The DeFi market has ushered in rapid development, with billions of dollars worth of assets locked in hundreds of different DeFi systems and converted into different yield tokens, such as Uniswap LP tokens or AAVE interest-bearing tokens.
However, the risks associated with locking in the DeFi protocol as LP token assets have become opaque. Due to the split between different public chains, the transfer channels between assets have not been fully opened. For example, a major process of bridging assets from ETH DeFi to Solana The problem is that while there is an opportunity cost for users, the potential gain in ETH is lost.
The Parrot Protocol was born out of this and aims to make the value locked in LP tokens accessible by creating a liquidity and lending network that is collateralized by LP tokens.
The following is the organization of the AMA text content, and the content has been deleted.
The following is the organization of the AMA text content, and the content has been deleted.
Analysis of Parrot
At the beginning of the AMA, Mr Parrot gave a brief introduction to the characteristics and birth background of Parrot Protocol.
Mr Parrot replied that Parrot Protocol has built a series of DeFi products on the basis of LP collateral. Although more and more value will be locked on Ethereum, due to the high cost, more applications will actually migrate to a faster and cheaper chain, so the idea of developing such a product arises .
Since LP tokens are assets that can generate income, it is feasible to realize the bridge between Ethereum and other public chains through LP tokens. Conversely, the current way of bridging the native Ethereum chain is by staking ETH, which is pointless.
The first product of Parrot Protocol is a stable currency called PAI, which achieves TVL growth by migrating LP tokens from Layer1 to Solana.
The story behind the team
The story behind the team
Parrot Protocol has ushered in rapid development since its establishment, and it must be inseparable from the efforts of the team members. Mr Parrot gave a brief introduction to the team members and shared interesting stories behind them.
Mr Parrot said that the Parrot team is currently located in Asia. The team draws members from a wide range of Asian and Western countries, and this blend brings different perspectives to Parrot and balances his approach to issues.
Parrot focuses on the rapid achievement of short-term goals without losing sight of long-term value creation through a mission-oriented approach.
financing progress
financing progress
Parrot has always received the attention of many investment institutions. When talking about the current financing progress, Mr Parrot pointed out that the seed round financing channel has now ended and relevant announcements will be made as soon as possible.
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Similarities and Differences Between Parrot and MakerDAO
Parrot has a function that allows users to mortgage assets. When it comes to mortgage platforms, many people may first think of Maker, an automated mortgage loan platform on Ethereum. Then, Mr Parrot introduced the similarities and differences between Parrot and Maker.
First of all, the Parrot team pays sincere respect to the achievements of MakerDAO, and at the same time, firmly believes that the expansion of debt is a solid foundation for establishing a stable currency system. Maker can be regarded as a product of DeFi 1.0, which existed long before the advent of a wide range of DeFi products, and products that allow users to pledge collateral to generate income again have not yet appeared.
As a well-established and widely trusted protocol, Maker has to proceed cautiously. For them, passing a governance proposal similar to "investing in ETH collateral pledged in the ETH-A mining machine gun pool" is almost impossible. possible.
And Parrot can be regarded as a product of DeFi 2.0. Parrot's mission is far more than just developing a stable currency. If users obtain stable currency income by staking SOL in the smart pool, they will naturally be obliged to seek higher returns for users staking SOL.
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Mortgage assets
When talking about the types of collateral that Parrot plans to support and the differences between different collaterals, Mr Parrot said that Parrot will provide better liquidity for stablecoins, and will first support SOL, BTC, and ETH.
Parrot will then support interest-bearing tokens for these stablecoins. Badger DAO’s ibBTC will be issued for BTC, and LIDO’s stETH will be issued for ETH. For SOL, Certus is also developing interest-bearing packaged SOL assets.
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Asset-to-collateralization ratio, debt ceiling
When talking about what assets LP holders can lend through Parrot mortgage assets, the mortgage ratio, and the detailed mechanism of the debt ceiling, Mr Parrot said that the first product of Parrot is the PAI stable currency, and users can generate PAI through pledge.
At the beginning, Parrot will be relatively conservative, the loan limit will be maintained at a low level, and the mortgage rate will be relatively high. As the system gradually matures, restrictions on the risk factor will gradually be relaxed.
Fund utilization is not a problem on the Parrot platform, because LP tokens are pledged, and LP tokens will generate income. There is not much difference between the mortgage rate of 200% and 500%.
Parrot will still create a stable currency smart pool, and users can borrow PAI at a ratio of nearly 100% by staking USDT, USDC, and DAI.
In practical applications, this mechanism is more interesting. Like the Yearn smart pool, the stable coin smart pool can also bring benefits to users.
Parrot can aggregate all kinds of stablecoin assets into a single stablecoin. In addition to USDT and USDC, interest-earning USDT and USDC assets can also be introduced from AAVE, Compound and Yearn.
Bridge of Ethereum Layer1
Regarding the topic of how the LP tokens already held by Ethereum layer1 can directly participate in Solana’s DeFi financial activities through Parrot, Mr Parrot pointed out that Curve, Sushi, Uniswap V2, AAVE, Compound, etc. are all ERC20 tokens, which can be exchanged through wormholes. Bridge to Solana.
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Synthetic Debt Transactions
Between different types of synthetic debt (eg, dUSD<-> dBTC <->dETH) can be traded directly, and there will be losses such as handling fees in the transaction, Mr Parrot replied that the current significance of synthesizing encrypted assets is not particularly great, it is similar to shorting the collateral held by users, and at the same time (invalid ground) long generated synthetic assets.
It only makes sense if users are only using protocol tokens for collateral, and in many synthetic assets, if long positions go up, it means that all users holding synthetic assets (including yourself) are down.
If the crypto market as a whole is on an upward trend, and the market capitalization of tokens does not increase as much as the crypto market as a whole, then it may become more and more "de-debtized".
In an overall rising market, there is a persistent long-short imbalance. In this case, some synthetic debt agreements must incentivize short sellers to maintain their own operation, but in the long run, this is not sustainable of.
And for Parrot, want to put all assets as collateral not just PRT tokens. In this model, assuming you generate pBTC and the price of BTC rises, you will only take on more debt without earning income.
This is why Parrot chose the stablecoin track.
Although Parrot does not make synthetic encrypted assets, it will provide zero-slip exchange services for foreign exchange, which has greater practical significance. The trend of fiat currency value is either continuous stability or slow depreciation, so the debt of the whole system is gradually expanding, and with the introduction of encrypted market debt, this market will become larger and larger.
Zero transaction means zero slippage (just renaming the debt), so no wear and tear. After effective management of TVL, the agreement may also generate stable fee income.
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Oracle Price Feeding Mechanism
After a brief understanding of the debt system, Mr Parrot talked about the price feeding mechanism of the oracle machine.
Mr Parrot said that the price oracle is a very complicated thing. The difference between Parrot's stablecoin PAI is that the protocol will take more risks to delay the time for user assets to be liquidated. For example, DAI price updates are delayed by an hour to give users more time to adjust their collateralization ratios to avoid asset liquidation.
People have a higher tolerance for bad debts in stablecoins because the protocol can sell its governance tokens to generate more stablecoins to make up for losses.
Delaying the liquidation time is actually a good compromise, and at the same time, the user's asset security can also be improved.
The demand for price information in the lending market is different, and the liquidation speed must be fast enough to avoid the loss of the actual lending asset user.
Aggregating price information from FTX, BitThumb, Coinbase, Binance, etc. will make the whole system more stable.
Smoothing the function through TWAP (time-weighted average price) can reduce the impact of short-term fluctuations on the overall trend.
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liquidation mechanism
Mr Parrot then shared Parrot's liquidation mechanism. He pointed out that Parrot wants to make it easier for more people to liquidate assets. It will open a liquidation pool where users can deposit PAI to obtain income, and the agreement will automatically use it. The funds in the liquidation pool are used to liquidate positions. Proceeds generated will be distributed proportionally to users participating in the pool.
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Development of the public chain track
Next, Mr Parrot shared some views on the development status of the public chain track.
When asked about the advantages and characteristics of the future ecology of the Solana public chain compared with Ethereum, Polkadot, BSC and other public chains that have formed a certain ecological foundation, Mr Parrot said:
Given the head start over the years, the tools and libraries are more mature for the EVM, and the EVM ABI solves the problem of defining composability well. Solana programs, on the other hand, are lower-level, making composability more difficult.
The Solana toolchain is certainly improving rapidly, very much to see the anchor framework that the Serum project builds upon. If more projects start adopting it, it will better solve the Solana ABI composability problem.
An interesting advantage of Solana is the ability to combine multiple processing steps into a single transaction. In ETH, each "step" requires a separate transaction, which is super cumbersome for users if the network is congested. That's why there are products like zapper.fi (which simplifies the process).
In Solana, on the front end you can implement something like zapper.fi. Once the entire community moves beyond the "product copy-paste" learning phase, it's sure to see interesting new UX patterns in native Solana apps.
Regarding the most promising track in the Solana ecosystem and the possible short board topics, Mr Parrot joked that he was curious about what types of applications would cause Solana network congestion. The Parrot protocol hopes to cause at least one Solana network congestion.
Importantly, greater network capacity and cheaper prices apply to different use cases. A savings product that a user can participate in by investing as little as $1 per day would be cool, maybe it’s more like “DeFi gamification.”
Join Solana Ecosystem
Join Solana Ecosystem
Following the previous topic, Mr Parrot talked about why Parrot chose to join the Solana ecology and its positioning in the ecology compared to other public chains.
Mr Parrot pointed out that at the time, friends told us "Hey Solana is very cool, you should try to build something based on it".
Then I tried Serum DEX and was shocked by the experience at that time. I didn't expect that as a DEX, it could be so close to the user experience of centralized trading. Read the Serum DEX code and thought it was an amazing job.
So if smarter people have put their all into Solana, why not give it a try?
Mr Parrot also said that the people met in the Solana community are very interesting, they have interesting ideas, and explore what new things can be built on Solana.
The Parrot team cares a lot about design and usability, and it's fun to innovate and create, but in the end it should meet the needs of users. Right now, Solana feels like the early days of ETH DApps, the user experience is terrible. It will take some time for the community to figure out good patterns, and Parrot hopes to grow in terms of usability.
Token Economic Model
Token Economic Model
Regarding value capture, Mr Parrot shared Parrot's token economic model, how to motivate users to hold tokens for a long time, token application scenarios and other topics.
Mr Parrot said that value accumulation is very important for the long-term sustainable development of the agreement. Stability fees collected from minted stablecoins will be used to purchase PRT from the open market. Instead of burning PRT, the protocol will reward network participants with purchased PRT.
Recent Development Plan
Recent Development Plan
Finally, Mr Parrot shared the latest developments in Parrot's recent development plans, products, and ecological cooperation development.
Stablecoins coming soon
Parrot will start building lending products, aiming for launch in July
The governance token gPRT will need to be pledged. The longer the user pledges, the stronger the voting rights and mining power will be.
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