The report was initiated and commissioned by the WOO Network team. Every piece of content within it originates from ASXN. We take pride in the fact that the information presented is unbiased and solely represents our findings and perspectives.
Overview
WOOFi is a cross-chain DEX where users can swap, earn and stake across 10 chains. The DEX utilizes a novel sPMM (Synthetic Proactive Market Making) algorithm to price assets, via the retrieval of CEX order book data and a sophisticated hedging mechanism for the market maker. Compared to traditional AMMs, this allows for more accurate pricing, more efficient liquidity, minimised IL and MEV protection.
Over the past year, WOOFi has actively pursued an aggressive cross-chain expansion strategy, and has often been one of the first non-native DEXs on recently launched, EVM compatible chains.
Through WOOFi Earn, WOOFi offers Supercharger Earn Vaults, which are single sided yield products without IL. The Supercharger Vaults are in essence an undercollateralized lending product, similar to Maple Lending, which offer real yield.
WOO token holders can benefit from these protocol fees through WOOFi Stake. WOOFi Stake enables users to stake WOO on multiple chains and earn protocol fees, having consistently earned WOO stakers a 4% yield, paid in USDC.
Over the past month, WOOFi Swap has had $13.63M in daily average trading volume, making it the 20th most volume traded DEX across the space. In addition, WOOFi Swap saw approximately 7000 active traders per day over this period.
Overview
WOOFi is a cross-chain DEX where users can swap, earn and stake across 10 chains. The DEX utilizes a novel sPMM (Synthetic Proactive Market Making) algorithm to price assets, via the retrieval of CEX order book data and a sophisticated hedging mechanism for the market maker. Compared to traditional AMMs, this allows for more accurate pricing, more efficient liquidity, minimised IL and MEV protection.
Over the past year, WOOFi has actively pursued an aggressive cross-chain expansion strategy, and has often been one of the first non-native DEXs on recently launched, EVM compatible chains.
Through WOOFi Earn, WOOFi offers Supercharger Earn Vaults, which are single sided yield products without IL. The Supercharger Vaults are in essence an undercollateralized lending product, similar to Maple Lending, which offer real yield.
WOO token holders can benefit from these protocol fees through WOOFi Stake. WOOFi Stake enables users to stake WOO on multiple chains and earn protocol fees, having consistently earned WOO stakers a 4% yield, paid in USDC.
Over the past month, WOOFi Swap has had $13.63M in daily average trading volume, making it the 20th most volume traded DEX across the space. In addition, WOOFi Swap saw approximately 7000 active traders per day over this period.
Mechanics
WOOFi Swap is constructed using an sPMM algorithm, which aims to emulate the price, spread, and depth of a centralised exchange order book.
WOOFi Swap is constructed using an sPMM algorithm, which aims to emulate the price, spread, and depth of a centralised exchange order book.
In contrast, most DEXs operate as AMMs and utilise constant product market maker models. These models rely on the xy = k function to calculate prices for two tokens based on the available reserve balance for each token (x and y). This curve is based on the principle that trades should not alter the product (k) of a pair's reserve balances (x and y). According to the constant product formula, the price of token x is calculated as price x = reserve_token_y / reserve_token_x.
The sPMM algorithm, on the other hand, receives order book data from CEXs to determine a trade price using the mid-price (P0) (the average of the bid and ask prices), spread (s) (the difference between the ask and bid prices over the mid-price), and slippage.
The sPMM algorithm, on the other hand, receives order book data from CEXs to determine a trade price using the mid-price (P0) (the average of the bid and ask prices), spread (s) (the difference between the ask and bid prices over the mid-price), and slippage.
The CEXs from which order book data is sourced are selected by the market maker and depend on where they choose to hedge. Custom on-chain price feed oracles are used to receive data. The oracle pushes price updates proactively; meaning that as the CEX price moves, the new price replaces the old one. When users swap, they receive the price based on the latest valid parameters on-chain. The on-chain data is updated based on price deviation at the discretion of the market maker, and is typically around 0.1% (i.e. updated when price moves 0.1%).
In addition to the mid-price and spread data, WOOFi Swap uses a slippage coefficient (k) to simulate the liquidity of the CEX order book from which the data is drawn. It is used to ensure that the slippage on-chain matches the slippage on the CEX orderbook, i.e. so that a user executing an identical trade on the CEX and on WOOFi Swap, experiences similar slippage.
The slippage coefficient ensures that the on-chain quotes are competitive enough to attract flow from aggregators, while also managing the risk associated with hedging the on-chain flow to maintain market neutrality and generate profits.
Price of Asset x:
AMM:
In addition to the mid-price and spread data, WOOFi Swap uses a slippage coefficient (k) to simulate the liquidity of the CEX order book from which the data is drawn. It is used to ensure that the slippage on-chain matches the slippage on the CEX orderbook, i.e. so that a user executing an identical trade on the CEX and on WOOFi Swap, experiences similar slippage.
The slippage coefficient ensures that the on-chain quotes are competitive enough to attract flow from aggregators, while also managing the risk associated with hedging the on-chain flow to maintain market neutrality and generate profits.
Price of Asset x:
AMM:
Where:
y is the balance of token y in the pool
x is the balance of token x in the pool
WOOFi Swap:
y is the balance of token y in the pool
x is the balance of token x in the pool
WOOFi Swap:
Below is an overview of how WOOFi swaps work:
Example, user wants to buy ETH using USDC:
1. User initiates swap to use USDC to buy ETH.
2. sPMM Algorithm gets the mid-price and spread data from the CEX order books using a custom on-chain price feed oracle.
3. The amount of ETH that the user will receive is estimated based on the spread and liquidity to match the CEX.
4. User receives ETH for their USDC through the liquidity pool.
5. sPMM Pool Manager hedges by taking the same position as the user to keep market neutrality. (i.e. since the market maker sold ETH for USDC to the user, so they buy ETH for USDC, or use another tool such as perps to increase their ETH position).
WOOFi Swap Fundamentals
Minimised IL
Users who provide liquidity to traditional AMMs face significant impermanent loss. AMM pools are rebalanced by arbitrageurs who buy the underpriced token and sell the overpriced token until the AMM price matches the broader markets. This profit is extracted from liquidity providers, who suffer from impermanent loss, who incurs negative slippage to realign the pool’s balance.
In the sPMM model, users deposit assets for the sPMM Manager to manage. There is no toxic flow, i.e. no arbitrageurs who extract profits from LPs. The sPMM manager hedges their position to stay market neutral, and therefore even if the swap pool is out of balance, are able to make up the assets through their position on WOO X.
For example:
1. User buys 10 ETH for 20,000 USDC from WOOFi Swap.
2. The pool is theoretically imbalanced, with less ETH and more USDC.
3. sPMM Manager hedges position by buying 10 ETH off chain, so they are able to make up the imbalance.
MEV Protection
Since WOOFi Swap does not use an AMM pricing model, i.e. pricing does not come from a pool of underlying assets therefore, it cannot be influenced by MEV bots, users are protected from sandwich attacks and LPs (and users) are protected from JIT liquidity attacks.
Firstly, a sandwich attack works as follows and can lead to poor price execution for users:
1. User submits a transaction to buy asset X through an AMM.
2. MEV bot sees the pending transaction in the mempool and places two transactions, one before the users and one after.
3. Since pricing of an asset on an AMM is derived from the balances on the AMMs liquidity pool, the MEV bot is able to push the price of asset X up by buying it.
4. The user ends up paying the inflated price for asset X.
5. The bot ends up selling asset X at the inflated price.
A JIT liquidity attack is a bit more complicated. In most cases JIT liquidity actually provides a better fill for users. It works as follows:
1. A user submits a large swap transaction on a DEX that uses an AMM for pricing. Typically a concentrated liquidity AMM.
2. The MEV bot / searcher sees this transaction in the mempool and seeks to benefit from the trading fees the LPs in this pool will gain from swap transactions.
3. Right before the swap occurs, the MEV bot adds liquidity to the specific pool that will handle the transaction. This liquidity is often focused on the single price tick (in Concentrated liquidity) where the swap will be most relevant.
4. The swap then takes place, and a fee is earned for providing the necessary liquidity for the transaction.
5. The liquidity and any accrued fees are immediately withdrawn after the swap is completed.
6. The MEV bot may hedge out their inventory risk on another trading venue, and the resultant profit for the bot will be the difference between the transaction fees associated with the hedge, the transactions to add/remove liquidity and the LP fee earned.
7. This usually results in a better fill for swappers as they fill into a deeper LP. However, passive LP’s lose out as their trading fee rewards are diluted by the active JIT liquidity. They are not compensated sufficiently for the risk they are taking.
8. More recently, it was discovered that JIT liquidity could result in a worse fill for swappers if a sandwich attack was also implemented.
Cross Chain
Over the past year, WOOFi has actively pursued an aggressive cross-chain expansion strategy, and has often been one of the first non-native DEXs on recently launched EVM compatible chains, like Linea and Base. This initiative has been led by their cross-chain swaps. Through LayerZero's cross-chain messaging protocol and Stargate's liquidity, WOOFi Swap enables users to execute cross-chain transactions with a single signed transaction.
However, it's worth noting that WOOFi Swap relies on Stargate for its cross-chain token bridging, which tends to be more costly compared to alternative bridging solutions. To address this, WOOFi has announced forthcoming support for LayerZero's OFT (Omnichain Fungible Token) Standard and Chainlink's CCTP.
Example, user wants to buy ETH using USDC:
1. User initiates swap to use USDC to buy ETH.
2. sPMM Algorithm gets the mid-price and spread data from the CEX order books using a custom on-chain price feed oracle.
3. The amount of ETH that the user will receive is estimated based on the spread and liquidity to match the CEX.
4. User receives ETH for their USDC through the liquidity pool.
5. sPMM Pool Manager hedges by taking the same position as the user to keep market neutrality. (i.e. since the market maker sold ETH for USDC to the user, so they buy ETH for USDC, or use another tool such as perps to increase their ETH position).
WOOFi Swap Fundamentals
Minimised IL
Users who provide liquidity to traditional AMMs face significant impermanent loss. AMM pools are rebalanced by arbitrageurs who buy the underpriced token and sell the overpriced token until the AMM price matches the broader markets. This profit is extracted from liquidity providers, who suffer from impermanent loss, who incurs negative slippage to realign the pool’s balance.
In the sPMM model, users deposit assets for the sPMM Manager to manage. There is no toxic flow, i.e. no arbitrageurs who extract profits from LPs. The sPMM manager hedges their position to stay market neutral, and therefore even if the swap pool is out of balance, are able to make up the assets through their position on WOO X.
For example:
1. User buys 10 ETH for 20,000 USDC from WOOFi Swap.
2. The pool is theoretically imbalanced, with less ETH and more USDC.
3. sPMM Manager hedges position by buying 10 ETH off chain, so they are able to make up the imbalance.
MEV Protection
Since WOOFi Swap does not use an AMM pricing model, i.e. pricing does not come from a pool of underlying assets therefore, it cannot be influenced by MEV bots, users are protected from sandwich attacks and LPs (and users) are protected from JIT liquidity attacks.
Firstly, a sandwich attack works as follows and can lead to poor price execution for users:
1. User submits a transaction to buy asset X through an AMM.
2. MEV bot sees the pending transaction in the mempool and places two transactions, one before the users and one after.
3. Since pricing of an asset on an AMM is derived from the balances on the AMMs liquidity pool, the MEV bot is able to push the price of asset X up by buying it.
4. The user ends up paying the inflated price for asset X.
5. The bot ends up selling asset X at the inflated price.
A JIT liquidity attack is a bit more complicated. In most cases JIT liquidity actually provides a better fill for users. It works as follows:
1. A user submits a large swap transaction on a DEX that uses an AMM for pricing. Typically a concentrated liquidity AMM.
2. The MEV bot / searcher sees this transaction in the mempool and seeks to benefit from the trading fees the LPs in this pool will gain from swap transactions.
3. Right before the swap occurs, the MEV bot adds liquidity to the specific pool that will handle the transaction. This liquidity is often focused on the single price tick (in Concentrated liquidity) where the swap will be most relevant.
4. The swap then takes place, and a fee is earned for providing the necessary liquidity for the transaction.
5. The liquidity and any accrued fees are immediately withdrawn after the swap is completed.
6. The MEV bot may hedge out their inventory risk on another trading venue, and the resultant profit for the bot will be the difference between the transaction fees associated with the hedge, the transactions to add/remove liquidity and the LP fee earned.
7. This usually results in a better fill for swappers as they fill into a deeper LP. However, passive LP’s lose out as their trading fee rewards are diluted by the active JIT liquidity. They are not compensated sufficiently for the risk they are taking.
8. More recently, it was discovered that JIT liquidity could result in a worse fill for swappers if a sandwich attack was also implemented.
Cross Chain
Over the past year, WOOFi has actively pursued an aggressive cross-chain expansion strategy, and has often been one of the first non-native DEXs on recently launched EVM compatible chains, like Linea and Base. This initiative has been led by their cross-chain swaps. Through LayerZero's cross-chain messaging protocol and Stargate's liquidity, WOOFi Swap enables users to execute cross-chain transactions with a single signed transaction.
However, it's worth noting that WOOFi Swap relies on Stargate for its cross-chain token bridging, which tends to be more costly compared to alternative bridging solutions. To address this, WOOFi has announced forthcoming support for LayerZero's OFT (Omnichain Fungible Token) Standard and Chainlink's CCTP.
Limited Listings
WOOFi Swap is unable to offer swapping of many coins, since their sPMM model relies on CEXs for pricing. The decision to list new coins has to consider suitability of hedging, therefore the platform prioritises tokens with deep CEX liquidity - particularly with strong liquidity in perpetual markets. As of now, WOOFi Swap has natively listed only 11 markets: USDC, USDT, WOO, ETH, BTC, ARB, AVAX, BNB, MATIC, FTM and OP.
Unfortunately, although the sPMM model comes with benefits, such as mitigated IL and MEV reduction, one of its major downsides is the inability to list assets quickly, due to liquidity requirements, particularly perp liquidity requirements.
Furthermore, listings are limited currently, since adding more assets increases the risk of all assets, if one asset goes to zero. This is because WOOFi uses a singleton pool design. WOOFi is exploring separate pools for long tail assets to support more listings. WOOFi has integrated 1inch to combat the lack of listings: assets that are not available to trade on WOOFi will be routed through 1inch.
For example, if a user is trading Asset A (not available on WOOFi):
- User swaps Asset A on Ethereum for ARB on Arbitrum.
- 1inch executes the swap of Asset A for USDC.
- WOOFi executes the cross-chain swap of USDC for ARB.
Capital Efficiency
Traditional AMMs require large amounts of liquidity and are relatively capital inefficient, since most trades are executed within a narrow range of price levels. WOOFi Swap requires less TVL and liquidity, yet can achieve similar pricing due to the use of orderbook data for pricing and use of a professional market maker, as opposed to underutilised “lazy liquidity”.
WOOFi Earn
WOOFi Swap is unable to offer swapping of many coins, since their sPMM model relies on CEXs for pricing. The decision to list new coins has to consider suitability of hedging, therefore the platform prioritises tokens with deep CEX liquidity - particularly with strong liquidity in perpetual markets. As of now, WOOFi Swap has natively listed only 11 markets: USDC, USDT, WOO, ETH, BTC, ARB, AVAX, BNB, MATIC, FTM and OP.
Unfortunately, although the sPMM model comes with benefits, such as mitigated IL and MEV reduction, one of its major downsides is the inability to list assets quickly, due to liquidity requirements, particularly perp liquidity requirements.
Furthermore, listings are limited currently, since adding more assets increases the risk of all assets, if one asset goes to zero. This is because WOOFi uses a singleton pool design. WOOFi is exploring separate pools for long tail assets to support more listings. WOOFi has integrated 1inch to combat the lack of listings: assets that are not available to trade on WOOFi will be routed through 1inch.
For example, if a user is trading Asset A (not available on WOOFi):
- User swaps Asset A on Ethereum for ARB on Arbitrum.
- 1inch executes the swap of Asset A for USDC.
- WOOFi executes the cross-chain swap of USDC for ARB.
Capital Efficiency
Traditional AMMs require large amounts of liquidity and are relatively capital inefficient, since most trades are executed within a narrow range of price levels. WOOFi Swap requires less TVL and liquidity, yet can achieve similar pricing due to the use of orderbook data for pricing and use of a professional market maker, as opposed to underutilised “lazy liquidity”.
WOOFi Earn
WOOFi offers Supercharger Earn Vaults, single sided yield products without IL, through their WOOFi Earn interface. The Supercharger Vaults allow users to lend tokens to the sPMM Pool Manager for a fixed borrowing rate, by depositing assets into the vaults. It’s important to note that the sPMM Pool Manager does not provide collateral for their borrowings. In essence, WOOFi has built an undercollateralized lending and RWA product, similar to Maple Lending.
The sPMM manager borrows from superchargers and deposits them into the liquidity pool. The user only interacts with the liquidity pool, where the settlement happens.
The borrowing rate is calculated by estimating the rate of a collateralized non-stablecoin loan and applying a multiplier according to the collateralization ratio.
The sPMM manager borrows from superchargers and deposits them into the liquidity pool. The user only interacts with the liquidity pool, where the settlement happens.
The borrowing rate is calculated by estimating the rate of a collateralized non-stablecoin loan and applying a multiplier according to the collateralization ratio.
Where:
- Bi is the borrowing rate for a single platform i
- Xi is the overcollateralized borrowing rate for a non-stablecoin asset on platform i
- The Collateralization Ratio Multiplier is sourced from lending platforms.
The calculation of the final borrowing rate B uses multiple lending platforms, and is calculated using the exponential moving average of Bi.
For example, if we assume that the borrowing rate for ETH only takes into account three platforms: Aave, Compound and Radiant:
Aave: Borrowing Rate: 3%, Collateral Ratio: 105%
- Bi is the borrowing rate for a single platform i
- Xi is the overcollateralized borrowing rate for a non-stablecoin asset on platform i
- The Collateralization Ratio Multiplier is sourced from lending platforms.
The calculation of the final borrowing rate B uses multiple lending platforms, and is calculated using the exponential moving average of Bi.
For example, if we assume that the borrowing rate for ETH only takes into account three platforms: Aave, Compound and Radiant:
Aave: Borrowing Rate: 3%, Collateral Ratio: 105%
Compound: Borrowing Rate: 3.2%, Collateral Ratio: 102%
Radiant: Borrowing Rate: 2.8%, Collateral Ratio: 110%
The final borrowing rate for ETH will then be:
The sPMM Pool Manager can borrow up to 90% of the assets within the vaults. The vaults operate over a 7-day period, with a 24 hour window at the end where the manager has to settle their loans with the users. Users can withdraw their deposits with no fee during this 24 settlement period. Additionally, users can opt for an instant withdrawal, for a 0.3% withdrawal fee.
Through the Supercharger Vaults, users who lend assets to the sPMM Manager earn a borrowing fee, while taking on counterparty risk. In addition, the Supercharger Vaults minimise impermanent loss.
WOOFi Staking Mechanics
WOOFi Stake 1.0
The WOOFi protocol gives the WOO token utility via a real yield staking mechanic, having consistently earned WOO stakers a 4% yield, paid in USDC. Initially, WOOFi introduced staking of the WOO token in December of 2021, making use of unique, per-chain staking contracts that distributed 80% of all swap fees to WOO stakers on that chain. WOO stakers had a 7-day unstaking period or incurred a 5% fee for an instant unstake. In this iteration, users were able to stake on Polygon, Arbitrum, BNB Chain and Avalanche.
Through the Supercharger Vaults, users who lend assets to the sPMM Manager earn a borrowing fee, while taking on counterparty risk. In addition, the Supercharger Vaults minimise impermanent loss.
WOOFi Staking Mechanics
WOOFi Stake 1.0
The WOOFi protocol gives the WOO token utility via a real yield staking mechanic, having consistently earned WOO stakers a 4% yield, paid in USDC. Initially, WOOFi introduced staking of the WOO token in December of 2021, making use of unique, per-chain staking contracts that distributed 80% of all swap fees to WOO stakers on that chain. WOO stakers had a 7-day unstaking period or incurred a 5% fee for an instant unstake. In this iteration, users were able to stake on Polygon, Arbitrum, BNB Chain and Avalanche.
In this first iteration of the staking mechanism, the WOO protocol used 80% of the swap fees generated from WOOFi to buy back the WOO token and distribute to WOO stakers. This proved very successful with over 100 million tokens staked across multiple chains and a total of 4.6 million WOO tokens earned by stakers.
However, having WOOFi on multiple chains with unique staking contracts led to difference in staking APR between chains.This meant that a user staking WOO on a chain with a higher swap volume to number of WOO staked would earn a higher APR. This design was less than ideal and it led to the birth of the WOOFi Stake 2.0.
WOOFi Stake 2.0
Improving on some of the drawbacks of WOOFi Stake 1.0, WOOFi introduced WOOFi Stake 2.0 or omnichain staking. Through an integration with Layerzero’s cross-chain messaging protocol, WOOFi has enabled users to stake WOO on multiple supported chains and earn the same yield, regardless of where the WOO is staked. All fees from WOOFi are collected in the quote token on each chain (all USDC except BSC which is USDT), this yield is then paid in USDC instead of the previous buyback and distribution of WOO tokens.
A new, opt-in ‘auto-compound’ feature has been added to the stake page and users have to claim their USDC yield, swap for WOO tokens and then stake the WOO tokens. This is where the WOO buyback comes from in Stake 2.0 and since launch over 1 million WOO has been bought back.
WOOFi Stake 2.0
Improving on some of the drawbacks of WOOFi Stake 1.0, WOOFi introduced WOOFi Stake 2.0 or omnichain staking. Through an integration with Layerzero’s cross-chain messaging protocol, WOOFi has enabled users to stake WOO on multiple supported chains and earn the same yield, regardless of where the WOO is staked. All fees from WOOFi are collected in the quote token on each chain (all USDC except BSC which is USDT), this yield is then paid in USDC instead of the previous buyback and distribution of WOO tokens.
A new, opt-in ‘auto-compound’ feature has been added to the stake page and users have to claim their USDC yield, swap for WOO tokens and then stake the WOO tokens. This is where the WOO buyback comes from in Stake 2.0 and since launch over 1 million WOO has been bought back.
Cross-chain Mechanism:
1. Users can stake WOO on any of these chains: Polygon, Arbitrum, Binance Smart chain and Avalanche, Optimism and Ethereum.
2. WOOFi collects 80% of the swap fees from each WOOFi deployment on each chain.
3. Every Thursday these swap fees are bridged to Arbitrum using Layerzero’s protocol and are then streamed to WOO stakers over the following 7 day period.
4. Users' entire staked balance of WOO tokens (& Multiplier points) across all chains are taken into account for this yield claim.
Multiplier Points
In Stake 1.0, WOO stakers had a 7-day unstaking period or could opt into instant unstaking via incurring a 5% fee. WOOFi Stake 2.0 abandons these restrictions on unstaking and instead incentivises long term staking of WOO via a GMX-esque multiplier points (MP) system. This multiplier points system rewards long term stakers of WOO without inflation.
The multiplier points system works as follows:
1. A user stakes their WOO tokens on any supported chain.
2. All WOO stakers earn MP’s at a 50% base APR (e.g. if you stake 1000 WOO for 1 year, you will have accrued 500 MP’s).
3. These MP’s can themselves be staked and each MP has the same earning potential as 1 staked WOO token (1 staked MP earns the same amount of USDC yield as 1 staked WOO token).
4. If a user decides to unstake a portion of their WOO tokens, an equivalent portion of their MP’s will be burnt which means they lose the earning potential of those MP’s. For example, if a user had 1000 WOO staked and 1000 MP’s staked they would be earning the equivalent USDC rewards of 2000 staked WOO. If they then decide to unstake 100 WOO (10% of their total WOO staked), then 10% of their MP’s would be burnt forever (100 MP’s).
Challenges (MP APR Boosts)
As discussed, the base earning rate of MP’s is 50% APR. However, through completing ‘challenges’ or tasks specific to the WOOFi protocol, users can increase the rate at which they earn MP’s up to a maximum of 109.85% APR.
There are 3 ways to boost the MP earning rate; WOOFi Swap volume, Supercharger vault deposits and the use of the auto-compound feature. A WOO staker needs a minimum of 1800 WOO staked to complete these challenges and there is a tiered system based on how much WOO a user has staked. If a user completes all the challenges for their staking tier, they will receive a 1.3x boost on MP earning rate for each of the three categories discussed. To earn these boosts on their MP’s, their MP’s must be staked.
1. Users can stake WOO on any of these chains: Polygon, Arbitrum, Binance Smart chain and Avalanche, Optimism and Ethereum.
2. WOOFi collects 80% of the swap fees from each WOOFi deployment on each chain.
3. Every Thursday these swap fees are bridged to Arbitrum using Layerzero’s protocol and are then streamed to WOO stakers over the following 7 day period.
4. Users' entire staked balance of WOO tokens (& Multiplier points) across all chains are taken into account for this yield claim.
Multiplier Points
In Stake 1.0, WOO stakers had a 7-day unstaking period or could opt into instant unstaking via incurring a 5% fee. WOOFi Stake 2.0 abandons these restrictions on unstaking and instead incentivises long term staking of WOO via a GMX-esque multiplier points (MP) system. This multiplier points system rewards long term stakers of WOO without inflation.
The multiplier points system works as follows:
1. A user stakes their WOO tokens on any supported chain.
2. All WOO stakers earn MP’s at a 50% base APR (e.g. if you stake 1000 WOO for 1 year, you will have accrued 500 MP’s).
3. These MP’s can themselves be staked and each MP has the same earning potential as 1 staked WOO token (1 staked MP earns the same amount of USDC yield as 1 staked WOO token).
4. If a user decides to unstake a portion of their WOO tokens, an equivalent portion of their MP’s will be burnt which means they lose the earning potential of those MP’s. For example, if a user had 1000 WOO staked and 1000 MP’s staked they would be earning the equivalent USDC rewards of 2000 staked WOO. If they then decide to unstake 100 WOO (10% of their total WOO staked), then 10% of their MP’s would be burnt forever (100 MP’s).
Challenges (MP APR Boosts)
As discussed, the base earning rate of MP’s is 50% APR. However, through completing ‘challenges’ or tasks specific to the WOOFi protocol, users can increase the rate at which they earn MP’s up to a maximum of 109.85% APR.
There are 3 ways to boost the MP earning rate; WOOFi Swap volume, Supercharger vault deposits and the use of the auto-compound feature. A WOO staker needs a minimum of 1800 WOO staked to complete these challenges and there is a tiered system based on how much WOO a user has staked. If a user completes all the challenges for their staking tier, they will receive a 1.3x boost on MP earning rate for each of the three categories discussed. To earn these boosts on their MP’s, their MP’s must be staked.
An Example
A user who had 2,000 WOO staked would be in the lowest viable staking tier. In order to earn the 1.3x boost to MP earning rate from trading volume, that user would need to trade at least $200 in cumulative volume (including cross chain swaps) in the observed 30 day period. Likewise, they would need to have at least $100 deposited in the supercharger vaults for the full 30 days. To earn the final 1.3x boost, a WOO staker must have the autocompound feature enabled.
WOOFi NFT Boosted Yields
In the future, WOOFi will introduce novel ways to boost staking rewards via NFTs. There are two planned types of NFTs that can be used to boost WOO staking rewards:
1. Consumable NFTs - These NFTs are earned through quests or challenges and can then be staked for a temporary boosted yield. The size of the yield boost is based on the rarity of the NFT earned.
2. Avatar NFTs - These NFTs will provide permanent boosts to staking yields.
WOOFi Stake 2.0 Metrics
Since the migration from WOOFi Stake 1.0, we have seen a total of 132 million WOO staked in WOOFi. These WOO tokens have earned over $300,000 USDC rewards since May 18th, averaging an APR of 4.15%.
Although users can stake on 7 unique chains, the stake is centred on Arbitrum (36.8%), Avalanche (24.5%) and Ethereum (16.3%).
A user who had 2,000 WOO staked would be in the lowest viable staking tier. In order to earn the 1.3x boost to MP earning rate from trading volume, that user would need to trade at least $200 in cumulative volume (including cross chain swaps) in the observed 30 day period. Likewise, they would need to have at least $100 deposited in the supercharger vaults for the full 30 days. To earn the final 1.3x boost, a WOO staker must have the autocompound feature enabled.
WOOFi NFT Boosted Yields
In the future, WOOFi will introduce novel ways to boost staking rewards via NFTs. There are two planned types of NFTs that can be used to boost WOO staking rewards:
1. Consumable NFTs - These NFTs are earned through quests or challenges and can then be staked for a temporary boosted yield. The size of the yield boost is based on the rarity of the NFT earned.
2. Avatar NFTs - These NFTs will provide permanent boosts to staking yields.
WOOFi Stake 2.0 Metrics
Since the migration from WOOFi Stake 1.0, we have seen a total of 132 million WOO staked in WOOFi. These WOO tokens have earned over $300,000 USDC rewards since May 18th, averaging an APR of 4.15%.
Although users can stake on 7 unique chains, the stake is centred on Arbitrum (36.8%), Avalanche (24.5%) and Ethereum (16.3%).
WOOFi Pro
On top of the standard implementation of the sPMM on EVM chains, WOOFi is also experimenting with a central limit order book model (CLOB). The CLOB is built atop Orderly networks ‘plug and play CLOB’ exchange protocol allowing for WOOFi to outsource the risk engine, matching engine and the asset pools.
The CLOB is aimed at professional traders, allowing for more complex order types, use of professional trading interfaces and tooling whilst allowing those traders to self custody their assets.
The initial implementation of WOOFi Pro was on Near.The trading volume on this CLOB for both spot and perpetual markets was very small, with only low 6 figures of total daily volume being processed by these markets, likely in part due to the lack of activity on Near as a whole.
The team has shifted away from Near towards being omnichain, and will enable cross-chain deposits from Arbitrum, Optimism, BNB Chain, Ethereum, Base, Linea, and Polygon. Additionally, WOOFi Pro trading fees will be shared with WOOFi stakers from following mainnet launch, which is anticipated to launch in Q4 2023.
Competition Overview
Cross-chain swaps are currently relatively unexplored across the space, with only a few protocols, mainly Hashflow and SushiXSwap, implementing relevant solutions aside from WOOFi Swap.
SushiSwap
SushiXSwap is Sushi’s cross-chain AMM built using LayerZero's Stargate to swap assets between multiple chains. Sushiswap originally launched in 2020 on Ethereum, as a fork of Uniswap.
SushiXSwap is currently integrated with Optimism, Arbitrum, Binance Chain, Avalanche, Polygon. SushiXSwap will aggregate more bridges in the future, with a focus on building SushiXSwap in a modular, composable way. SushiXSwap utilises Sushi’s own liquidity on each and every chain in the cross-chain transaction.
Hashflow
Hashflow is a decentralised exchange which, similar to WOOFi Swap, offers non-AMM based cross-chain swaps. Unlike AMMs, Hashflow uses a RFQ model through professional market makers.
An off-chain RFQ engine receives quotes from market makers who manage liquidity in on-chain pools. The RFQ model handles both the settlement and swapping of assets on-chain, while market makers price assets off-chain.
Comparison
Sushi employs an AMM model. This model uses the xy = k function to determine prices for two tokens based on their respective reserve balances (x and y).
In contrast, WOOFi's sPMM algorithm and Hashflow use order book data from CEXs to set a trade price. Since neither Hashflow nor WOOFi's pricing mechanisms rely on the AMM pricing model, they're not susceptible to MEV bot manipulation, safeguarding users from sandwich attacks and shielding both LPs and users from JIT liquidity attacks.
Additionally, traditional AMMs are known to pose risks for liquidity providers. Those who contribute liquidity to these AMMs often encounter significant impermanent loss.
On top of the standard implementation of the sPMM on EVM chains, WOOFi is also experimenting with a central limit order book model (CLOB). The CLOB is built atop Orderly networks ‘plug and play CLOB’ exchange protocol allowing for WOOFi to outsource the risk engine, matching engine and the asset pools.
The CLOB is aimed at professional traders, allowing for more complex order types, use of professional trading interfaces and tooling whilst allowing those traders to self custody their assets.
The initial implementation of WOOFi Pro was on Near.The trading volume on this CLOB for both spot and perpetual markets was very small, with only low 6 figures of total daily volume being processed by these markets, likely in part due to the lack of activity on Near as a whole.
The team has shifted away from Near towards being omnichain, and will enable cross-chain deposits from Arbitrum, Optimism, BNB Chain, Ethereum, Base, Linea, and Polygon. Additionally, WOOFi Pro trading fees will be shared with WOOFi stakers from following mainnet launch, which is anticipated to launch in Q4 2023.
Competition Overview
Cross-chain swaps are currently relatively unexplored across the space, with only a few protocols, mainly Hashflow and SushiXSwap, implementing relevant solutions aside from WOOFi Swap.
SushiSwap
SushiXSwap is Sushi’s cross-chain AMM built using LayerZero's Stargate to swap assets between multiple chains. Sushiswap originally launched in 2020 on Ethereum, as a fork of Uniswap.
SushiXSwap is currently integrated with Optimism, Arbitrum, Binance Chain, Avalanche, Polygon. SushiXSwap will aggregate more bridges in the future, with a focus on building SushiXSwap in a modular, composable way. SushiXSwap utilises Sushi’s own liquidity on each and every chain in the cross-chain transaction.
Hashflow
Hashflow is a decentralised exchange which, similar to WOOFi Swap, offers non-AMM based cross-chain swaps. Unlike AMMs, Hashflow uses a RFQ model through professional market makers.
An off-chain RFQ engine receives quotes from market makers who manage liquidity in on-chain pools. The RFQ model handles both the settlement and swapping of assets on-chain, while market makers price assets off-chain.
Comparison
Sushi employs an AMM model. This model uses the xy = k function to determine prices for two tokens based on their respective reserve balances (x and y).
In contrast, WOOFi's sPMM algorithm and Hashflow use order book data from CEXs to set a trade price. Since neither Hashflow nor WOOFi's pricing mechanisms rely on the AMM pricing model, they're not susceptible to MEV bot manipulation, safeguarding users from sandwich attacks and shielding both LPs and users from JIT liquidity attacks.
Additionally, traditional AMMs are known to pose risks for liquidity providers. Those who contribute liquidity to these AMMs often encounter significant impermanent loss.
As of September 2023, Sushi operates across the most chains, at 18 chains, followed by WOOFi on 10 chains, and Hashflow on 6. In terms of 24-hour trading volume, Hashflow leads with approximately$16.46M, followed by WOOFi at $13.63M, and Sushi trails with $12.31M.
However, when it comes to fees earned over the past 30 days, Sushi dominates with a substantial $1.08M, while WOOFi has generated only $75.1K, and Hashflow hasn't earned any fees. In revenue generation, Sushi again takes the lead with $147.5K, WOOFi follows with $62.1K. Examining active users on a monthly average basis, Sushi boasts a significant 127.8K users, dwarfing WOOFi's 7.1K and Hashflow's 4.7K.
Notably, even though WOOFi has a fraction of Sushi's user base, it still achieves a higher daily volume. Additionally, WOOFi's revenue-to-fees ratio is relatively higher compared to Sushi, indicating a more efficient capture of revenue.
History & Partnerships
Overview
WOO Trade and the WOO ecosystem was founded by Kronos Research in 2019. Kronos actively participates in various trading strategies such as market making, arbitrage, Commodity Trading Advisor services, and high-frequency trading. They made a name for themselves in the digital assets markets by averaging $5-$10 Billion in daily trading volume around that time.
Initially the WOO token was called KRON, before its rebranding in December of 2019. Throughout the end of 2019 and the beginning of 2020, the WOO product continued to make strides with their successful shipping of WOO Trade 2.0. Their successes were noticed by the top allocators in the space and on September 28th 2020, they successfully closed a $10 million seed round with participation from the likes of Dragonfly Capital, Fenbushi Capital, QCP Capital Venture arm, Hashkey and 3AC.
Throughout 2020, the platform continued to reach new trading volume highs whilst onboarding institutional traders and making strategic partnerships with some of the large players in the space. On October 29th 2020, the WOO token started trading on Gate.io, before being listed on Huobi a day later. WOOFi swap did not go live until 2021 however, long after the Woo team had proven themselves in the CeFi arena.
WOOFi Roadmap
- On October 27th 2021, the Woo Network announced the alpha launch of WOOFi Swap 1.0 on the Binance Smart Chain (BSC). This introduces Woo to the world of on-chain liquidity and cements them as a player in DeFi.
- In November, Woo closed their Series A round, raising over $30 Million with leadership from Binance Labs.
- On December 15th 2021, the first iteration of WOOFi Stake was implemented, allowing users to stake WOO on BSC.
- On February 9th 2022, Woo introduced WOOFi Earn.
- On March 2nd 2022, WOOFi Swap went live on the Avalanche network.
- On March 9th, Woo announced that WOOFi has undergone a number of developments; they completed a code audit by Verilog Audit, they’re integrated into Yield Yak aggregator and that they are now live on Debank alongside the release of their multichain data dashboard.
- On April 14th 2022, WOOFi Swap went live on the Fantom network.
- On March 19th 2022, Woo introduces WOOFi Brokers
- On July 16th 2022, Woo announced that cross-chain swaps between Avalanche, Fantom and BSC were live. 2 weeks later, Polygon is added.
- On July 20th 2022, The Polygon Adventurer NFT launched, showcasing the functionality of WOOFi’s cross-chain NFT infrastructure.
- On November 9th 2022, WOOFi Swap went live on the Arbitrum network.
- On December 12th 2022, WOOFi Swap went live on the Optimism network.
- On January 10th 2023, the Woo Network released their revamped tokenomics including the burning of 24% of the total WOO supply.
- On February 3rd 2023, WOO Ventures airdropped venture tokens to WOO X and WOOFi swap stakers.
- On March 9th 2023, WOOFi cross-chain swaps exit beta stage, incorporating more chains with better UX.
- On April 27th 2023, WOOFi swap went live on zkSync Era.
- On May 25th 2023, WOOFi swap released WOOFi stake 2.0, enabling cross-chain staking on Arbitrum via a LayerZero partnership.
- On July 5th 2023, WOOFi swap launched on their 10th network, the Polygon zkEVM network.
- On August 4th 2023, formed a strategic partnership with Burrito wallet.
- On August 10th 2023, WOOFi swap went live on the Linea network.
- On August 15th, WOOFi swap went live on the Base network.
However, when it comes to fees earned over the past 30 days, Sushi dominates with a substantial $1.08M, while WOOFi has generated only $75.1K, and Hashflow hasn't earned any fees. In revenue generation, Sushi again takes the lead with $147.5K, WOOFi follows with $62.1K. Examining active users on a monthly average basis, Sushi boasts a significant 127.8K users, dwarfing WOOFi's 7.1K and Hashflow's 4.7K.
Notably, even though WOOFi has a fraction of Sushi's user base, it still achieves a higher daily volume. Additionally, WOOFi's revenue-to-fees ratio is relatively higher compared to Sushi, indicating a more efficient capture of revenue.
History & Partnerships
Overview
WOO Trade and the WOO ecosystem was founded by Kronos Research in 2019. Kronos actively participates in various trading strategies such as market making, arbitrage, Commodity Trading Advisor services, and high-frequency trading. They made a name for themselves in the digital assets markets by averaging $5-$10 Billion in daily trading volume around that time.
Initially the WOO token was called KRON, before its rebranding in December of 2019. Throughout the end of 2019 and the beginning of 2020, the WOO product continued to make strides with their successful shipping of WOO Trade 2.0. Their successes were noticed by the top allocators in the space and on September 28th 2020, they successfully closed a $10 million seed round with participation from the likes of Dragonfly Capital, Fenbushi Capital, QCP Capital Venture arm, Hashkey and 3AC.
Throughout 2020, the platform continued to reach new trading volume highs whilst onboarding institutional traders and making strategic partnerships with some of the large players in the space. On October 29th 2020, the WOO token started trading on Gate.io, before being listed on Huobi a day later. WOOFi swap did not go live until 2021 however, long after the Woo team had proven themselves in the CeFi arena.
WOOFi Roadmap
- On October 27th 2021, the Woo Network announced the alpha launch of WOOFi Swap 1.0 on the Binance Smart Chain (BSC). This introduces Woo to the world of on-chain liquidity and cements them as a player in DeFi.
- In November, Woo closed their Series A round, raising over $30 Million with leadership from Binance Labs.
- On December 15th 2021, the first iteration of WOOFi Stake was implemented, allowing users to stake WOO on BSC.
- On February 9th 2022, Woo introduced WOOFi Earn.
- On March 2nd 2022, WOOFi Swap went live on the Avalanche network.
- On March 9th, Woo announced that WOOFi has undergone a number of developments; they completed a code audit by Verilog Audit, they’re integrated into Yield Yak aggregator and that they are now live on Debank alongside the release of their multichain data dashboard.
- On April 14th 2022, WOOFi Swap went live on the Fantom network.
- On March 19th 2022, Woo introduces WOOFi Brokers
- On July 16th 2022, Woo announced that cross-chain swaps between Avalanche, Fantom and BSC were live. 2 weeks later, Polygon is added.
- On July 20th 2022, The Polygon Adventurer NFT launched, showcasing the functionality of WOOFi’s cross-chain NFT infrastructure.
- On November 9th 2022, WOOFi Swap went live on the Arbitrum network.
- On December 12th 2022, WOOFi Swap went live on the Optimism network.
- On January 10th 2023, the Woo Network released their revamped tokenomics including the burning of 24% of the total WOO supply.
- On February 3rd 2023, WOO Ventures airdropped venture tokens to WOO X and WOOFi swap stakers.
- On March 9th 2023, WOOFi cross-chain swaps exit beta stage, incorporating more chains with better UX.
- On April 27th 2023, WOOFi swap went live on zkSync Era.
- On May 25th 2023, WOOFi swap released WOOFi stake 2.0, enabling cross-chain staking on Arbitrum via a LayerZero partnership.
- On July 5th 2023, WOOFi swap launched on their 10th network, the Polygon zkEVM network.
- On August 4th 2023, formed a strategic partnership with Burrito wallet.
- On August 10th 2023, WOOFi swap went live on the Linea network.
- On August 15th, WOOFi swap went live on the Base network.
Tokenomics
Token Utility
The WOO token is interwoven throughout the WOO ecosystem across both their DeFi and CeFi products. As such, the WOO token is held for a number of different reasons, by different market participants.
1. Real Yield - As discussed, the WOO token, when staked, earns 80% of the swap and earn fees of WOOFi paid in USDC. The current APR of staking WOO is ~5% and there are over 130 million WOO staked.
2. Trading Benefits - The WOO token also has utility derived from WOO X, the centralised exchange offering. Similar to other exchange token models, WOO can be staked to unlock the zero fee zone, offering traders greatly reduced fees on their CeFi trading. Other benefits include referral bonuses, free withdrawals and fee discounts on perps and API trading.
3. Institutional Benefits - Trading firms and market makers on WOO X are incentivised to stake WOO in order to get fee reductions and qualify for increased API limits.
Token Supply
The initial token distribution of WOO looked like this:
Token Utility
The WOO token is interwoven throughout the WOO ecosystem across both their DeFi and CeFi products. As such, the WOO token is held for a number of different reasons, by different market participants.
1. Real Yield - As discussed, the WOO token, when staked, earns 80% of the swap and earn fees of WOOFi paid in USDC. The current APR of staking WOO is ~5% and there are over 130 million WOO staked.
2. Trading Benefits - The WOO token also has utility derived from WOO X, the centralised exchange offering. Similar to other exchange token models, WOO can be staked to unlock the zero fee zone, offering traders greatly reduced fees on their CeFi trading. Other benefits include referral bonuses, free withdrawals and fee discounts on perps and API trading.
3. Institutional Benefits - Trading firms and market makers on WOO X are incentivised to stake WOO in order to get fee reductions and qualify for increased API limits.
Token Supply
The initial token distribution of WOO looked like this:
However, due to multiple reasons outlined in WOO’s Q1 tokenomics revamp article, the WOO team decided to burn about 705.2 million WOO tokens (23.51% of the total 3 billion WOO tokens) from the ecosystem and team portion.
Firstly, WOO Ventures was sunsetted and the WOO Network decided to burn the remaining amount (of the 5% of total supply the WOO ventures team received) of tokens the entity held. This resulted in 147,417,657 WOO tokens being sent to the burn address.
Secondly, WOO DAO was sunsetted. This led the WOO Network to burning 259,136,204 of the WOO tokens allocated to WOO DAO and to sending 5,000,000 WOO tokens to the newly formed WOO Force which will be focussing on community engagement.
Finally, the remaining 298,697,900 WOO tokens which were burned came from the insurance fund. In light of the events that occurred in 2022 (CeFi blowing up, FTX borrowing against their volatile tokens), the WOO Network decided backing an insurance fund to support WOO X with WOO tokens, which are volatile and correlated to issues with WOO X, was not ideal. They therefore decided to allocate $10M of company-owned stablecoins to form an insurance fund which stands as a first-loss tranche in the event of the WOO Network suffering a loss or from a liquidity source defaulting. The WOO tokens in the insurance fund were therefore burned.
Breakdown of Q1 Tokenomics burn:
Firstly, WOO Ventures was sunsetted and the WOO Network decided to burn the remaining amount (of the 5% of total supply the WOO ventures team received) of tokens the entity held. This resulted in 147,417,657 WOO tokens being sent to the burn address.
Secondly, WOO DAO was sunsetted. This led the WOO Network to burning 259,136,204 of the WOO tokens allocated to WOO DAO and to sending 5,000,000 WOO tokens to the newly formed WOO Force which will be focussing on community engagement.
Finally, the remaining 298,697,900 WOO tokens which were burned came from the insurance fund. In light of the events that occurred in 2022 (CeFi blowing up, FTX borrowing against their volatile tokens), the WOO Network decided backing an insurance fund to support WOO X with WOO tokens, which are volatile and correlated to issues with WOO X, was not ideal. They therefore decided to allocate $10M of company-owned stablecoins to form an insurance fund which stands as a first-loss tranche in the event of the WOO Network suffering a loss or from a liquidity source defaulting. The WOO tokens in the insurance fund were therefore burned.
Breakdown of Q1 Tokenomics burn:
The resultant effect of the Q1 burn was a better token distribution and a reduction in the amount of coins that were set to be vested. As it stands, the number of WOO tokens in circulation now sits at 1,741,008,844, whilst the total supply is now 2.2 billion tokens. Therefore 79.81% of WOO tokens are already circulating.
Token Distribution and Emissions
The current token distribution post the Q1 tokenomics upgrade looks like this:
Token Distribution and Emissions
The current token distribution post the Q1 tokenomics upgrade looks like this:
Investors
From an early-stage the WOO token was backed by some of the largest capital allocators and VC’s in the space, across a number of rounds. The WOO Network raised through 3 means; a seed round, launchpad and a Series A round.
Seed Round
On September 28th 2020, WOO closed their seed round after raising a total of $10 million from Dragonfly Capital, Three Arrows Capital, IOSG Ventures, QSN (the ventures arm of QCP Capital), Defi Capital, Fenbushi Capital, Chain Capital, One Boat Capital, Vector Capital, AKG Ventures, Evernew Capital, Krypital Group, Axia8 Ventures, The Cabin Capital, Hashkey Capital, SNZ, and Fenbushi Capital.
Launchpad
On October 30th 2020, Huobi Global launched WOO trading on their platform. The WOO Network provided 9M WOO (10% of their initial circulating tokens) to Huobi Global.
Investors
All Investors are fully vested except for Series A investors, who own 2.27% (71M WOO) of the total supply. Series A vesting was 3 years, with a 6-month cliff. Vesting started on November 1st 2021.
There is currently approximately 13 months left until Series A investors are fully vested. To note, a small tranche of 2.25M WOO has finished vesting in January 2022.
Team & Advisors
The team and advisors section (8.43%) is locked and has a variable emission schedule independent of each team member and their joining time. When a WOO employee joins they receive WOO tokens on a 4 year vesting period starting when they join the firm.
Risks
Smart Contract Risk
WOOFi, like all decentralised applications, faces the risk of exploitation / malfunctioning due to the nature of smart contracts. This is an unavoidable reality DeFi faces and we are still seeing well tested and respected projects like Curve and Balancer getting exploited. There is also a layered smart contract risk here since the spMM utilises third party protocols to earn yield on supercharger vault assets whilst they are not being utilised by the spMM manager.
WOOFi has taken steps to mitigate this risk by undertaking multiple audits of their contracts to check for bugs. WOOFi audits:
- WOOFi swap was audited by Certik and Verilog in October 2021
- WOOFi Stake was audited by Certik in December 2021
- WOOFi Earn was audited by Certik in February 2022
- WOOFi Earn Supercharger Vaults were audited by both Certik and Peckshield through July & August 2022
- WOOFi Swap v2 was audited by Certik in October 2022
- WOOFi Staking v2 was audited by Certik in May 2023.
Centralisation Risk
Kronos Ventures, Kronos’ venture capital arm, incubated WOO Network, and therefore in its current state, WOOFi is heavily reliant on a single sPMM manager, Kronos Research. This introduces risk if Kronos research runs into any financial issues or has to spot managing the spMM, liquidity and the functioning of WOOFi could become dire.
WOO X was initially very reliant on Kronos research as a market maker, but as the exchange progressed more and more market makers joined and ate into Kronos’ share of volume. This is a healthy state for an exchange and we would encourage and welcome more sPMM managers to WOOFi as well.
Supercharger Vault Risks
Users lend to Kronos Research, the sPMM Manager, without collateral to earn yield through the Supercharger Vaults. This comes with significant counterparty risk and could lead to loss of funds, in case Kronos Research is unable to pay back loans due to smart contract exploits, incurred losses during their hedging process or other problems.
Bridge Risk
The WOO token is multichain, which allows users to stake WOO on many different chains. Whilst this is great for usability and simplicity in staking, having lots of WOO tokens locked up in various bridge contracts represents a tail risk due to the vulnerability of these protocols. Bridges are very susceptible to exploitation, in part due to the complexity of bridging and the lucrative nature of these contract exploits.
Regulatory Risk
WOOFi faces regulatory risk, like most of DeFi. The underlying mechanics of the aggregation and distribution of yield could break US securities law and classify WOO an unregistered security. Further, the running of WOOFi / WOO X could constitute the running of an unlicensed exchange, similar to what Coinbase and Binance are dealing with in the US justice system currently.
From an early-stage the WOO token was backed by some of the largest capital allocators and VC’s in the space, across a number of rounds. The WOO Network raised through 3 means; a seed round, launchpad and a Series A round.
Seed Round
On September 28th 2020, WOO closed their seed round after raising a total of $10 million from Dragonfly Capital, Three Arrows Capital, IOSG Ventures, QSN (the ventures arm of QCP Capital), Defi Capital, Fenbushi Capital, Chain Capital, One Boat Capital, Vector Capital, AKG Ventures, Evernew Capital, Krypital Group, Axia8 Ventures, The Cabin Capital, Hashkey Capital, SNZ, and Fenbushi Capital.
Launchpad
On October 30th 2020, Huobi Global launched WOO trading on their platform. The WOO Network provided 9M WOO (10% of their initial circulating tokens) to Huobi Global.
Investors
All Investors are fully vested except for Series A investors, who own 2.27% (71M WOO) of the total supply. Series A vesting was 3 years, with a 6-month cliff. Vesting started on November 1st 2021.
There is currently approximately 13 months left until Series A investors are fully vested. To note, a small tranche of 2.25M WOO has finished vesting in January 2022.
Team & Advisors
The team and advisors section (8.43%) is locked and has a variable emission schedule independent of each team member and their joining time. When a WOO employee joins they receive WOO tokens on a 4 year vesting period starting when they join the firm.
Risks
Smart Contract Risk
WOOFi, like all decentralised applications, faces the risk of exploitation / malfunctioning due to the nature of smart contracts. This is an unavoidable reality DeFi faces and we are still seeing well tested and respected projects like Curve and Balancer getting exploited. There is also a layered smart contract risk here since the spMM utilises third party protocols to earn yield on supercharger vault assets whilst they are not being utilised by the spMM manager.
WOOFi has taken steps to mitigate this risk by undertaking multiple audits of their contracts to check for bugs. WOOFi audits:
- WOOFi swap was audited by Certik and Verilog in October 2021
- WOOFi Stake was audited by Certik in December 2021
- WOOFi Earn was audited by Certik in February 2022
- WOOFi Earn Supercharger Vaults were audited by both Certik and Peckshield through July & August 2022
- WOOFi Swap v2 was audited by Certik in October 2022
- WOOFi Staking v2 was audited by Certik in May 2023.
Centralisation Risk
Kronos Ventures, Kronos’ venture capital arm, incubated WOO Network, and therefore in its current state, WOOFi is heavily reliant on a single sPMM manager, Kronos Research. This introduces risk if Kronos research runs into any financial issues or has to spot managing the spMM, liquidity and the functioning of WOOFi could become dire.
WOO X was initially very reliant on Kronos research as a market maker, but as the exchange progressed more and more market makers joined and ate into Kronos’ share of volume. This is a healthy state for an exchange and we would encourage and welcome more sPMM managers to WOOFi as well.
Supercharger Vault Risks
Users lend to Kronos Research, the sPMM Manager, without collateral to earn yield through the Supercharger Vaults. This comes with significant counterparty risk and could lead to loss of funds, in case Kronos Research is unable to pay back loans due to smart contract exploits, incurred losses during their hedging process or other problems.
Bridge Risk
The WOO token is multichain, which allows users to stake WOO on many different chains. Whilst this is great for usability and simplicity in staking, having lots of WOO tokens locked up in various bridge contracts represents a tail risk due to the vulnerability of these protocols. Bridges are very susceptible to exploitation, in part due to the complexity of bridging and the lucrative nature of these contract exploits.
Regulatory Risk
WOOFi faces regulatory risk, like most of DeFi. The underlying mechanics of the aggregation and distribution of yield could break US securities law and classify WOO an unregistered security. Further, the running of WOOFi / WOO X could constitute the running of an unlicensed exchange, similar to what Coinbase and Binance are dealing with in the US justice system currently.
Disclaimer:
The information and services above are not intended to and shall not be used as investment advice.You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.
The information and services above are not intended to and shall not be used as investment advice.You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.