Thread by @intechlligence

NYSE is worth $26T, & access is limited

Thus, with @PoisonFinance, we have

- A reliable assets system that offers everyone (in the world) exposure to stocks prices

- Potential great cashflow into DeFi, as people realize they can securely trade a semblance of RWA on-chain

🧵👇

This thread educates you about #SyntheticAssets & Poison Finance, split into 5 sections:

1️⃣ Synthetic assets
2️⃣ Poison Finance
3️⃣ Potions (Synthetic assets on Poison)
4️⃣ Benefits of synthetic potions
5️⃣ POI$ON

Abbreviations to note:
RWA: Real-world assets

1️⃣ Synthetic assets

Also called synths, these are replicated representations of RWA on-chain, they are tokenized derivatives that represent certain assets (e.g. stocks, land, bonds, etc.) & they enable traders who do not own these assets to benefit from their price fluctuations

Synths track the price performance of an external asset but it may not be backed by the actual asset, thus, in order to ensure sustenance & consistency, they are usually overcollateralized by another asset.

This is the concept Poison employs, which takes us to the next section

2️⃣ Poison Finance

Poison is a decentralized protocol that issues synths, it is multichain & currently on Ethereum, Arbitrum & BSC (with plans to expand to more blockchains).

Synths on Poison are called potions/synthetic potions (pTokens) & are collateralized by stablecoins

Since potions are always collateralized, stablecoins are locked in the vault contract to allow issuance of potions.

Synthetic potions mimic the price behavior of RWA, hence Poison, through them, offers us access to price exposure of RWA, without us having to own the actual asset

Poison is directed by its community, its markets are preserved by users through the platform's token incentives, thus, the minting of potions is decentralized & steered by users of the protocol, with Poison Finance ensuring there is always enough collateral to back potions.

There are 5 participants that engage the Poison protocol & they are:

- The Trader
- Minter & Shorter
- Liquidity Provider
- Staker &
- Liquidator

• Trader (also known as Uncle) buys & sells pTokens on exchanges, profiting from price exposure through pTokens

• Minter & Shorter (known as Cook), gets newly minted pTokens by depositing collateral into the vault, thus entering a collateralized debt position (CDP)

• Liquidity Provider (also Wizard), adds equal amounts of a pToken & a stablecoin to the corresponding pool to get POI$ON.

• Staker (King) stakes either pTokens or LP tokens in the Master Castle & gets POI$ON

• Liquidator (also Shark) is responsible for the liquidation of vaults that fall below the minimum collateral ratio

There are several other synthetics issuance protocols (eg. Synthetix, Mirror, etc.) that achieved wide adoption,

But Poison stands out, as it offers stability, transparency, decentralization, scalability, security & adaptability - which other synthetic assets systems lack

3️⃣ Potions

Potions on Poison (pTokens) are ERC-20 & BEP-20 compatible tokens, thus, they are liquid & can be traded on exchanges.

The name & symbol assigned to pTokens expresses the respective RWA they are meant to represent. (e.g pToken for Apple = pAAPL)

A pToken is minted by opening a vault & depositing stablecoin to back the pToken, a vault is basically a short position against the price movement of an RWA

To maintain the collateral ratio, vault creators will have to deposit more stablecoin if the price of the RWA rises

To avoid liquidation, a vault mustn't fall below the minimum collateral ratio value

Users can add more collateral to raise the effective collateral ratio value of vaults, & can also withdraw to adjust the value

Collateral ratio (CR) is the ratio of a vault's locked collateral value to the value of currently minted tokens.

CR = collateral / pToken amount * pToken price

Vaults on Ethereum must maintain a CR above 150% & 130% on BSC, to avoid being liquidated.

Poison charges a fee upon liquidation, a fee is also charged when a vault is closed & whenever withdrawal from a vault is made.

This fee is converted into POI$ON (platform's token) with 50% distributed as LP rewards through Master Castle & other 50% burned.

4️⃣ Benefits of synthetic potions

Stable & decentralized, synthetic potions have what it takes to democratize finance & offer access to low-volatile quality assets to parts of the world that do not have the privilege.

Wide use of synthetic potions in DeFi will enhance liquidity & activate better risk management

As they can be used to hedge against price fluctuations in the crypto market, helping investors preserve their portfolios & reduce the risk associated with their investments in general

Synthetic potions enable trading of assets without having to own them, thus diminishing issues related to poor cross-chain communication protocols

& bringing about flexibility & greater accessibility, as traders with small sizes can still gain exposure to a wider range of assets

5️⃣ POI$ON

POI$ON is the native token, minted by Poison & distributed to reward users that secure the protocol

Users who supply liquidity are rewarded POI$ON as they ensure the liquidity of potion markets. It can be staked to earn voting rights & a part of vaults' withdrawal fee

Thus POI$ON is a multichain governance utility & rewards token.

This brings us to the end of the thread.

Synthetic assets are essential in DeFi & Poison is killing it by employing mechanisms that offer users a secure & reliable synthetic assets system

TAG:

@LouisCooper_

See you at the top

https://twitter.com/intechlligence/status/1628358847139049480?s=20