Hey folks, if you’re unfamiliar with DeltaPrime, as a primer (pun intended), I highly recommend that you read an article I wrote last February, which goes into a deep dive for how DeltaPrime is able to offer undercollateralized loans up to a rate 5x’s their original deposit.
Earlier this month, DeltaPrime announced that they were taking their success across chain to Arbitrum, one of Ethereum’s most popular and active Layer-2’s. But before I breakdown why I think this is such a big deal, here’s a quick recap of what DeltaPrime is and how its been able to come up with such an extremely capital efficient way for people to borrow and lend.
What is Delta Prime?
As I mentioned before, DeltaPrime is able to offer users undercollateralized loans up to a rate 5x’s their original deposit. In other words, if you supplied $1000 dollars worth of assets, then you can borrow up to $5000 dollars worth in return. The way that Deltaprime stops you from running off with your borrow assets is through a trustless system which they call a Prime Account:
Within a Prime Account, a “walled garden” system is setup where you can perform actions just as if you were doing so from your own wallet — paying gas fees, making LP tokens, staking, etc. The only thing that you are unable to do is to send them to an outside wallet that is not connected to your Prime Account; however, you can withdraw as long as much as you want, as long as your position stays solvent. The more you want to withdraw, the more, you need to repay (at least part of) your borrowed funds.
The Need for Growth
Over the last several months, perhaps the biggest downside for DeltaPrime has been the limited growth/potential seen on the Avalanche Network. Yes, we’re still in a bear market but despite this fact, Avalanche has continued to get its TVL eaten away by other chains and L2s:
Avalanche TVL for the past 12 months
And to make matters worse, $AVAX, the native token to the Avalanche network continues to go undergo diluting unlocks:
With $AVAX bouncing back towards yearly lows, I think it was nearly only a matter of time for DeltaPrime to take its success and move on to greener pastures.
In Comes Arbitrum
Comparing TVL’s over the past year, where Avalanche has shrunk to nearly a third of its original size, Arbitrum on the other hand has more than tripled:
As one of the premier Ethereum L2 solutions, in addition to its rapid growht in TVL, Arbitrum continues to ship quality upgrades such as Arbitrum Nitro and Arbitrum Nova. Therefore earlier this month when the DeltaPrime team officially announced a date for their launch on Arbitrum, it didn’t come as much of a surprise:
Over the past few weeks, the DeltaPrime team continues to announce more and more partnerships for different Arbitrum protocols that will be accessible in their walled garden system. To date, these include:
Wombex Finance announced on August 3rd
Level Finance announced on August 10th
Penpie xyz announced on August 14th
Camelot DEX announced August 17th
Pendle Finance announced on August 25th
With several more likely to be announced, it’ll be exciting to see what strategies users will be able to take advantage with 5x the amount of collateral. In fact, if you yourself are an Arbtirum-centric user, it would make sense for you to get on DeltaPrime’s discord and start lobbying for the inclusion of some of your favorite Arbitrum protocols right away!
Risks and potential drawbacks
Like anyone/anything that wants to fly too close to the sun, there’s always a risk of being burned, and DeltaPrime is no different. From what I could tell, these are the biggest risks and drawbacks:
Liquidations: With any borrowing/lending platform this should be obvious, but I’ll say it anyway — there’s always a risk of getting liquidated and you can still get liquidated on DeltaPrime. With DeltaPrime however, the liquidation mechanisms work a bit differently so it is still important to know the rules before you play the game. When on your Prime Account page, you’ll see a Health ratio which will tell you the overall health of your collateral versus what is loaned:
If the meter drops below zero, liquidation bots will get activated to bring up your Health ratio at least back to 25%. It always sucks to get liquidated, but the benefit here is that you don’t get liquidated for 100% — this measure is put into place to protect lenders from getting absolutely rekt.
Liquidity: one could argue that this is an inherent risk factor for all protocols, but I would say that this is especially important for DeltaPrime since there is so much potential liquidity being borrowed but potentially not enough liquidty being supplied.
If the protocol experiences a potential liquidity drain in the future, there are certain levers DeltaPrime can pull in order to incentivize borrowers/lenders including different changing interest rates in regards to different pool utilization ratios, however this cryptomarket gets easily spooked, and in the past we’ve seen how easily billions of dollars can run away in just days.
Security: It’s pretty clear that DeltaPrime has high standards for security, as they’ve even had to turn down potential partnerships when others weren’t willing to do the same. DeltaPrime’s notable security features include:
- Multisig — Two out of three people on DeltaPrime’s core team must agree with every code upgrade; all 3 of the core team members have doxxed profiles on linkedin, including Gavin, the CBDO that I spoke with before: (1, 2, 3)
- Six different audits — the most recent from May 2023 by Peckshield
- Code changes are on a timelock — a 24-hour timelock for code changes was instituted on January 10th, but there are plans to change this to a 72-hour timelock in the future (and as I mentioned above, code changes are approved via multisig)
However just as audits can’t give a 100% percent safety guarantee for certain protocols, unfortunately neither can DeltaPrime. For whatever protocols you are exposed to via DeltaPrime, if they suffer a hack/exploit, you might be put at risk too.
A perfect case in point occurred last February with one of DeltaPrime’s partners Platypus Finance, where an “emergency withdraw” exploit drained nearly $8.5 million dollars. With an extremely quick and and clear response from the DeltaPrime team, it was very apparent that they had contingency plans in place to protect it’s borrowers:
As with any unforeseen attacks, there’s no telling what/how an exploit or breach may happen in the future, so therefore it’s important to DYOR and ask questions to any protocol you’re using, whether it’s DeltaPrime or anything else in DeFi.
Conclusion
There’s a lot of things to be excited about with DeltaPrime’s launch onto Arbitrum, and I will be keeping a very close eye on what partnerships they continue to announce in the weeks to come.
If you’re interested in learning more about DeltaPrime and have any more questions, I highly recommend you join their active discord community (and while you’re there, you might want to ask some questions about their $PRIME token which should be released sometime this quarter!).
Thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates. Also, looking for a gift for your Crypto-loving/hating friend? Give them a REKT journal to cheer them up!
Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Cheers everyone!
