Despite having a pickle as a logo, the platform is not part of the “food coin” frenzy that took DeFi by storm recently. The project is innovative and has a unique approach, instead of being just another fork or copy of a major platform.
Nowadays, it is not uncommon to see stablecoins (DAI, USDC, USDT, etc.) trading at slightly different prices than their peg. The concept that drives Pickle Finance is to provide a solid mechanism to bring stablecoins back to balance (1:1 proportion with US dollar).
With an intuitive and easy-to-use UI that reminisces of a 90’s SNES video game, Pickle Finance has four main products so far – Farm, Swap, Stake, and the exclusive PJars.
Like many other DeFi protocols (Curve, Compound, Balancer, etc.), the platform utilizes recursion-based mechanisms to balance stablecoins with their peg and generate yield for users.
So far, it is secure to state that Pickle Finance has the potential not only to survive but also to thrive after the yield farming frenzy is gone.
A Quick Background
Anyone with minimal interest in decentralized finance heard a lot about yield farming in the last couple of months. Suddenly, every investor was trying to maximize the rate of return on capital by leveraging multiple DeFi protocols.
The ever-growing chase for yield was started, so yield farmers would go around switching from protocol to protocol to reap the best returns.
Multiple strategies involving Compound, Balancer, Curve, Uniswap, and other decentralized platforms were replicated by thousands of people worldwide, always trying to beat the previous numbers and get better APYs.
Currently, it is not to say that yield farming is dead yet. However, such strategies are going through the natural cycle of validation and re-validation (same as the whole crypto market goes every once in a while).
In this sense, Pickle Finance is following a more mature path, focusing on mitigating stablecoin volatility and generating yield at the same time. Despite a few security issues (non-audited code), the platform is still a refreshing idea for yield farmers and investors who want to diversify their portfolios.
What Is Pickle Finance?
Pickle Finance is a platform self-described as “an experimental protocol to bring stablecoins closer to their pegs using farming incentives, vaults, and governance”.
In the current phase, where DeFi markets start to seem somewhat bearish, the protocol identified a real-world problem and created an innovative- and profitable- solution to address it.
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First, Curve Finance addressed the problem of slippage in crypto trading and succeed to bring an effective solution. However, one platform is not enough, as stablecoins still often trade a few percent above or below their pegs.
The rise of yield farming just worsened the issue, as farmers began to trade larger volumes of stablecoins in their non-stop chase for higher yields.
To address this issue, Pickle encourages capital movement between stablecoins to balance them and bring them back to their intended value (1:1 US dollar). At the same time, the platform rewards investors and liquidity providers to incentivize cashflow within the mechanism.
Dig Into It
Pickle aims to bring the four largest stablecoins in the crypto scene (DAI, USDC, USDT, and sUSD) closer to their peg by using the power of farming and Vaults.
The idea is not hard to understand: the platform has four stablecoins pools (DAI/ETH, USDC/ETH, USDT/ETH, and sUSD/ETH), where liquidity providers deposit the respective coins to obtain rewards.
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The platform rewards liquidity providers with PICKLE tokens (native token) for arbitrage between off-peg stablecoins, as well as vault-based strategies that will use arbitrage techniques and flash loans to short overvalued stablecoins.
In layman’s terms, more rewards are given to below-peg stablecoin pools and fewer rewards are given to above-peg stablecoin pools. For instance, if DAI starts trading slightly under its peg, the protocol incentivizes users to provide more stablecoins in exchange for PICKLE tokens.
The PICKLE Token
Without employing VC allocation, pre-mine, or a traditional ICO, the platform opted for launching its native PICKLE token through an ongoing liquidity mine, using the popular concept “fair launch” introduced by Yearn Finance.
Besides, a portion of the total supply of PICKLE will be reserved for a development fund. It is possible to mine PICKLE tokens by staking Uniswap LP tokens into the platform’s pools (DAI/ETH, USDT/ETH, etc.) and also providing tokens into the exclusive ETH/PICKLE pool.
The ETH/PICKLE pool will take care of the situation in case all stablecoins start trading above their peg. The platform promises other pools soon.
Pickle Jars (PJars)
While PICKLE holders have governance rights within the platform, Pickle understands that this fact alone is not enough to encourage people to hold PICKLE tokens.
Hence, the platform developed the Pickle Jars (PJars), which use flash loans to leverage and arbitrage between stablecoins, generating returns to PICKLE holders while fulfilling their mission to bring stablecoins to their peg.
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Each PJar, similar to Yearn Vaults, utilize pooled assets deposited by liquidity providers to generate yield. For instance, a PJar may generate yield by farming sCRV tokens on Curve stablecoin pools.
Nonetheless, every gain has its share of risk. The feature’s code is not audited, while much of the implementation is largely identical to Yearn’s yVaults.
It is fundamental to remember that this project is still in the experimental stage, so there is a real risk for investors. The platform recommends users to participate at their own risk, so do not put in more money than you can afford to lose.
Straying from the stereotype associated with “food coins”, Pickle Finance follows a completely distinct approach.
The purpose of the platform is to bring stablecoins (DAI, USDC, USDT, and sUSD) closer to their peg while generating profitable returns for liquidity providers.
For that, the platform introduced its native PICKLE token to fulfill different purposes, which includes governance and incentives for different strategies.
In this sense, it is possible to foresee that, even if the PICKLE token and the project’s multi-strategy approach do not live up to the current expectations, the platform will continue to add value to the DeFi scene anyway.