Many DeFi protocols are on Ethereum and Binance blockchains, with huge amounts of funds locked up there. These DeFi solutions, though they could function perfectly well under Cardano, are not willing to move yet because of lesser yield opportunities.
The project proposes a token with 1:1 convertibility with ADA that allows holders to keep staking their underlying ADA while also yield farming using the tokens. These tokens will be tokenized ADA, a representation of the token holders will deposit into a dApp or a centralized custodian. Once they have deposited these tokens, they will receive other tokens that can be converted back to ADA at any time.
Users can then stake the deposited ADA with community staking pools to earn staking rewards. Issued tokens can be used by holders for yield farming in DeFi applications like staking and liquidity pools.
The Developer Behind the Proposal
Nim is currently operating Staking Rocks (PHRCK), a staking pool for the Cardano blockchain based in Manilla, Philippines. PHRCK has minted 153 blocks and has 1668 delegators at the moment. Nim maintains PHRCK web services and has been actively studying the Cardano blockchain for months before joining Project Catalyst.
He is very active on the platform, answering questions and offering more information about his proposal. The detailed replies offer more about the project than the original proposal does.
How it Works
The proposal is meant to reward Cardano supporters with a tokenized ADA that can earn them staking rewards when deposited into liquidity pools and lending pools. The native ADA will also keep earning staking rewards that can be sent to official holders. The tokens can be transferred or sold to another user on the platform and the staking rewards associated with the tokens can also be transferred.
According to Nim, this will need the development of a system that tracks the wallets holding the tokenized ADA at a particular time, so that rewards from staking can be transferred to them. He also proposes a decentralized governance system that will decide on the delegation choices for deposited ADA such that the likeliness of centralization of a huge amount of stake in the network is avoided. This system is meant to give users to power such that decentralization is maintained.
Nim has requested funding of $80,000 that will be needed to build the solution. They have broken down the uses of funds for this project into three major categories. First, 50% will be used for the development of the dApp that will hold custody of deposited ADA. 30% is for marketing and 20% for miscellaneous expenses and initial overheads.
This proposal touches a very important point about the Cardano. Although the DeFi surge is the current craze in the blockchain space, it is not being associated with Cardano, which is one of the largest and well known blockchains.
It is important for such projects to be developed to attract more DeFi protocols to Cardano, and reward Cardano supporters, most of whom have been on the ecosystem for years. Nim appears to have a solid background in app development and runs a reliable stake pool that also contributes to the Cardano ecosystem.
To gain more information about tokenized ADA for yield farming and follow the discussions, visit ideascale and be part of the movement. It is also important to note the positive feedback from Cardano users who have stated that such a project would be a good incentive and could further help them continue their support for the platform.