Hey guys :) I’m back with another comprehensive Q&A piece, this time for the liquidity mining platform that provides users with different levels of risk exposure and yields – Saffron Finance (SFI).
Saffron Finance is a unique derivatives protocol that allows users to safely earn interest by providing liquidity to markets without having to lock up their underlying assets. It’s one of the hottest DeFi projects right now that is still very much under the radar.
Now, before we dive in, the following piece is similar to my latest articles on OriginTrail (TRAC), Numerai (NMR), and Hegic (HEGIC), so if you haven’t already seen those, be sure to check them out as well.
Hope you enjoy!
The list of Q&A is kind of long so first comes the list of questions that I have prepared the answers to:
- What is Saffron Finance?
- Who and When Created Saffron Finance?
- What is $SFI Token Used For?
- What is the main product of Saffron Finance?
- What are Saffron's Epochs For?
- What are some notable milestones by Saffron?
- Where to Store $SFI?
- Where to Buy & Sell $SFI?
1. What is Saffron Finance?
Saffron Finance website homepage
In short, Saffron Finance is an innovative Ethereum DeFi protocol for tokenizing on-chain assets to allow liquidity providers to customize their risk and return profiles.
To put Saffron’s innovation into perspective:
Existing decentralized earning platforms expose liquidity providers to an array of catastrophic scenarios where the volatility of crypto and platform bugs could lead to a significant impermanent loss or the liquidation of their crypto holdings.
Saffron Finance, on the other hand, is a decentralized earning platform that narrows down the set of negative outcomes and provides liquidity providers with dynamic exposure via tranches.
Saffron Liquidity Providers can Customize their Risk
For the first time, liquidity providers can better customize their risk and return profile with the use of Saffron Pool Tranches. Each tranch has its own set of properties and the different Saffron tranches are:
The AA Tranche is a low-risk pool that earns less interest but covers liquidity providers (LPs) in the case of a loss from platform risk. The covered capital comes from the principal and interest earnings of A tranche LPs. Also, the AA tranche (merged with S Tranche) rewards LPs with 95% of the SFI token generation.
The A Tranche is a higher risk higher reward pool. LPs earn higher interest but risk the chance of losing their principal and interest earnings in the case of loss from platform risk. The liquidity providers under this tranche earn 5% of the SFI tokens generated per epoch and their earnings are not included in covering the first loss for AA tranche LPs.
The S tranche (currently merged with AA Tranche) earns 95% of SFI generated per epoch. The S Tranche maintains the exact value of the tranche interest multiplier to balance the A and AA tranches such that they are always in perfect equilibrium with each other. In other words, the S Tranche is for allocating liquidity efficiently as it is needed based on a tranche balancing algorithm.
In summary, Saffron Finance is an innovative new DeFi platform that provides liquidity providers with an array of risk-averse liquidity pools that earn them interest and distributes $SFI tokens to liquidity providers.
2. Who and When Created Saffron Finance?
Saffron Finance was created by an anonymous developer(s) under the psykeeper alias who launched the Saffron.Finance web3 application on November 1, 2020. Saffron is open source and its code can be found on GitHub and verified on etherscan.io.
It managed to reach $5M TVL in DAI in just 6 hours after launch and reached $11M just 7 days after. These days its TVL hovers around $20M with liquidity pools being added every few days.
3. What is $SFI Token Used For?
Saffron Finance (SFI) logo
The native cryptocurrency of Saffron Finance is $SFI. $SFI tokens or Spice Tokens are the native currency of the Saffron ecosystem, driving all of its features, products, and incentive structures.
SFI Token Utility:
- Subsidy for Liquidity Providers
SFI tokens must be staked before an LP can join the yield-enhancing A tranche. Additionally, once Saffron introduces fees, SFI staking will entitle stakers to a proportional share of fee revenue.
Subsidy for Liquidity Providers
SFI tokens are awarded to liquidity providers for their liquidity provision. This is done to incentivize LPs to provide the protocol with their idle assets. During the first epoch (14 days in length), 40,000 SFI tokens were generated with 30% being distributed to Saffron liquidity providers and 10% to the team.
In the subsequent epochs up to and including epoch 7, the SFI token subsidy is halved at every epoch. Beginning at epoch 8, the halving discontinues and SFI tokens are steadily released at a rate of 200 tokens per epoch until the 100,000 SFI cap is reached or a governance proposal to change the emission schedule is passed.
SFI tokens will be used in Saffron’s on-chain governance mechanism as voting power. SFI token holders will be able to submit and vote on various governance proposals such as protocol changes, upgrades, improvements, fees, SFI token allocation, etc.
SFI Token Stats
SFI is an ERC-20 token with a maximum supply capped at 100,000 SFI. The total supply of SFI is currently 40,000 with a circulating supply of ~58k.
SFI tokens are minted at the end of each epoch schedule and are distributed to Saffron liquidity providers and the Saffron team.
The emission schedule for the first 6 months (12 epochs) is as follows:
Approximately 15,000 SFI tokens will be distributed to the Saffron team after the first 6 months of SFI generation. Following this distribution, Saffron’s on-chain governance will decide how the rest of their token allocation gets distributed.
SFI Token Distribution
- Team - 25%
- Governance controlled treasury - 15%
- Liquidity miners - 60%
4. What is the main product of Saffron Finance?
Saffron Finance liquidity pools (Source)
The main product of Saffron Finance is its web3 application – Saffron.Finance – and all of its smart contracts including pools, adapters, and strategy.
Smart Contracts of Saffron Finance
The primary component of the Saffron Finance system is its pools of liquidity. These liquidity pools hold deposited digital assets from liquidity providers and deploy them on various DeFi platforms to earn interest.
The first Saffron pool was the DAI pool, which launched with a DAI/Compound adapter and since Saffron’s liquidity pools are ever-expanding, an SFI/ETH, SFI/BTSE, and an SFI pool have already been added.
In epoch 3, three new pools will be added: USDT, SFI/Geeq, and SFI/ESD (Empty Set Dollar) liquidity pools.
Working in conjunction with pools, adapters connect the pooled capital in these pools to various DeFi platforms so the capital can start earning interest. The first adapter was the DAI/Compound adapter which connects the DAI pool to the Compound platform giving DAI pool LPs the opportunity to earn interest on Compound.
More adapters with other DeFi platforms will continuously be added/and/or removed in future epochs.
The strategy smart contract is what connects all pools and adapters together. It selects the best adapter to deploy capital to every hour for each pool and it also generates and distributes SFI tokens to LPs at the end of every epoch.
5. What are Saffron's Epochs For?
Epochs are two-week (14-day) periods where deposited liquidity from LPs is locked up and deployed to DeFi platforms to earn interest. In the meantime, SFI tokens are automatically mined by the LPs.
At the end of an epoch, the interest earned is calculated and can be distributed to LPs according to their proportional tranche ownership. The same goes for the mined (or generated) SFI tokens.
All in all, Saffron’s epochs are periods of time where the Saffron system puts LPs provided liquidity to work and earns them interest and SFI mining rewards. At the end of each epoch, LPs can choose to remove their liquidity alongside SFI mined and interest earned.
6. What are some notable milestones by Saffron?
Saffron Finance only launched in November of this year and has already crossed multiple milestones and achievements including:
Security Review by Quantstamp (Source)
On November 23, 2020, Quantstamp – a trusted leader in blockchain security – completed an express security review of Saffron Finance. The review was completed without any findings of high severity.
Saffron joins BTSE Labs Incubator (Source)
On November 19, 2020, Saffron Finance became the first member of the BTSE Labs incubator. The incubator is for up and coming DeFi products and will provide Saffron with additional resources needed to build a dynamic risk layer on top of the existing DeFi ecosystem.
Successfully handles a situation with a bug (Source)
When Saffron’s epoch 1 came to an end, there was a bug that prevented users from withdrawing their funds. But without panicking, Saffron solved the issue within 3 days by creating a rescue contract and deploying it successfully to return almost all of the funds.
Saffron Epoch 2 launches with changes and enhancements (Source)
On November 29, 2020, Saffron launched epoch 2 with the following changes from epoch 1:
- SFI Staking pool
- SFI/BTSE Uniswap LP pool
- New SFI rewards per pool
- A tranche SFI enhanced rewards
All in all, Saffron Finance is already innovating at a swift pace with its epochs and we can expect to see much more from Saffron as new epochs are rolled out.
7. Where to Store $SFI?
MetaMask wallet website homepage
Saffron Finance (SFI) is an ERC-20 token residing on top of the public Ethereum blockchain. That said, you can store SFI in any ERC-20 token supported wallet.
However, the best wallets for storing SFI are non-custodial Web3 wallets that provide seamless access to the best DeFi applications, like Uniswap, Balancer, etc.
That said, DeFi wallets are the best for storing SFI because the token is widely used and supported in the Ethereum-DeFi ecosystem.
Popular Saffron Finance (SFI) Wallets:
- Argent (mobile)
- MyEtherWallet (MEW) (web)
- Metamask (web)
In addition to the above-listed wallets, Saffron Finance (SFI) can be stored on a wide variety of other reputable wallets supporting ERC-20 tokens.
8. Where to Buy & Sell $SFI?
Saffron Finance (SFI) can be bought and sold on a peer-to-peer (P2P) basis but the most popular way to buy, sell, or trade $SFI is through centralized and decentralized cryptocurrency exchanges.
You can buy and sell SFI with cryptocurrency or fiat currency at the following top DEXes and exchanges. In most cases, you will be able to buy SFI with BTC, ETH, or stablecoins.
- Uniswap - WETH
- 1inch Exchange - USDT, COVER
- 0x Protocol - WETH
- Bilaxy - ETH
In addition to the exchanges listed above, Saffron Finance (SFI) is also traded on a variety of other exchanges and platforms that enable people to buy, sell, or trade cryptocurrencies.
Hope you enjoyed that read :) Let me know if I have missed something in the comments.