The Arbi Szn is well and truly underway and is accelerating at full throttle. According to Nansen, token deployments on Arbitrum hit peak numbers in February 2023.
As a result, there’s a lot of noise. Mercenaries are going wild on the streets, looking to benefit from these opportune times – including both investors and builders.
How long will the hype last? Will the growth be sustainable? Well, it’s anyone’s guess at the moment. However, there’s no denying the fact that once we combine capital and bright minds, interesting things start to develop. Products that are designed to last and actually make an impact start to come to the limelight.
Trust me, you’ll find your fair share of pump and dumps, rug pulls and failed experiments. Well, that’s part and parcel of crypto and web3 as things are (hopefully, they change for the better). However, you’ll find absolute gems too. Protocols that are solving real problems and changing how this industry operates.
Factor may be one such project. In a nutshell, Factor is a decentralised asset management protocol on Arbitrum. The protocol deploys a modular architecture and will live on Arbitrum. Crucially, the Factor team believes in a multi-chain future, and as such, we may see future deployment on other chains.
Factor provides a platform where individuals can manage and explore a diverse range of digital assets. By combining yield-bearing assets, tokenised baskets, and derivatives, users have the ability to construct their own innovative and distinctive portfolios and indices. Factor offers all the necessary components to support this process.
Essentially, think mutual funds but for DeFi. In case you’re interested in diving deep and learning more about the protocol, you can read our complete guide here.
In this article, I want to focus on the various broad-level solutions that the devs had to implement in order to navigate the treacherous waters of DeFi composability and build a resilient product in the process. I will also touch on the launch plans after a successful token sale.
Let’s get cracking!
Lacking DeFi Middleware
One of the major problems that plague the DeFi ecosystem is a lack of composability and fragmented liquidity. Protocols have been developed in isolation and, as a result, lack interoperability and don’t allow for a frictionless flow of funds. As you can guess, to build a decentralised asset management platform, you’d need the various protocols that will be leveraged by Factor to seamlessly integrate with each other. Well, that’s easier said than done.
This lack of DeFi middleware creates a disconnect between protocols and users, which is something that needs to be solved.
In DeFi, when protocols become overly complex and lack composability, a disconnection occurs between the various protocols and the users. This lack of connectivity creates inefficiencies and difficulties in navigating the various protocols, which ultimately undermines the scalability and efficiency of DeFi.
When users cannot seamlessly navigate multiple protocols, it limits their ability to take advantage of the full range of services available in the DeFi ecosystem. Additionally, the complexity and fragmentation of DeFi protocols can lead to decreased interoperability, which further hinders the ecosystem’s potential for growth.
Therefore, to promote the efficient and scalable development of DeFi, it is crucial to address the issue of disconnection between protocols and users. By providing a middleware solution that bridges the gap between protocols, users can more easily access a wider range of DeFi services and products. This, in turn, increases the interoperability and efficiency of the DeFi ecosystem, leading to greater adoption and growth. Who wouldn’t want that, eh?
A key point of consideration here is that Factor essentially inhibits a partner protocol – while the underlying product remains siloed. This allows for additional potential use cases that benefit the protocol and users. As you can guess, many of these new use cases wouldn’t have been possible without Factor and this symbiotic relationship.
But what is the solution? I’m glad you asked! Factor aims to provide a solution for this glaring problem.
The issue arises when the protocols become too complex, which causes a disconnection in the system, resulting in inefficiencies and scalability challenges. This complexity often makes it difficult for users to navigate multiple protocols, thus leading to a less-than-optimal user experience.
Factor intends to solve this issue by introducing a middleware solution that bridges the gap between protocols. From a user’s perspective, Factor serves as a DeFi frontend, simplifying the user experience and enhancing DeFi’s interoperability and efficiency. Perfect!
Factor’s middleware solution is designed to address the problem of fragmentation and disconnection in DeFi. This solution is beneficial for both partner protocols and users. It offers composability, new use cases, adoption, and revenue streams for partners, while for users, it provides access to a broader range of services and products. It’s a win-win situation for the users and for the partner protocols.
Factor acts as a front end that seamlessly integrates multiple protocols via the middleware solution, creating a unified experience for users. With Factor, users can leverage the unique features of each protocol to build/access potentially limitless strategies.
Factor believes in mutually beneficial partnerships that offer real value for both the partners and the end-user. These partnerships go beyond a logo swap or integration and are a way to derive tangible benefits for all parties involved.
The primary motivation behind these protocol partnerships is to ensure new use cases and structured products are able to develop for their assets (in combination with assets from other protocols). This will inadvertently drive more TVL, volume and open new revenue streams for the partner protocols. In case you couldn’t tell, this is what truly composable dapps will look like.
Essentially, Factor’s middleware solution is a critical enabler for the growth and adoption of DeFi. By addressing this challenge and creating new opportunities for innovation, Factor is helping to drive the evolution of DeFi and offering ease of access through its intuitive front end.
Believe me, you cannot undermine the magnitude of this achievement. If we wanna onboard the next large wave of users, these advancements are mandatory. Otherwise, we’ll simply attract tourists in times of high euphoria and won’t have much to show for it once the party is over. As such, these real and fundamental building blocks need to be put in place. I know we have many problems to solve, but interoperability and composability are on that list, that I am sure of.
And we’ll need multiple solutions. I mean, this Factor implementation doesn’t necessarily provide native interoperability on the underlying protocol layer like LayerZero, for instance, but nonetheless, it’s a platform that is fundamentally composable.
Having said that, we need to take into account Factor’s multi-chain future plans. As I previously mentioned, Factor aims to become a multi-chai protocol in the future. Don’t quote me on this, but deployments on Ethereum mainnet, zkSync, and Polygon may be in the works. The devs deliberately decided to go the multi-chain route than the omnichain/cross-chain approach. There are concerns surrounding the latter in regard to speed and security. Obviously, both implementations have their pros and cons. However, the multi-chain approach will allow the users to utilise the Factor protocol natively on any chain (that the protocol is deployed on) in the long term and without fail. That accounts for something, right? Other interesting developments, such as cross-chain compatibility of the native token so that governance and revenue share elements aren’t restricted to a particular blockchain, maybe things of consideration.
Let’s get to the juicy stuff now and talk about the product and the team’s plans with the phase 1 mainnet launch.
First, as has become the norm, and I completely understand it, the team hasn’t committed to an ETA. With development, and especially in crypto, where user funds are at risk, extreme precautions must be taken. This may sometimes result in delays. Again, a part and parcel of DeFi and crypto. Don’t mind it.
Revenue share will begin once the vaults are live on mainnet. Nonetheless, over 1 million FCTR has been staked in the staking contract already. That amounts to ~7% of the circulating supply. That’s an impressive feat, given that revenue share isn’t live yet. One could assume a larger % of the total circulating supply will be staked once we get real yield. Furthermore, as vaults aren’t live yet, the devs have performed a snapshot and are going to reward early stakers – no promises, just getting it out there, haha. Details regarding the same will be released in due course. The idea is that there may be further incentives at major milestones, like 2m, 5m, and 10m tokens staked etc.
After a successful public sale and raising ~$7.5 million, the team quickly enabled staking. This feature allows FCTR holders to lock their FCTR for veFCTR. veFCTR holders will earn a share of the protocol revenue generated from the vault fees and get governance rights too.
Users can lock their FCTR from 1 day to up to 4 years in 2-week increments. Obviously, the longer you lock for, the more vote escrowed tokens you’ll receive.
A 4-year lock gives the maximum number of veFCTR. 1 FCTR = 1 veFCTR, if locked for the maximum duration.
The more veFCTR a user has, the higher will be their share of the protocol revenue and more governance power too.
Interestingly, Factor offers a “rage quit” option that will allow users to get out of their locked stake. As you can guess, users will have to pay a fee to avail of this option. The fee will be sent to the DAO treasury. Penalty rate = (Unlock Time – Time Now) / 4 years. E.g. 2 years remaining on lock / 4 years = penalty of 0.5 FCTR per FCTR un-staked.
Also, a user can delegate their voting power to another wallet. Learn more about it here.
The index vaults have been developed and are awaiting further testing. Additionally, the devs are waiting for the necessary price feeds from the oracle provider for a few assets to launch with all required assets.
To be eligible for inclusion, the vault assets must possess adequate liquidity and trading volume. Importantly, the first two vaults meet these requirements!
- Roundtable4: This is the first vault that will go live and is deployed in partnership with Camelot. The vault features key members of the roundtable based on metrics including volume, market cap and liquidity. Assets: GMX, GRAIL, JONES & VELA.
- ArbDerivatives: This is a vault index to provide exposure to the native tokens of the premier derivatives platforms on Arbitrum. If you’re bullish Arbi perp DEXes, this will interest you. Assets: GMX, VELA, GNS.
Do note that these vaults serve as a starting point to demonstrate the potential of Factor. More complex and interesting strategies will become available in due time.
The devs have shared a comprehensive summary of the vault rollout plan. New vaults, integrations, and work on v2 vault contracts will continue to roll out on a consistent basis.
In terms of integrations with other products and offerings, Factor has successfully completed the following integrations:
What’s more is that there are 10+ in the pipeline. Wow!
Additionally, the devs have built a partner vault onboarding system and have 10+ vaults mapped out, which will be worked on and deployed in due course.
I reckon it’s safe to assume that users will have a lot on their hands once these vaults go live!
Finally, if you cannot already tell, I am super excited about the launch of these vaults. At the time of writing, we’re still awaiting the launch of the Roundtable4 vault. I just might just yolo some funds. NFA btw.
As an overarching theme, it’s wonderful to see how far these devs have come. I mean in the context of how we’ve become accustomed to cheap forks in DeFi. However, learning about Factor made me appreciate the folks who build innovative and unique products and try to manoeuvre in uncharted territories. We sometimes tend to undermine what it takes to build something unique in an industry that in itself is unique and unpredictable. Kudos!
All right, that’ll do it for today, frens! I hope you found this article of help. Until next time!