Equilibrium AMA with Crypton Research — April 1st, 2021 — ENG
CryptoMachiavelli || Crypton Research
Hello Alex!
Hello all of you!
I’d like to welcome all of you to our first AMA at Crypton Research! It’s a great pleasure for us to have such a prominent guest with us today — Alex Melikhov, CEO & founder of Equilibrium.
Thanks Alex for accepting our invitation. We are very happy that we made it happen. I truly hope that we can help each other by bringing awareness of what Equilibrium is, but also making the Crypton Research community more recognizable.
Alex || Equilibrium
Hey guys, glad to be here!
CryptoMachiavelli || Crypton Research
It’s our pleasure to have you here!
Alex, as you probably know, Crypton Research is a Polish community for gems research. We’re always on a lookout for new projects and microcaps to research them and serve the reports to our community. One of such projects is Equilibrium which report was published here the day before yesterday so our members could familiarize themselves with the project.
Just a quick recap from the report:
Equilibrium is a cross-chain money market that combines loans with the generation and trading of synthetic assets. Equilibrium uses a novel approach to pricing in the chain and calculating risk, which sets Equilibrium apart from other well known DeFi projects. It allows users to bet and earn, borrow, increase liquidity in synthetic assets and decentralized stablecoins.
As we have lots of questions to you, I think that there’s no need to further introduce the project for now :)
Alex, I wish you good luck!
All members, enjoy the show and have fun!
Aaron Geryt || Crypton Research
Before we start the first round of questions I’ll share the rules of the AMA. From now on our chat will be muted so we can maintain a high standard of discussion. There will be three rounds of questions: initial questions as a warm-up, project specific questions and forward-looking questions. Afterwards we’ll give a chance to ask a couple of free questions to our members therefore we will unmute the chat. I’m sure that there will be plenty of questions therefore I urge you to ask them in English (even if you had to use a translator) so the Equilibrium team can choose the questions to answer without me having to translate them all.
Nevertheless, as our group serves to Polish speakers mainly, we’ll be translating everything so that everyone can understand our AMA. Let’s get started!
Jakub || Crypton Research
Okay, let’s warm up our community with the first question.
How would you, in your own words, explain what is Equilibrium?
Alex || Equilibrium
Equilibrium is the first cross-chain money market on Polkadot and a one-stop shop offering all the main DeFi primitives, including a lending platform, a cross-chain DEX, margin trading, synthetic assets, perpetuals, native, USD-pegged decentralized stablecoins (EQD) and our own utility token, EQ.
Jakub || Crypton Research
Could you tell us a bit more about the team of your project?
Alex || Equilibrium
Our team has worked together for several years on Nitrogen Network, Oxygen Trade, and EOSDT before starting Equilibrium. We have a team of 25, 16 of whom are developers, all of them with in-depth experience in blockchain and DLT, working on a number of different protocols, including Ethereum, EOS, Polkadot. Our team unites profound experience in blockchain/ DLT, digital assets, and conventional finance, along with solid business acumen from blue chip companies (Binance, Changelly, Ticketmaster, Huobi Global, Societe General, Alfa Bank, State Street, Goldman Sachs, Commerzbank).
Jakub || Crypton Research
Your team has worked with Ethereum and EOS in the past. Why did you choose Polkadot now?
Alex || Equilibrium
When we started working on Ethereum and EOS, no one had heard of Polkadot yet. Since then, Polkadot has set out to solve some of the most important tech challenges which currently limit DeFi, including scalability and interoperability.
Neither Ethereum nor EOS enables interoperability, which is essential so that the vast potential of the DeFi market can grow beyond Ethereum, where it is currently siloed. Interoperability is also a key enabler for us to maximize liquidity by allowing multi-asset collateral.
It is well known that scalability is a constant problem on Ethereum — and Polkadot has solved that as well. I think I’ll have a chance to go into this more when we talk about questions specific to our project.
Jakub || Crypton Research
What is the story behind Web3 Foundation grant?
Alex || Equilibrium
We have received two grants from Web3:
1) Grant for a financial pallet which will be useful for anyone building complex DeFi and Fintech solutions using Substrate technology on Polkadot. It is designed to gauge instrument and portfolio risk irrespective of the asset and portfolio considered.
2) Grant to bring a Substrate-based runtime version of Curve’s automated market maker (AMM) to Equilibrium’s users and to the Polkadot ecosystem.
Equilibrium’s Curve plugin-to-come will power a stablecoin exchange offering passive income for liquidity providers in a low-slippage environment. It will also become a highly efficient tool for exchanging homogeneous assets on Polkadot, whether they are DOT-based or different tokenized versions of the same asset, like Bitcoin’s WBTC and renBTC.
Jakub || Crypton Research
Let’s get to the financing now. There’s quite a lot of hype around Polkadot currently, however, it seems that many people don’t really understand what is PLO and crowdloan? Could you please elaborate on it and explain how it’s going to work for Equilibrium?
Alex || Equilibrium
We will be participating in the PLOs for both Polkadot and Kusama as follows:
POLKADOT PLO:
Our PLO (Parachain Leasing Offering) for Polkadot will consist of two phases:
1) Token swap; EQ/DOT: April 12–26.
Will gather DOT to prepare for the auction. Users can vote for a 1 or 2 year leasing period; majority vote wins. MInority voters can opt out or opt in. Majority voters’ DOT are used for bidding in the auction.
Bonuses offered based on the size of your pledge & the final leasing period.
2) Crowd loan (auction) on Polkadot (date to be announced).
You can join without having done the token swap earlier. Then you bid directly yourself, in our name. You can get rewards that cover your DOT staking opportunity costs as well as add premiums based on the size of your stake.
Note that you cannot get awards from both phases unless you participate in them separately.
E.g. if you do the swap, you get the bonuses that apply. If you want to also get premiums from the crowd loan, then you need to join the auction in addition to what you pledged in the swap, and bid in the auction directly. You can then get premiums on the amount you stake directly.
Here’s a quick overview on both of these phases & the awards:
KUSAMA PLO:
The dates for the Kusama crowd loan will be announced on our website as soon as Polkadot makes them known.
Jakub || Crypton Research
Maybe it’s a bit of an infantile question, but how did you come up with the name for the project? It’s seems to be quite meaningful.
Alex || Equilibrium
According to the Oxford English Dictionary, “Equilibrium” is a state in which opposing forces are balanced. This is the exact system of checks and balances that we are bringing into the DeFi space.
Equilibrium is contributing “balance” to the DeFi equation. This is where our namesake comes in — to be valuable, assets must be “balanced” and sustainable liquidity ensured. This works through the project’s unique risk management and bailsmen mechanisms.
Jakub || Crypton Research
It seems that at this point we have successfully exercised all the initial questions. I hope that our community enjoyed the first part of the AMA. Let’s get to the more detailed project specific questions.
DeFi has been a king of the landscape since last summer. Other trends that seem to emerge currently are among others aggregators, interoperability, synthetic assets and scalability. How do you see your project fitting into this space?
Alex || Equilibrium
All of these are key topics in DeFi, and so it’s very consciously that we address all of them. Scalability and interoperability are central to enabling DeFi — and have proven to be big problems to date. However, the technology that we are using on Polkadot solves these two tech challenges.
- SCALABILITY
We saw what problems insufficient scalability causes in the Black Thursday market crash on Ethereum in Spring of 2020. - INTEROPERABILITY
is key because blockchain tech is about breaking down information silos, and without interoperability, we have a number of isolated crypto currencies which are limited to the protocols they run on. - This ties in to AGGREGATING LIQUIDITY —
Equilibrium can do and solve DeFi’s perpetual liquidity challenge thanks to interoperability; making multi-asset collateral available from all the major blockchain protocols. In this way, we also solve DeFi market fragmentation. - SYNTHETIC ASSETS
are not new — Synthetix is a good example — however, Equilibrium will enable synthetics with interoperability — thereby enabling multiple assets — and also offer a much lower minimum c-ratio, with programmatic interest rates and a robust risk management system to proactively ensure liquidity. We can expect that the interest in synthetic assets is only going to grow, since they allow users to hedge against volatility, leverage, and speculate on the growth of an underlying asset.
Jakub || Crypton Research
It seems that you take risk assessment very seriously and that the bailsman function plays a special role in that on Equilibrium. What are the advantages of your risk assessment methodology?
Alex || Equilibrium
We have a unique risk assessment mechanism, which works together with the bailsmen system and replaces forced auctions that are usually used to liquidate bad debt on other platforms. This is an important innovation, because forced auctions are a big risk. We all saw what happened when the crypto market crashed in March 2020, and due to the auction system, MakerDAO had to cover more than US $5M in bad debt.
Our risk algorithm monitors the liquidity of both individual users’ portfolios and on an aggregate level in real time. It thus acts as an early warning system and a correction mechanism. If system liquidity is low, bailsmen are incentivized to inject more liquidity into the system, thereby making auctions irrelevant.
We have a dedicated bailout liquidity pool. Bailsmen are third-party participants that provide their liquidity in advance to earn a substantive fraction of interest paid by the borrower. The interest rate fluctuates depending on several factors, including the conditions of the bailout pool, and bailout rewards fluctuate correspondingly.
Jakub || Crypton Research
What platforms do you consider to be your greatest competitors in DeFi and how are you different from them? A few words about individual interest rate?
Alex || Equilibrium
Our main competitors are MakerDAO, Compound, and Synthetix. We have combined all of their innovations into a DeFi one-stop shop and added interoperability and several other features, like our programmatic interest rate and proactive risk management, which enables us to offer much more flexible collateral requirements so users can co-determine their interest rates and start with a much lower c-ratio than others:
Jakub || Crypton Research
What do you think is the weakest point in your protocol? The highest risk for the project
Alex || Equilibrium
The greatest risk for the project is probably to get a parachain slot. That’s because, to have full access to all the benefits of Polkadot and all the synergies it is creating in its ecosystem, you want to be a Polkadot parachain which enables connection to everything in the ecosystem and beyond it.
However, there are two things to add to this.
- This is the reason that we are carefully preparing the Polkadot PLO (Parachain Leasing Offering) with a two step process consisting of a token swap (Phase 1), which will provide the basis for collecting a solid pool of DOT before the bidding in the crowd loan (Phase 2) starts.
- We are a stand-alone blockchain on the Substrate — which means that, if needed, we can act independently and still profit from Polkadot’s tech advantages like interoperability and scalability which we have since we are built on the Substrate.
- We are also taking steps to proactively anticipate any difficulties which could arise via dependency on Polkadot or its roadmap — in order to solve them in advance — just in case. Thus, we are actively building our own bridges to Ethereum and Bitcoin right now. That means that we will be able to connect and serve those assets without delay.
Jakub || Crypton Research
Has the Quantstamp audit concluded already? If so, have any security issues been found? If not, when can we expect the announcement?
Alex || Equilibrium
The Quantstamp audit was completed last year. It scrutinized our EQ-aggregates, EQ-balances, EQ-claim and EQ-vesting pallets. The audit found some issues, all of which have been fixed except for three that have no negative consequences in practice. We are proud of our audit by Quantstamp and consider it to be an asset; it is key to ensuring the quality of our performance, and Equilibrium is the first Polkadot-based project that has been professionally audited.
Quantstamp was particularly well suited to the task since it has a focus on DeFi. Notably, it has helped Maker respond to the Black Thursday incident this year and audited numerous Maker Foundation Community Grant recipients. One of Quantstamp’s specialties is protecting digital assets from hackers.
Crypto Grinch || Crypton Research
Our second round of the questions has exhausted. We are doing quite good, aren’t we? Let’s get to the last round of our prepared in advance questions. All of them will regard the future.
What milestones have you achieved so far and what are some of your upcoming plans on your roadmap?
Alex || Equilibrium
We are currently on testnet with most of the main functionalities. You can try it out here: https://testnet.equilibrium.io/claim/en
We also have a basic claim/vesting functionality mainnet network here: https://app.equilibrium.io/claim/en
Let me run you through some of the current tech milestones.
- Lending functionality:
Under development; pilot phase is limited to bailsman pool liquidity. Successful simulation & integration tests. Crypto assets from the bailsman pool can be borrowed via our user interface. - Production release:
Integration tests have been done to confirm main components of business logic, including: Ethereum bridge & first assets; Migrations to upgrade our production chain; Genesis node & historical prices to calculate asset returns and volatilities; Node docker image & deployment documentation; Custom address formats. - Upcoming production milestones, including:
Migration to U128 (Polkadot’s default metadata type); Adding RenVM BTC bridge; Migration from enums to enable adding new assets without runtime upgrades; Preparation of our DEX. - Curve grant 1st milestone:
We have completed the first step in enabling the use of the AMM Curve in the Polkadot Ecosystem. This will benefit the whole community by minimizing slippage when trading similar assets. Curve’s unique stableswap invariant uses liquidity more efficiently than any other stablecoin DEX, and this is essential to maximize the efficiency of liquidity on Polkadot. Pooled storage for diverse asset pools and custom asset pools are in place. - PLO Phase 1 (token swap) platform interface in place:
To prepare for the crowd loan (auction) on Polkadot, Equilibrium will do a token swap offering EQ for DOT from April 12–26. We have completed the interface for this and it will soon be live under plo.equilibrium.io. It enables: Passing KYC, depositing DOT, monitoring your balance, getting referral bonuses.
Crypto Grinch || Crypton Research
What is your strategy for marketing and for quick mass adoption?
Alex || Equilibrium
Equilibrium has a dedicated Go To Market strategy consisting of three steps which target
1) Institutional liquidity providers
2) Major crypto platforms
3) utilizes ongoing PR & partnerships.
The resulting exposure to institutional clients, and through them, to end-consumers is synergetic and will promote quick mass adoption. Our Liquidity Farming will also promote that.
Crypto Grinch || Crypton Research
On your website you state that what sets you apart is the highest possible liquidity that will be achieved by attracting institutional clients on multiple platforms. To prove that these are not just big words please tell us how are you planning to incentivize institutional clients to migrate to your platform? What will be your selling point that will lead to capital shift?
Alex || Equilibrium
On Equilibrium, users can earn by providing liquidity on three levels:
- As Bailsmen
- Through staking in liquidity farming (passive earning)
- Via AMM (automatic market makers) like Uniswap & Curve (increase our ETH exposure).
Liquidity Farming (LF) is a key incentive instrument for mass adoption, which addresses both institutional investors and private end users and offers attractive earning opportunities.
Similar yield farming mechanisms have driven DeFi’s rapid growth since last summer. But on Equilibrium, LF goes beyond just offering users earnings, since it offers balanced, sustainable liquidity and incentivises platform use.
We use a weighting system to push key assets and promote stablecoins (minimize volatility). This also hedges risks by adjusting liquidity distribution among our various liquidity pools.
We want to reward borrowers when they borrow assets, thus we will tie the rewards they get to the collateralization levels of their portfolios. The curve we propose is a mirror image of the one that Polkadot uses to reward its stakers. If the collateralization level of a user’s portfolio is at a “balance” point of 200% we will pay out a maximum reward of 20% APR. If their collateralization drops, the reward will decrease exponentially. If collateralization rises above 200%, rewards will drop off linearly:
Initially, liquidity farming will stress the bailsman function by adding an additional 20% APR on the liquidity they bring into the system.
Crypto Grinch || Crypton Research
It seems that these are all the questions the Crypton Research team prepared for today. Now we will give the community a chance to ask their own questions. Is there anything that you’d like to know that hasn’t been mentioned yet? Feel free to ask, the Equilibrium team will choose the best questions and address them.
As we already urged you, please keep the questions in English. It will be way easier for us to maintain the chat. We’ll translate only the questions Equilibrium team chooses.
Marek G
Is it true that you have a plan to build your own DEX? What’s the purpose of it on a lending platform?
Alex || Equilibrium
Yes, we are creating our own DEX, which will be synergetic to our lending platform and offer margin trading.
Our borrowing/lending engine allows for leveraged trading out of the box. Users will deposit assets which will act as margin for their trades with leverage.
We plan to support a broad range of assets on KUSAMA and a stricter range of assets on Polkadot. All assets will be traded against our stablecoin on the exchange.
Sylwia Moongirl
Alex, could you share with us the information on how we can take part in the sale of tokens? I think a lot of people are curious.
Alex || Equilibrium
For sure. You need to do KYC once it’s available on our PLO website here: https://equilibrium.io/en/plo (soon to be activated). The steps are self explanatory. We will give priority to those who are on the whitelist, but if allocations remain, you can participate even if you are not on the whitelist.
Marek G
How will you keep all users to stay with your project in the long term?
Alex || Equilibrium
We have several things going for us:
- A DeFi one-stop shop
- Maximizing liquidity by using cross-chain, multi-asset collateralization
- Offering programmatic interest rates that let users co-determine their interest on debt
- A strong risk management system to ensure liquidity is constant
- High passive earnings through liquidity farming
Thanks very much for having me at your AMA, it was a pleasure to be here!
Feel free to join our community!
Twitter: https://twitter.com/EquilibriumDeFi
Telegram: https://t.me/equilibrium_eosdt_official
Medium: https://medium.com/equilibrium-eosdt
Crypto Grinch || Crypton Research
It was our pleasure to host you and the team here on Crypton Research Chat. We will follow Equilibrium closely, I think that most of our community is already very excited about the project and we wish you all the best.
