Please describe your proposed solution
Title: Enhancing Cardano DeFi with Non-Collateralised Lending and Non-paired Liquidity
1. Problem Statement
DeFi is highly plagued by entry barriers for existing, potential or small liquidity holders hindering crypto mass adoption for potential and small liquidity holders. It is also faces liquidity fragmentation and centralisation risks. Many DeFi platforms only offer paired liquidity provision hence limiting the many existing and potential LPs, they also run lending services that require collateral preventing those without collateral from acquiring financial services. Additionally, liquidity is scattered across various DEXs, resulting in inefficiencies such as increased slippage and suboptimal trade executions. Furthermore, many DeFi protocols rely on centralised services for liquidity management, making them vulnerable to central points of failure.
2. Solution
Felicity 1.0 aims to tackle these issues by offering non-collateralised loans and the option for non-paired or semi liquidity provision on the Cardano blockchain, This will also feature aggregating liquidity across DEXs on Cardano and yield farming. The project will focus on the following features during the initial phase:
- Non-Collateralised Lending and Yield Farming
- Non-Paired Liquidity Provision
- Felicity Token
- Omnipool
- Liquidity Aggregation
- Oracle Integration
3. Detailed Features
3.1 Core Features (Initial Phase)
1. Lending and Yield Farming:
- Lending: Felicity 1.0 will feature non-collateralised lending which is meant to allow users to borrow assets and use rewards to cover interest and loan repayments, offering a self-repaying loan mechanism.
- Yield Farming: The system will also enable users to stake their tokens and earn rewards in Felicity Token while maintaining flexibility through paired, semi-paired and non-paired liquidity provision.
2. Non-paired Liquidity Provision:
- With this function users can provide liquidity using only one asset, lowering barriers to entry and not limiting us to attracting paired liquidity providers but also those with small holdings and insufficient funds as they can opt for semi-paired liquidity provision.
- Our goal is making sure that we provide more options available for the Cardano Ecosystem.
3. Felicity Token
- Our objective was never to create a new currency as “too many” already exist, however in order for the above features to work we will have to introduce a new currency in the Cardano ecosystem and the cryptospace called JUF/JUE the Felicity token.
- It is also necessary for the incorporation of additional features in Felicity 2.0.
4. Omnipool:
- This feature unifies liquidity across all connected DEXs in the Cardano Ecosystem, maximising rewards for liquidity providers and optimising trade outcomes.
- This ensures that liquidity is channeled where it is required the most enhancing rewards for the community.
5. Liquidity Aggregation:
- This feature is meant to aggregates liquidity from multiple DEXs on Cardano blockchain to provide the best trade execution with minimal slippage.
- It was one of our objectives to be an AMM for Dexs when we applied for funding in Fund 7 2021. It is still our desire to do so though not our key selling point since SteelSwap wonderfully did that.
6. Oracle Integration:
- We intend on using Charli3 an internal oracle to provide real-time price data and market information, ensuring accurate trades and efficient liquidity routing, with plans to integrate external oracles later on.
4 How Felicity Works
4.1 Initial Phase Workflows
1. Trade Execution:
- The trader initiate the swap (e.g., ADA to DJED) on Felicity. The liquidity aggregation system helps the trader to route their trade through the optimal pool to ensure minimal slippage and efficient execution.
2. Non-paired Liquidity Provision:
- Liquidity providers (LPs) deposit a single asset into Felicity’s omnipool, allowing them to earn rewards without needing to pair assets with JUF. JUF holders can preset the assets they desire to pair with based on their goals.
3. Yield Farming and Lending:
- Users can stake their assets in Felicity’s liquidity pools to earn JUF tokens as rewards. Borrowers can also take out loans, with rewards automatically routed to cover interest payments through yield farming.
4.2 Step by step guide to the trading process and borrowing from Felicity Reserve Lending Pool
4.21 Steps for the Trading Process:
a. Trade Initiation: Traders select the currency pair and enter the trade amount.
b. Route Suggestion: Felicity analyses and displays optimal routes and trader chooses one DEX.
c. Fee Payment & Transaction Confirmation: Ordinary traders pay standard DEX trading fees, transaction fees and a small Felicity fee (e.g., 0.1%) as they confirm payment.
d. Trade Execution: Trade is processed on the DEX/AMM offering the best terms as chosen by trader.
e. Settlement: Assets are delivered to the trader's wallet trader receives funds as shown in the flow chart below.
Steps for Normal Trade Execution
4.2.2 Steps for Borrowing from Felicity Reserve Lending Pool:
1
a. Borrower Set Amount and IR: Borrowers enter the amount they want to borrow (minimum equivalent of 10 DJED) based on their stake and select their desired interest rate.
b. The system checks for available funds in the Felicity Reserve Lending Pool, which takes precedence for funding loans.
c. Borrower Proceeds: If the Reserve Lending Pool has available funds matching the borrower’s request and borrower is to proceed.
2. Borrower Accepts TCs: The borrowed funds are locked until the generate rewards that repays the principal and interest unless the borrower funds the repayment using another method.
3. Borrower Confirms Transaction: The borrower pays platform fees (in ADA) and confirms the transaction, the loan is funded immediately.
Steps for Non-Collateralised Loan
Steps 4 and 5 are done automatically once there are enough funds for loan repayment
4. Loan Repayment: Once rewards generated by borrowed funds are enough to pay for principal and interest the system sends the principal to the Reserve Lending Pool, and interest to its intended platform e.g conversion or insurance wallet.
5. Borrower Owns Funds: Ownership of funds is transferred to borrower minus all rewards.
This primarily is the solution that we envisage for Felicity 1.0..