Horizon Space #1 w/ Wombat Exchange Recap

July 12, 2023

Horizon Space #1 w/ Wombat Exchange Recap

Last week our Education Director, Stanton Wong, hosted the very first Horizon Protocol Twitter Space, where he had a conversation with Jeff from Wombat Exchange. In case you missed it, this article provides a recap of the topics discussed during the talk. Alternatively, you can listen to the recording of the session.

Sections:

The purpose of the Twitter Space talk
Introduction to Wombat and our guest
Community questions and concerns
Conclusion & Closure

The purpose of the Twitter Space talk

A few weeks ago, we shared several HIPs (Horizon Improvement Proposals) with our community, outlining our plan to make adjustments to the LPs in the ‘Earn’ section. These changes aim to improve efficiency and enhance the user experience. We are grateful for the feedback we received from our community, as it played a crucial role in shaping these proposals. We appreciate the positive responses and also acknowledge the concerns raised by the community. To address these concerns and promote transparency, we invited our friends at Wombat Exchange to join us for our first-ever Twitter Space event. Through live conversation, we discussed key points and encouraged open dialogue.

Introduction to Wombat and to our guest

Q: Let’s start with a brief introduction. Could you tell us a little bit about yourself and Wombat?

Hello, everyone! I am Jeff, and I have been involved in crypto since 2020, actively participating in several DeFi protocols. Wombat is a reputable stablecoin swap and AMM (automated market maker) on BNB Chain. We have a solid track record on the BNB Chain, which we are proud of.

One key aspect that sets Wombat apart is our proprietary algorithm. It’s important to note that our algorithm is not a fork of existing models like Curve or Uniswap V3. Our team takes great pride in the simplicity and elegance of our algorithm. Its simplicity allows for lower gas fees compared to other AMMs in the market, as we minimize on-chain calculations during transaction processing. Additionally, our single token/single asset liquidity pool (LP) model makes it easy for other DeFi protocols, such as lending and yield boosting platforms, to integrate with Wombat. This fosters a robust infrastructure for the broader DeFi ecosystem.

We also prioritize capital efficiency with our proprietary algorithm. This focus has led aggregators like 1inch to choose Wombat as the preferred routing route, as we consistently offer competitive prices and minimal slippage for supported pairs.

Building on our success on the BNB Chain, we recently expanded to Arbitrum. The launch on Arbitrum was met with positive results, achieving over 100 million TVL (Total Value Locked) within a short period of time. We have received strong support from the welcoming Arbitrum ecosystem, including Arbitrum itself and other top DeFi protocols such as Radiant and Lido.

Community questions and concerns

In this section, we will present the questions and concerns that we’ve received from our community. They are organized by topic for easier navigation.

General

Q: What is Wombat’s business model and how does the platform make money?

While DeFi 1.0 focuses on increasing Total Value Locked (TVL), Wombat embraces DeFi 2.0, which prioritizes capital efficiency. Our algorithm and business model are designed with the aim of achieving the highest capital efficiency. As an example, during the USDC depeg, Wombat ranked alongside top DeFi giants in terms of daily trading volume, despite having significantly less TVL. We believe in striking a balance between a reasonable TVL and high capital efficiency, ensuring real yield for our liquidity providers. Although we are making progress, there is still room for improvement, and we remain confident in our capital efficient model.

Q: In this model, does Wombat take a cut anywhere during the transactions? For example, is any part of the fees redirected to Wombat somehow?

Our revenue is primarily generated through trading fees, as we do get a cut from that. Also we receive a portion of the bribes redirected to the protocols. We are thinking of adding some changes to this, for example by redirecting a portion of the trading fees to the community instead.

Liquidity & Fees

Q: What specific advantages does Wombat offer compared to PancakeSwap’s current model as a new DEX partner to help with Horizon Protocol’s liquidity?

Our capital efficiency, as previously mentioned, has been demonstrated during the USDC depeg. Our daily trading volume reached 8 times our TVL. Unlike PancakeSwap or Uniswap V3, which require manual configuration and monitoring, Wombat operates differently. Our liquidity providers simply deposit funds, and our algorithm performs its concentrated liquidity magic. This approach saves time and effort for both pool openers and liquidity providers.

Q: With the trading fees already being relatively low on BNB Chain, how much more capital efficiency are we looking at?

While BNB Chain and Layer 2 solutions already offer low gas fees, our goal is to ensure that when you swap $10, you receive at least $10, considering you are swapping stablecoins. In addition to gas fees, capital efficiency encompasses the amount LPs receive for providing liquidity. Our highly capital-efficient model enables newer stablecoins and pegged assets to achieve higher trading volume and liquidity, even with lower TVL compared to larger platforms. This creates a fair playing field in the stablecoin market, where liquidity is crucial for growth and reputation.

Inflation & Price

Q: How does Wombat plan to address concerns regarding inflation, and could you provide more details about the specific strategies in place to mitigate this issue?

To tackle inflation concerns, Wombat has introduced governance measures to ensure that only projects aligned with our community’s beliefs can earn emissions and incentives. This approach aims to align the value provided by bribe providers with the overall Wombat ecosystem in the long run.

Q: What is Wombat’s perspective on concerns about the current price of WOM tokens and their unlocking? Do these have the potential to exert pressure on the WOM token price?

When partnering with new projects, we conduct thorough due diligence to ensure their long-term vision aligns with ours. The WOM token’s primary utility is for voting on WOM token emissions. We believe that by selecting DeFi builders who share our long-term vision, more WOM tokens will be locked, reducing circulating supply and potentially protecting the WOM token price. Many WOM tokens, including those from large investors and team allocations, are already locked for four years on our smart contract, indicating significant long-term belief in Wombat.

Q: Considering Wombat’s potential in the future, as the project matures and ICOs unlock, how does Wombat address these concerns and view the current situation?

We have indeed had some tokens unlocked previously, and it’s worth noting that those tokens are being locked up for up to 4 years, as I mentioned before. We firmly believe that the current bear market is a temporary phase, and we have strong confidence in our long-term vision. The team is continuously focused on building and expanding, which can be seen through our updates on Twitter. We have a robust roadmap with numerous new features currently undergoing audit, including a cross-chain swap pool in collaboration with Jump (one of our investors), Wormhole, and Pyth.

User Base & Community

Q: What’s Wombat’s user base? How would partnering with Wombat, and their existing user base, potentially contribute to attracting more active users and stakers on Horizon Protocol?

Our user base consists of both retail traders and sizable whales, with a roughly equal distribution. Most of our trades are routed through aggregators like 1inch, as we offer competitive prices, low slippage, and fast transaction speeds. By partnering with Wombat, Horizon Protocol can benefit from increased traction, TVL, and trading volume. Our algorithm, design, and business development efforts provide competitive advantages that can attract more liquidity and activity to Horizon Protocol, especially with newer stablecoins and pegged assets.

Reliability & Security

Q: Apart from having the backing of Binance and various other investors, what additional indicators of trust can Wombat provide to assure us of its reliability and credibility?

Trust indicators within Wombat include the fact that most of our team holds WOM tokens, with many of us having locked them up for four years, including our founders. Furthermore, we have completed the development of several new features, which are currently undergoing rigorous audits and security assessments. Additionally, top DeFi protocols such as Lido have provided significant incentives and support to the Wombat community, further demonstrating our long-term commitment and credibility.

Q: If Wombat experiences issues like exploits, shutdowns, or hacks, what risks would it pose to other projects, specifically Horizon Protocol?

The impact on Horizon Protocol would depend on the nature and extent of the issue. As Horizon Protocol will likely launch its own pool with a chosen routing asset, any damage would primarily be related to the stability of that specific routing asset. Issues related to the stablecoin’s general price, rather than Wombat’s smart contract, would come into play. We have implemented a time lock mechanism in our smart contract, requiring a 24-hour waiting period after initiating a transaction. This provides time for the team to respond effectively. We believe we offer the highest level of protection available within the crypto space to safeguard our users and partners.

Q: Could you provide us with an overview of the partnerships Wombat has formed, and can you share some insights into the successes and obstacles that other projects have encountered through their collaborations with Wombat?

One notable partnership is with Lido on Arbitrum, which has been highly successful. We work closely with our partners to guide them in optimizing their bribe strategy, co-marketing efforts, and interactions with our ecosystem and community. Our team remains highly involved and provides ongoing post-launch advice to adjust incentives and amplify community engagement.

Conclusion & Final Thoughts

We want to extend a big thank you to Wombat Exchange for joining us in our very first Twitter Space talk. We greatly appreciate their time and look forward to future cooperation! Special shout-outs to Jeff from Wombat and Stanton Wong, our Education Director, for hosting this awesome Twitter Space session. And of course, a big shout-out to BNB Chain for making this connection possible!

If you have any more questions after reading this recap, we’d be happy to do a follow-up AMA in text style. Just let us know through any of our social media channels listed at the bottom of this post.

That wraps up our very first Horizon Space! What started as a way to address questions and concerns from our community, the HZNation, will continue as a series of live talks with other projects. These talks are all about mutual learning, understanding different projects, and having friendly conversations. Stay tuned for more upcoming Horizon Protocol Twitter Space talks! We’ll announce them on Twitter and our other social media channels, so be sure to follow us there. All the relevant links are provided below.

Horizon Protocol is a DeFi platform that facilitates the on-chain trading of synthetic assets that represent the real economy. Horizon Protocol seeks to provide exposure to real-world assets risk/return profiles via smart contracts on the blockchain.

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