5.WavesExchange
6.WavesKeeper
7. Gravity Protocol
8.WavesDucks
9.Swop.fi
10.WavesAssociation
11. Future plans
Conclusion
Preface
Many people associate the Russia-Ukraine war with the rise in the price of Waves tokens. Putting aside the hype at the news level, from the perspective of product function analysis, the current Waves can indeed meet people's needs for financial hedging and can meet the experience of different needs.
Waves price surges during Russia-Ukraine war
Here are the reasons:
1. Waves has its own exchange. USDN stablecoins can be purchased directly through Waves Exchanges. The exchange integrates the functions of centralized exchanges and decentralized exchanges, meeting people's needs to directly purchase USDN with fiat currency and providing a good trading experience.
2. Waves' stablecoin system is well designed. The introduction of NSBT has greatly solved the problem of insufficient USDN reserves and further ensured the stability of USDN. When the SWIFT international settlement system or other payment infrastructure is closed, USDN can play the role of legal currency value transfer.
3. Waves has DeFo (decentralized foreign exchange trading). Different countries can use the DeFo tool to exchange USDN with various algorithmic stablecoins such as EURN, RUBN, CNYN, JPYN, UAHN, NGNN, BRLN, GBPN, TRYN, etc., meeting the needs of transferring multiple stable assets.
4. In addition to property transfer, the ecological construction of the Waves public chain is also very complete, including secondary markets, lending and savings, NFTs, games and other projects. Developers can build more usage scenarios relying on Waves development tools to meet people's needs for financial services and entertainment life.
5. Some time ago, an exchange froze Russian account assets. The probability of such an incident happening on Waves is extremely small. Waves Enterprise, an enterprise-level service platform under Waves, has been cooperating with many Russian industrial asset companies for many years. Its business involves enterprise and government levels, ranging from the transfer of industrial assets to the record of office property. Currently, only Waves Enterprise, a blockchain platform, has the ability to undertake such business. As a blockchain platform serving enterprise-level services, Waves will not easily do things that make corporate and government customers panic.
WavesEnterprise partial list of Russian customers
6. In addition to serving large enterprises like Microsoft through private chain technology, Waves is also relatively complete in the construction of the public chain ecosystem, and has developed a variety of DeFi, NFT, game wallets and other mass applications.
Therefore, it is logical to choose a public chain as a financial hedge. Although new public chain concepts are emerging in an endless stream at this stage, Waves is one of the few financial public chain projects that has been tested for many years.
1. Origin
Waves was founded in 2016 by Ukrainian scientist Sasha Ivanov.
Ivanov majored in theoretical physics for 7 years in college and worked in artificial intelligence for 7 years after graduation. In his spare time, he has been active in online communities mainly composed of scientists. Later, the blockchain community became more and more active, and Ivanov was deeply involved in it. He then decided to develop enterprise-level blockchain applications.
Waves founder Ivanov
Ivanov has a clear goal for Waves - to apply blockchain to financial and pan-financial fields such as securities, crowdfunding, and fiat currency transfers, thereby creating a public financial chain.
Today, the Waves ecosystem not only realizes a small cycle within the ecosystem, but also excels in solving cross-chain solutions, achieving a large cycle of interaction with other public chains. Its issued stablecoin USDN also supports ETH, BSC and other chains, and is currently circulating in the market.
2. Market value and price
Waves conducted an ICO in 2016 by accepting donations of bitcoins, raising 30,000 bitcoins (about 16 million US dollars), becoming the third largest blockchain crowdfunding project after The DAO and Ethereum at the time.
As of March 17, 2022, according to data from coinmarketcap.com: Waves' market value is $3,422,333,753.19, ranking 45th in total market value, and is currently the largest public chain project in Russia.
Waves Market Cap Trend
Waves Price Charts
The Waves coin price reached an all-time high of $41.86 in May 2021.
In recent trends, Waves experienced a 10-week decline in October 2021, from $32.44 to $8.02. On February 21, 2022, when the market fell as a whole, Waves began to rebound strongly, rising sharply for three consecutive weeks, from $8.2 to $32.93, an increase of 300%. It is currently close to the historical pressure level of around 32-34.
3. Stablecoin USD-Neutrino (USDN)
1. Market value and distribution
USDN ranks 8th in market capitalization in the stablecoin category. Compared with Terra USD, which is also an algorithmic stablecoin with its own ecosystem, its market capitalization is only half of that of Terra USD.
Almost all of the USDN on the ETH chain and the BSC chain is used to provide liquidity in the Curve protocol, and the amount of USDN held on the ETH chain is much higher than that of BSC.
(Note: Ellipsis.finance is an authorized fork of Curve.fi, providing Curve’s StableSwap protocol to users on the BNB chain.)
Comparison of the first USDN amount between ETH and BSC wallets
2. Stablecoin system design
The biggest problem with the most popular stablecoins on the market, such as USDT and USDC, is that they rely on real-world physical funds as reserves, which is still not decentralized enough. The Neutrino protocol is designed mainly to solve this problem.
First of all, Neutrino does not use fiat currency as a reserve fund like Tether's USDT, but adopts an algorithmic stablecoin protocol and uses on-chain assets as collateral as a reserve fund. The current main collateral asset is Waves. Secondly, the principle of Neutrino to solve the shortage of reserves is still "using market profit-seeking to make automatic adjustments", but unlike Terra's UST, Neutrino has added the "secondary marketization of reserves" by issuing NSBT.
This stablecoin system consists of Waves, USDN and NSBT:
（1）Waves
The core token of the Waves ecosystem, used to pay transaction fees. It is based on the lPoS (Leased Proof of Stake) consensus mechanism and can serve as collateral for USDN in the Neutrino system.
（2）USDN
Algorithmic stablecoins pegged to the US dollar can be used as collateral for other assets.
The maximum supply of USDN is determined by the maximum capitalization of the Waves token.
USDN has no pre-allocation or pre-mining. The increase and decrease of USDN supply is also controlled by the market.
（3）NSBT
Neutrino's governance token is generated through a smart contract, and its parameters depend on the reserve deficit value of USDN, which can be used to maintain the stability of USDN. The market price of NSBT is determined by the supply and demand dynamics of cryptocurrency exchanges and the Neutrino smart contract.
In addition to acting as a stable medium between Waves-USDN, NSBT tokens can also be used as payment for protocol operations, to create collateral positions (generating USDN against Waves) and pay fees to form "hedge funds" to generate new synthetic assets such as GLDN (gold), EURN (euro), etc.
Waves Token Architecture Diagram
3. How does USDN maintain stability?
(1) Equilibrium state
The generation of USDN is automatically realized through the smart contract system. When a certain value of Waves tokens is locked in the account of the smart contract, the same value of USDN can be minted. Ideally, when the market value of USDN and the locked assets is equal, the market value is balanced.
(2) Arbitrage mechanism
When the market demand for USDN increases, the USDN price will be higher than $1. At this time, traders can convert Waves tokens into USDN through the Neutrino protocol, and then sell USDN at a higher price on the exchange to make a profit. Such arbitrage behavior will increase the supply of USDN in the market and maintain the price back to $1.
Arbitrage Mechanism
On the contrary, the USDN supply on the exchange will increase significantly, which will cause the price of USDN to be below $1. Traders can buy USDN on the market, exchange it for Waves through the Neutrino protocol, and sell it at a profit.
This is similar to the arbitrage mechanism of Terra UST. The difference is that the Neutrino protocol also uses the issuance of NSBT to solve the problem of reserve asset price fluctuations.
4. How to solve the impact of reserve asset price fluctuations on USDN
When the price of Waves increases, the market value of the reserve asset Waves begins to exceed the market value of the USDN stablecoin. In this case, the smart contract detects the excess reserve and generates a corresponding amount of USDN to buy back NSBT to increase the supply of USDN.
When the price of Waves falls, the reserve assets will fall below the value of USDN. In this case, the smart contract will detect the reserve deficiency and can eliminate the reserve deficiency through an auction, in which NSBT will be generated and required to be purchased with Waves (NSBT/Waves trading pair).
To understand the operation mechanism of NSBT, let's take an example:
Assume that USDN is currently worth $1 million and the price of Waves, which is used as a reserve, has fallen by 10%.
This means that the Neutrino protocol only has $900,000 in reserve funds to pay for USDN.
To fill the $100,000 gap, the smart contract will issue NSBT. How much NSBT is issued will depend on the orders in the order book and the discounts from traders.
Assume that only one trader places an order with a recommended discount of 20% at this time. This means that paying the equivalent of $100,000 in Waves will get you $125,000 in NSBT.
When the Waves price rises again, traders will be able to liquidate NSBT at $125,000 or more through pending orders. This will allow traders to make a profit of $25,000 or more. In the process, arbitrageurs make a profit and the Neutrino protocol fills the $100,000 reserve gap.
5. The impact of USDN on reserve asset prices
When USDN begins to circulate in the market, the Neutrino mechanism will in turn begin to affect the tokens used as reserves (taking Waves as an example).
(1) Deflation
The size of Waves reserves determines the amount of USDN issued. Conversely, when USDN is in short supply, due to the regulation of the market and the Neutrino mechanism, the number of Waves used as reserves will increase, the circulating supply of Waves in the market will decrease, and Waves will experience deflation, leading to an increase in the price of Waves.
It is worth mentioning that the Neutrino protocol is not only applicable to Waves, but can also provide a deflation mechanism for DeFi-oriented blockchain platforms such as Ethereum, EOS, and Cosmos.
(2) Lossless Transaction
In traditional token conversions, converting Waves to USD and then back to Waves will cause a certain price drop. Unlike other third-party exchanges, Waves' own smart contracts can avoid price changes caused by spreads or low liquidity during transactions, and can ensure that the conversion from Waves to USDN will not cause any value loss to Waves.
6. Risks and solutions
Listed below are some of the risks identified and their corresponding risk mitigation plans:
risk
describe
solve
Hackers maliciously attack smart contract infrastructure
In the early stages, there may be vulnerabilities in the deployed smart contracts, which hackers can exploit to break into and steal system information.
In the worst case scenario, all tokens reserved in the smart contract are stolen with no chance of recovery.
Establish an emergency shutdown mechanism to allow USDN and NSBT users to retrieve their assets. Anomaly detection tools can be written using the RIDE programming language. RIDE in the Waves ecosystem allows smart contracts to migrate directly.
Black swan event for reserve token prices
What happens if Waves price drops significantly?
Neutrino smart contracts will issue NSBT to make up for the shortage of reserve funds. At the same time, the emergency oracle can unilaterally trigger the emergency shutdown of smart contract operations.
Pricing errors, DDoS attacks
Specifically, it refers to the erroneous price feedback from the oracle, the abnormal market dynamics of Neutrino value over a long period of time, and the dilution of Neutrino, which is unable to bring sufficient liquidity and stability to the market.
Neutrino states and transitions can be modeled and simulated with different parameters for these models to determine different parameters, limits, and threshold levels for various operations within the smart contract.
7. Summary
Waves has solved the problem of insufficient reserves by balancing the market value of USDN and reserves through the introduction of NSBT, and has expanded our thinking in the design of algorithmic stablecoins. Although Waves has its own security protection mechanism, it still faces the above risks.
USDN's market capitalization ranking lags behind UST, which is also an algorithmic stablecoin. This is not only because USDN's market capitalization is closely related to Waves' market capitalization. Waves' market capitalization ceiling determines USDN's issuance ceiling. It is also because of application scenarios and narratives. Similar to Terra's UST, when the application of the Waves ecosystem becomes more extensive and the USDN narrative becomes larger, the market capitalizations of both will spiral upward.
4. Waves Ecosystem and Main Applications
1. Basic Introduction
Currently, the main applications of Waves include Waves enterprise service platform, Neutrino protocol, Gravity protocol and other applications in DEFI and pan-financial fields, in addition to NFT collection and game applications.
Waves Ecosystem Overview
At the same time, Waves launched its own Ride programming language and supporting developer tools for developers
Waves Developer Components
2. Waves locked assets distribution
The number of protocols in the Waves ecosystem is far behind the top 9, but TLV is already in the top 10, with the main locked assets concentrated in the ETH chain, followed by the Terra chain. (Statistics from defillama.com)
Ranking of total locked assets on public chains
Ranking of locked assets on each Waves chain
Waves major protocol TVL ranking
It can be seen that the locked assets in the Waves ecosystem are currently mainly distributed in Neutrino (NSBT) and Vires Finance (VIRES).
3. Waves Enterprise
WavesEnterprise is a platform focused on providing blockchain technology services to enterprises and governments.
WavesEnterprise uses a hybrid model, which means that public and private chains are integrated in one ecosystem, combining the advantages of public and private blockchains. In this way, Waves retains the security of decentralization, data storage and privacy, while taking into account legal compliance.
Many people cannot tell the difference between WavesEnterprise and Waves. WavesEnterprise is an independent project with an independent team that is ideologically aligned with the Waves ecosystem and can share the Waves ecosystem through the Gravity protocol. WavesEnterprise technology was once a branch of the Waves protocol, but the target users are different, so the intersection of technology will disappear over time.
The application areas of WavesEnterprise blockchain service solutions include: manufacturing, retail, art, health care, oil and gas, financial technology, education, etc. Enterprises can order and choose according to their needs.
Major partners include: Alfa·bank (Russia's largest private bank), RUSAL (one of the world's top ten aluminum companies), X5 RETAIL GROUP (Russia's largest retail company with 16,500 retail stores), ROSNEFT (Russia's largest telecommunications company), Rosseti (Russia's national power grid), etc. In addition, the national electronic voting system in cooperation with the Russian government has also been launched.
Waves Partners with Microsoft
Most of them are giant companies in Russia's traditional heavy industry and communications industry, but they are not limited to Russian industries. On July 16, 2020, Waves Enterprise and Microsoft's Russian office signed a memorandum on the joint development of enterprise blockchain in Russia, agreeing on strategic cooperation in the field of enterprise blockchain solutions and cloud technology. The list of such assets is very wide, ranging from heavy machinery to basic office equipment.
Vires Protocol is a lending protocol on the Waves blockchain. Users, wallets, and dapps can participate as depositors or borrowers. Depositors provide liquidity to the market to earn passive income, while borrowers are able to obtain loans in an over-collateralized manner.
In Vires.finance, all deposited funds participate equally in interest-bearing activities. The greater the market demand for borrowed assets, the greater the return the APY lender gets. Users can lend and borrow the following tokens: WAVES, USDN, USDT, ETH and BTC. Not only that, Vires.finance also supports direct cross-chain assets, and the technology is provided by WavesExchange.
Previously, the founder of Waves tweeted that Vires.finance can provide more than 25% APY, which reminds people of Terra's Anchor, which uses 20% APY to attract users. Similar to the Terra ecosystem—UST—Anchor Protocol, Waves has also formed a capital flow of Waves ecosystem—USDN—Vires Protocol.
5. Waves Exchange
WavesExchanges is the first decentralized exchange (DEX) built on the Waves chain. It not only integrates the functions of centralized exchanges, but also adopts the procedures of decentralized automated market makers (AMM). Users can use the limit price trading mode commonly used by CEX in WavesExchange, or use the AMM mechanism of DEX.
WavesExchange Features:
On WavesExchange, in addition to using a wallet, you can also exchange cryptocurrencies, buy and sell stablecoins, and earn passive income through investments. In addition, users can even issue their own cryptocurrencies with one click. It can be said that it is a powerful tool for interacting with the many features provided by the Waves protocol.
Waves Exchange Part of the Business
waves.exchange pledges USDN to earn 12-15% return, with daily settlement of income and the ability to exit at any time.
6. Waves Keeper
Keeper is a wallet tool for the Waves ecosystem. Currently, the extension is available for all popular browsers including: Google Chrome, Firefox, Opera and Microsoft Edge.
Waves Keeper display page
Users can view account assets and NFTs through WavesKeeper, transfer funds in the WavesKeeper interface, and exchange assets directly through WavesKeeper integrated with Swop.fi.
7. Gravity Protocol
Gravity protocol is an oracle protocol under the Waves ecosystem, which is used to realize on-chain and off-chain data interaction and communication between multiple chains.
(1) Real data
Gravity does not issue native tokens, which makes it extremely convenient for other applications to integrate Gravity services. If an application wants to integrate Gravity's oracle service, they can use the protocol's own tokens to pay, and Gravity's nodes will share these revenues. Due to the interest binding relationship, this node will honestly provide real and valid data.
(2) Open Ecosystem
Gravity creates a more inclusive and open ecosystem, solving the problems of scalability and stability. The Gravity protocol not only helps nodes provide data, but also provides asset liquidity and cross-chain exchanges.
At the same time, the Gravity protocol can link any blockchain to the outside world, allowing a fully centralized gateway to be built on top of it to help lock assets and pass the lock information to another blockchain network to complete cross-chain asset transfers.
Gravity improves the liquidity and capital efficiency of crypto assets, providing a variety of use cases for building various DeFi products. Ducks is a digital duck chain game for collecting NFTs. All characters, items, resources, and achievements in WavesDucks are represented by NFTs.
Currently, the average monthly active users have reached 296,000, making it the main game in the Waves community. The game also encourages the community to promote the Waves ecosystem.
(1) Battle: Fight for different farms and get tokens as rewards
(2) Growth: Cultivating ducklings and nurturing them into higher-level NFTs can increase the price of NFTs
(3) Breeding: Hatch NFT ducks to expand collections and earning opportunities. Unlike most NFTs, ducks are able to generate EGG tokens that can be withdrawn or used in the game. Staking NFTs generates passive income.
(4) Guild: For each activity organization, WavesDucks has set up communication communities such as Telegram groups.
Waves Ducks Community Events
9. Swop.fi
Swop.fi is an AMM automated market maker that allows users to instantly exchange their tokens without having to create orders or wait for trades to be executed. The Waves blockchain ensures that every transaction is completed within seconds, and the smart contract call fee is only 0.005. The project is open to liquidity providers: any user can replenish the pool and earn SWOP rewards. Current project total market value locked (TVL): $ 21,471,027 USD
Users can get part of the transaction fees of each pool by putting liquidity into the fund pool. Except for the Waves-BTC pool, all pools use USDN or EURN as one of the trading assets. The annualized return of USDN staking is basically 8-15%.
In addition to mining, currency exchange, and governance, Swop.fi can also serve as a project launch pad, where tickets can be purchased based on the number of SWOPs staked to participate in different projects.
Swop.fiIDO Project Details
10. Waves Association
The Waves Association is a non-profit organization dedicated to advancing Web 3.0 around the world. It is mainly used to promote research within the Waves ecosystem and provide funding to support Waves technology for projects based on the Waves protocol.
Similar to the Ethereum Foundation, WavesGrants offers a grant program to support individual developers, teams, and startups serving the Waves ecosystem.
Funding amounts are determined on a case-by-case basis, taking into account technical complexity, details of the proposed solution, developer/team needs, size and importance of the Waves project, and other criteria.
All grants are made in the Waves system, with the grant distribution and awarding process being executed through the DAO.
Waves Association Support Program
The Waves Association recently announced a $1 million Waves Grant Program for projects developed on Waves infrastructure. As a core and binding component of WavesTech, the Waves Association provides governance and support for the entire Waves ecosystem and cultivates more Web3 talent for Waves.
11. Future plans
Waves social media all add the suffix of their name (1 ➝ 2)
Waves has formulated the specific content of the 1→2 version iteration, including:
(1) Support Ethereum Virtual Machine
Make Waves more accessible to external teams by providing an infrastructure of extensive development and analysis tools.
(2) Opening up new DAO governance models,
Additional rewards are given to participants, and they can have 'skin' in the game. Waves DAO will upgrade the old futarchy concept, and thus will launch a new universal governance model, which is said to have applications far beyond current blockchain technology.
(3) Cross-chain finance
Expand Gravity as a bridge to all industry chains and create an integrated portfolio of universal bridges.
(4) Expanding business in the United States
Waves has already established a US company, Waves Labs, headquartered in Miami in the first quarter of 2022, and the team is currently recruiting experienced engineering, business development and marketing leaders.
In version 2.0, Waves announced that the United States is a key market to promote mass adoption in 2022. And the main KPI is the number of products built on Waves by teams from the United States.
A $150 million fund and an incubation program were announced this spring to meet this need and continue to develop and cultivate talent and market opportunities. In addition, an independent DeFi fund will be launched in the first quarter of 2022 to invest in selected Waves-based DeFi products.
Conclusion
The Waves ecosystem is very large, but just like the positioning of the Waves public chain, it focuses on financial and pan-financial applications.
In terms of product composition, the Waves ecosystem, from the DeFi application Swop.fi to the game Waves Ducks, is connected in series with the stable currency USDN. It also has its own Gravity oracle that can realize stable currency exchange rate reading, cross-chain data interaction, and off-chain data on-chain functions. In terms of product interaction, Waves Exchanges and DeFi applications are interrelated, and the ecological experience is relatively smooth.
In terms of business selection, the Waves public chain serves the general public, and Waves Enterprise serves enterprises and governments, providing a variety of demand scenarios for the Waves ecosystem, which is an advantage that other public chains do not have.
From the perspective of public chains, from DEX to DEFI to stablecoins, Waves has been following hot technologies and has certain advantages in technology. These technological accumulations can bring bonuses to other applications in the ecosystem. For example, Waves has many years of accumulated cross-chain technology, so USDN and NSBT tokens can be used in ecosystems such as Ethereum and Binance Smart Chain in addition to the Waves public chain.
In terms of stablecoins, the USDN algorithm mechanism design with the Neutrino protocol bonus is relatively complete, but the current USDN market value ranking needs to be improved. As mentioned above, the impact of USDN on Waves is mutual. When the application of the Waves ecosystem is more extensive and the stablecoin narrative is larger, the layout of USDN will attract more capital for Waves, and people will have a stronger consensus on USDN and Waves.