An overview of ichi.org One of the most interesting projects I’ve ever seen, recently starting to catch mainstream traction.
Ichi Overview: In my mind, Ichi’s model has many similarities to the partial collateralization model Frax has. In this case, these stablecoins are over collateralized. Further, the project’s main value add is offering these things called branded dollars. Branded dollars are stablecoins that can be created by any project. Each project’s branded dollar is backed by stablecoins and their native token. For example, each oneUNI token is backed by both USDC and UNI. Initial concern: With many stables that are partially backed by volatile assets, a main concern is the death spiral that caused the end of Iron Finance. To mitigate this, each branded dollar is overcollateralized so that if the volatile asset were to fall in price, the protocol would automatically sell off some of the asset into a stable so by the time the volatile asset were (if) to fall to $0, there would still be over or equal to $1 backing each branded dollar.
Why would I want to create a branded dollar?
- Better way for teams to pay employees
- Maintains control of own treasury
- Aligns with governance
1: It’s often an under-considered fact that teams have to pay workers. This puts a downward pressure on the native token as workers “take profits” by converting into stables. With Ichi, by minting branded dollars for salaries, this constant downward pressure is mitigated
2/3: Teams maintain control of their treasury and a branded dollar lets you keep control of that native token, getting further liquidity on top of it. Further, by locking away the token, it takes it out of circulation, therefore not diluting the current team’s governance
They currently have three main products.
- Angle Vault
- HODL Vault
- Rari pool (136)
There are more in the pipeline, particularly their cross chain implementation into polygon happening currently.
Product 1: Angel Vaults: Uniswap V3 yield optimizer for branded dollar yields (Docs: https://docs.ichi.farm/earn-yield/angel-vaults)
When depositing into an angel vault, the protocol will pair with $ICHI on Uni v3 such that the concentrated liquidity is just at and below the current ICHI price. Therefore, equal buy and sell demand means the sell is going through much more liquidity than the buy side. This quite clever take means that the price of $ICHI will increase more than it will go down for an equal amount bought or sold. So far this has definitely worked as a look at ICHI’s price chart is up/sideways only. (Chart: https://dexscreener.com/ethereum/0x275ef1031161d9358a7a35d5028f9d03845d4f2d)
This image showcases many of the benefits of supplying in the Angel vaults as opposed to traditional Uni v3 supplying. Essentially, these vaults allow projects to earn better fees without having to manage their concentrated protocol owned liquidity positions.
Product 2: HODL Vaults: Automated single side pools with different projects’ tokens (Docs: https://docs.ichi.farm/earn-yield/hodl-vaults)
HODL Vaults are a Uniswap v3 liquidity management protocol that allow projects to create single-sided liquidity pools with their native tokens. Users deposit a crypto asset and earn more of their deposited asset as the pool generates trading fees and the price of $ICHI increases.
Product 3: Rari Pool (136): Isolated money market for select branded dollars and angel LP tokens (Link: https://app.rari.capital/fuse/pool/136)
One can borrow and lend a selection of project native tokens such as oneUNI and oneUNI angel LP tokens. Certain branded dollars are offering very high aprs right now, (over 100% at time of writing), due to super high borrow demand of these tokens.
⚠️Risks and Concerns⚠️
Rebalances Suboptimal: Currently, the rebalances for the angel vaults’ concentrated liquidity are manually adjusted every few days or so instead of being automated. However, they intend to automate that in the future. (Link: https://docs.ichi.farm/earn-yield/angel-vaults/angel-vault-faqs)
Depeg Risk Insurance: Currently Ichi has @riskharbor insurance so that if the price of a branded dollar on Uniswap is less than $0.90 for over an hour, they can go to Risk Harbor and redeem it for $0.95. (Youtube video described in: https://www.youtube.com/watch?v=weU5b58LTdI)
If $ICHI tanks?: There has been very good price performance so far; however, I’m a bit unsure of how yields/$ICHI will do when there is less buy pressure and a big dump that could possibly go through the concentrated buy side liquidity.
UI Note: Currently, returns are based on past IRR and not current APR. The project has gained a lot of traction and volume recently so the IRR could be a bit skewed based on the past few days.
Isolated Pools Concern: A big possible risk and thing to keep in mind is the “exotic” pool risks associated with these isolated money markets. Money markets in the past have been subject to price manipulation hacks:
EX 1: https://twitter.com/FloatProtocol/status/1482184042850263042
This is always a big risk with money markets, and even more so with isolated pools. However, a calming fact is that this pool already has over $350m in total deposits and is one of the biggest pools on Rari. Super high aprs for stablecoins and a constantly appreciating token price is always a good sign for success.
As @jai_bhavnani tweeted, I would not be surprised if we see an “Ichi forks” season very soon. (https://twitter.com/jai_bhavnani/status/1512517108516548611?s=21&t=ZNj-tdSqmdyaaAx_Ka2CBQ)
Personally, I found the docs and info out there a bit confusing so I’d love to further discuss these topics. I do know that the team hasn’t been focusing much on marketing, and pretty much have solely focused efforts on building so far. 📈 Overall, this is one of the coolest projects I’ve seen in a long time, and I’m excited to see where this will go!
As always, thanks for your time — Juanbug
