Yield optimizoors. Growing APYs and powering LSDfi. - by zj.valz

Are you tired of constantly hopping from one yield farm to another across various Dexes?

Do you want a more convenient way to earn yields?

Look no further than Parallax Finance (”Parallax”) - the new protocol on the block that aims to become the yield infrastructure layer of DeFi.

With its innovative approach to yield generation, Parallax offers composable strategies and deep liquidity pools that usher in a new age of yield farming.

In this article, we'll delve into why Parallax is poised to become the de-facto choice of yield generation protocols, and what it means for the average DeFi user looking to maximize their returns while minimizing their effort. Get ready for a deep dive into the future of yield farming.

Project Overview:

Parallax is not your average yield infrastructure layer. What sets it apart from the competition is its focus on building synergistic products that make composable yield farming a breeze for all types of DeFi strategies.

Parallax understands that not all users have the same goals or investment styles, which is why they've created an ecosystem that caters to a wide range of needs for individuals and even DAOs to better manage their capital.

Products/Services:

There are 4 key products Parallax is offering: Orbital, Andromeda, Supernova and Blackhole.

Orbital - Yield Optimizer: A yield auto-compounder, reinvesting LP tokens to increase the share of the pool and in turn, the trading fees earned and APY generated for depositors.

Andromeda - Multivariant Yield: Zap in and out of Index Vaults that auto compounds all LP rewards.

It is a simple, reliable, and diversified way to generate yield across multiple protocols in one Index strategy (”IS”) vault. Each vault combines up to three LP strategies, generating governance token yield and/or LP rewards in multiple protocols. Users can enter the vault using any EVM token and cash out with any EVM token.

There are 2 types of IS vaults:

1. Bluechip Index Vaults Strategy: Bluechip tokens like GMX/GLP, and WETH/USDC.

2. Degen Index Vaults Strategy: A mix of Bluechips and newer, higher APY protocols. This will be actively managed by the team who will explore new degen vaults and protocols to integrate with.

Supernova - Powering LSDfi: A Meta-LSD vault, with customizable % allocation. Users can easily invest in one structured product and gain exposure to LSD yields from multiple protocols with one click.

A future iteration of SupernovaV2 also allows users to supercharge LSD yields through leverage, where the vault will algorithmically use the deposited collateral to borrow additional ETH from a lending platform to stake. The looping mechanism will be automated and users can power up their yields with borrowed capital.

Black hole - Liquidity Marketplace: Protocol-Owned Liquidity (POL) marketplace enables partners to establish bonding markets for any token pairs, deepening sticky liquidity and creating secondary markets for bonded tokens.

There are two types of Bonds, fixed term and fixed expiry bonds:

1. Fixed Term bonds will vest for a period of time following the purchase.

2. Fixed expiry bonds will vest with a specific time stamp.

Product-market fit:

Orbital: As APY increases, more users are likely to deposit into the Orbital vault, increasing TVL which motivates partner protocols to drive more liquidity into their own LPs, creating a positive feedback loop for everyone involved.

Parallax also teased a future iteration of Orbital, incorporating a “boost” function that enables partner protocols to incentives the pool further with their rewards, increasing APY. For the layman, this basically means you can earn more yield on your deposits.

Andromeda: Andromeda Multivariant Vault will allow users to access a diversified yield generation strategy, reducing risk while providing diversified returns.

Parallax is currently working on the Blue-chip index vault consisting of:

1. GMX/GLP - GMX

2. WETH/USDC - Sushiswap

3. WETH/USDC - Uniswap

The team also teased a new feature which will allow users to leverage their collateral deposited into Andromeda vaults. Further information will be released in the future.

Supernova: This product is aimed at DeFi users who want better yields on their LSD.

Parallax’s Meta-LSD vault is a customizable LSD aggregator. With just one click, users can adjust their exposure to their preferred LSD protocol, giving them greater control over their yields.

Moreover, the team also teased a future iteration of Supernova V2 where users can leverage their LSD for more yields via borrowing with collateral.

If you have ever used leverage in Defi, you know how tedious and expensive the looping process can be. Supernova's algorithm automates this process, reducing gas fees while allowing users to supercharge their yields with a smaller capital. However, note that both gains and losses are magnified due to leverage, so only use this if you know what you are doing.

Blackhole: POL marketplace helps partner protocols a secured marketplace to raise sticky liquidity via bonding while providing Parallax’s users with deeper liquidity and reducing slippage of the protocol’s

Furthermore, Liquidity that is locked in the protocol’s treasury will also provide a constant source of revenue from transaction fees, creating a new revenue stream for Parallax users.

Revenue-sharing:

Parallax will generate revenue from the performance fees on Vaults, which will be split to $PLX stakers, treasury, harvest caller and strategies as follows:

Vault User Interface (”UI”):

Parallax is currently in the Alpha stage and released a MIM3CRV-f vault for early-access users to try out. The UI thus far is slick and intuitive and they even provided a breakdown of the daily, and weekly APY for easy ROI calculation.

Safety:

Being a yield vault, security is paramount to attracting users. Parallax has committed itself to embark on multiple Audits with well-known audit firms and community audits.

They completed the Hacken Audit on March 3, 2023, and achieve a 10/10 security score on their Orbital Vault.

There are 6 more Audits planned to ensure users’ funds are SAFU.

Tokenomics:

*P.S. The project’s tokenomics has not been finalised yet, but PrimapesDAO has been given early access to what it could look like. Note that this will be subject to changes.*

Token Tickers: $PLX, $yPLX

Parallax operates on a two-token system. $PLX is the native utility of the protocol while $yPLX is a time-locked version of $PLX which comes with several benefits.

Purpose of $PLX:

• Lock and Earn - Capture the majority of generated fees both protocol/performance.

• yPLX - Timelock/vote to receive greater % rewards.

• Strategist - Hold tokens to suggest vault strategies in the DAO

• Governance - Hold tokens to participate and direct platform emissions to boost vaults

Users can lock their $PLX to obtain $yPLX, boosting yields generated from Parallax.

The amount of $yPLX obtained is based on the duration of the lock, the longer the lock, the more $yPLX they can obtain.

Refer to the infographic below for further details of $yPLX:

With $yPLX, users can benefit from:

1. Deflationary token supply: A percentage of performance fees will be used to buy back tokens from the market and burn them.

2. Governance rights: $yPLX holders can participate in governance decisions, charting the project’s next stage of evolution.

3. Higher Yields: $yPLX can obtain higher yields based on the proportion of locked $PLX and the duration of the lock. The longer the time lock, the higher the yield generated.

4. Earn Penalty Fees: Early unstaked time-locked vaults will incur a penalty fee which will be redistributed to lockers.

Token Distribution and Emission Schedule:

IDO details:

• IDO date: May/June 2023

• Max token supply: 100,000,000

• Tokens used for Fundraise: 18,000,000

• Total target raise: $3,300,000

  • Strategic raise: $300,000

  • Public raise: $3,000,000

• Tokens at Genesis: 4,250,000

• Circulating Market Cap at Genesis: $850,000

Fundraising details:

• There will be no VCs or large token holders participating in the sale.

• All unsold tokens will be burnt.

• Advisor tokens will be burnt if they are unable to fulfil their roles.

Post-Launch Vaults:

Parallax will offer 3 staking vaults post-launch to reduce selling pressure:

• 1/2/3 month vaults with increasing APY depending on the duration staked.

• There will be penalties for users who unstake early.

• The penalties will increase the APY of the remaining stakers.

Fund’s runway and usage:

Parallax Finance Roadmap:

Things I like:

• Yield farming is difficult for the average DeFi user who wants to maximize yield and minimize risk. Offering a one-stop shop that provides deep liquidity and optimized yield farming can be a game-changer, simplifying the process and eliminating the need for users to navigate multiple platforms.

• Supernova and Blackhole will be Parallax's key differentiators from its competitors (Beefy, Reaper Farm, etc), allowing it to tap into a lucrative LSD sector and attract Protocols with its OHM-like bonding products to build deeper liquidity.

• Parallax has engaged 7 different Audit firms to battle-test the products to ensure user funds are SAFU, demonstrating the team's commitment to security and risk management.

• Deflationary tokenomics ensure that the native token $PLX will be more valuable over time while ensuring liquidity remains sticky with its locking mechanics.

• The emission schedule seems reasonable, where the team, advisors and strategic investors are incentivised to ensure the long-term success of the protocol.

Risk Factors:

• Yield vaults face a significant risk from hackers, and it's crucial for Parallax to ensure that its vaults are free from vulnerabilities and have undergone thorough Audits before releasing them.

• Parallax is competing in a crowded space (e.g. Yield aggregator, LSD aggregator, etc). To stand out, the team needs to build synergy between its products while building deeper liquidity to attract users. Convenience should be Parallax’s key value proposition and the team’s success in carving out a niche in this arena will drive growth and success in the long-term.

• The incorporation of leverage exposes the protocol to a range of risks, such as flash loan exploits and counterparty risk. It's important for Parallax to conduct a thorough risk assessment and educate users about these risks before releasing their vaults. This will help minimize risks and ensure that degens who participate in these vaults are fully aware of what they're getting into.

• Defi participants are fickle and the prospect of locking $PLX for an extended period of time is not attractive to most users due to opportunity costs incurred on locked capital. The onus will be on the team to be able to deliver attracting yields at minimal risk to incentivise users to lock their tokens for a long time.

Conclusion:

Parallax's ambitious plan to become the yield infrastructure layer in Defi is commendable, and its suite of products showcases its bold plans to make that a reality. The focus on convenience and composable yield will allow Parallax to carve out a niche for itself. So whether you're a DeFi novice or a yield farming pro, it's time to say goodbye to the hassle of navigating multiple yield farms and walk into the future of yield farming with Parallax Finance.

If you are interested in participating in the alpha stage, do hop into the discord to sign-up for early access, claim the Alpha Tester Role and be eligible for airdrops.

Disclosures:

This is a sponsored educational post in collaboration with Parallax Finance. Opinions formed are solely the views of the author and do not constitute any financial advice. The information presented is accurate and up-to-date to the best of the author's knowledge and as always DYOR and psyops.