Savvy: A bull case

July 28, 2023

In conclusion

For today’s read, we will assume you’ve got 4 mins at maximum to read through what the heck this is and go back to enjoying your summer! You have no reason to be stuck beyond such time at your computer! Well, except you’ve spent the earlier part of the year being dumped on and buying straight-up poorly done VC tokens, and this would be the case if you’ve not been paying attention to our articles before now!

The point is, we introduced Savvy right before all of Europe put on bikinis and shorts and went outside, but right now, we’re gonna do something we rarely do! Present a “Bull case” for Savvy ahead of an upcoming Liquidity Bootsrapping Pool (LBP) Token Generation event in August! Everything you’re about to read in the next few minutes is going to be straight-up facts, pretty compelling, and biased as hell! To show you why there’s nothing quite like Savvy — an Omnichain Yield Aggregator that grants you access to non-liquidating, auto-repaying, 0% interest loans.

Savvy and Alchemix

In our previous article, and video chat with Savvy, we pretty much talked about Savvy being a lot different from other lending protocols specifically in terms of liquidations, fees, and debt repayments. This time, we examine how Savvy fares in comparison to a close relative, Alchemix. 

  • Savvy is more flexible in terms of collateral type, accepting BTC deposits. 
  • More collateral assets = More debt types, as shown in the image above, Savvy issues svBTC and accepts BTC deposits. 
  • Unlike ALCX, The total supply of SVY is capped (limited) at 10 million SVY tokens allowing for maintenance of the value of the token. 

Both protocols offer quite similar functionality and capabilities in terms of auto-repayments of loans, issuance of synthetic assets, and composability. They (Savvy and Alchemix) allow users to deposit their assets, borrow from themselves by minting synthetic assets, and have their loans repaid from future yield. 

However, there are key differences between both protocols, and these differences set Savvy apart.

Tokenomics

The SVY token, unlike the ALCX, is limited in supply, capped at 10 million tokens. This encourages scarcity of the token, potentially leading to an increased demand for SVY tokens. Additionally, there will be token buybacks, removing a portion of the total supply from circulation via Savvy’s protocol-owned liquidity. Savvy’s governance model (veToken model) also drives value to the token, contributing to a reduction of the circulating supply as SVY.

Borrowers can earn more SVY by staking their tokens to boost their collateral's APY in the form of boosted rewards. This creates a positive feedback loop where users are incentivized to hold and use SVY, which in turn creates more demand for the token and helps to establish a stable economic model. Borrower Boosts: Incentivizes long-term SVY stakers to borrow and vice versa. Holders lock up their tokens to obtain veSVY tokens, which are used to determine the allocation of SVY incentives and result in a second yield source for users.

With Savvy’s market making campaign, there is an opportunity to accumulate SVY before the LBP in August by providing liquidity to the pools on Trader Joe. In a short period, Savvy’s pools have accumulated over $1.5m in liquidity deposits with over 130k $SVY tokens emitted — growing rapidly I must say. Furthermore, liquidity mining rewards tend to be among the most lucrative in DeFi.

Omnichain CDPs 

It goes without saying that the future of DeFi is omnichain and Savvy’s future plans are to take advantage of this. Although Savvy is on Arbitrum and will integrate with Avalanche down the line, the goal remains to leverage cross-chain messaging tools like Axelars Interchain Token Service (ITS) to allow users to take collateral debt positions on any chain. Word is this might come sooner than expected and is scheduled for sometime in August/early Q3. What this means is that, for the user, collateralization is flexible as long as the asset is accepted by Savvy. Users can borrow funds on one chain and earn yields on another such that their loans are repaid in a flexible form. 

I.E; Borrow svTokens on chain A, earn yields on chain B and auto-repay loan on chain A. 

Omnichain CDPs expose Savvy to yield strategies across multiple chains, potentially more lucrative thereby reducing the time needed to accrue yields enough to repay loans. To put it simply, Omnichain CDPs will allow users to enjoy the same benefits as users of omnichain yield aggregators — flexibility, exposure to competitive yields on new chains, the possibility of new synthetic assets, unified liquidity, and reduced risk exposure for Savvy. 

This is in comparison with Alchemix, which uses Connext for interoperability. Alchemix’s tokens use Connext’s xERC20 (ERC-7281) standard, which necessitates liquidity pools on all of the chains Alchemix deploys on. Fragmented liquidity will ultimately limit the market size on any particular chain.

BTC collateral 

While Alchemix sticks to stable and ETH collaterals issuing corresponding debt types(alUSD and alETH), Savvy's is more diverse, adding other collateral types such as BTC.b and WBTC to the mix (svUSD: stablecoins, svETH: ETH,  LSD, WETH, and svBTC: BTC.b, wBTC). These collateral deposits will be backed on a 1:1 basis with their Savvy Synth counterpart; svBTC. 

Savvy’s acceptance of bitcoin assets will allow users to gain exposure to the growth of bitcoin-related assets and bitcoin as well as open up the landscape to a broader user base of bitcoin asset holders leveraging the growing utility of bitcoin assets in the DeFi ecosystem. 

<For example, Savvy now accepts gmdBTC with a 5% APR through exposure to GLP (GMX)>

https://twitter.com/SavvyDeFi/status/1684295024630960134?s=20

The ability to borrow against BTC without liquidation risk may become especially pertinent when Fidelity, Blackrock, Invesco, VanEck, WisdomTree, and Bitwise (a combined $14.5+ trillion AUM) spot ETFs get approved by the SEC. 

LBP launch on Fjord Foundry

Using Fjord Foundry for the LBP, Savvy will seed a substantial portion (500k SVY equivalent to 5%) of the SVY token supply to a SVY<>ETH pool, (paired with $500k in ETH of POL), (one-sided pool) at various varying price levels. The LBP will run from the 8th of August at 5pm EST up until the 11th, 5pm EST. Moreso, the LBP will be weighted, so the price of SVY will begin high and decrease over time. As the price decreases, market dynamics of supply and demand will ultimately determine a fair market price for SVY at the conclusion of the LBP.  This curve disincentivizes whale accumulation in a single transaction, a much better approach for retail degens. Anyone can permissionlessly buy into or sell out of the LBP anytime without minimum purchasing requirements.

Savvy’s approach to the LBP may be the best approach for raising SVY liquidity given the precedents set by Ripple v. SEC. For more see: What is a Liquidity Bootstrapping Pool (LBP) + Features on Fjord Foundry. 

Our thoughts

Savvy embraces a scientific approach akin to a laboratory, meticulously examining every scenario to guarantee the attainment of optimal solutions and outcomes, from protocol design to the token generation event. 

At the moment, market making campaigns are still ongoing, and you can still jump in and fetch yourself some SVY. However, MMC will end in the second half of this month and the token sale will commence in the first half of August. 

Participating in the LBP can be lucrative in two main ways:

  • By getting in early, you can benefit if the token appreciates in value after listing. Early supporters often see the most gains.
  • The active price discovery during the LBP allows you to buy and sell tokens from the pool to optimize your entry and exit points. Since there will be a large pool of capital, there will be good liquidity and trading volume during the LBP.

It’s also going to be a pretty busy August for Savvy as they’ll be looking to integrate with a few protocols. Recently, Savvy’s been integrated with GMD, with JonesDAO,  unshETH and Umami in the pipeline —the goal is to ensure that svTokens are used across board in a way that’s similar to how Maker popularized DAI or how Abracadabra and Wonderland boosted MIM

Indeed there are multiple ways to get involved with Savvy, with each way playing off each other. While they each have their strengths,  benefits, and tradeoffs, when combined,  you get the real power of Savvy. Some of the ways you can get involved are: 

  • Deposit Collateral for auto repaying loans and yield farming opportunities -
  • They currently offer 5.23% on WBTC and ETH and 7.25% on USDC
  • Check out app.savvydefi.io/strategies
  • Participate in Savvy’s Market Making Campaign - Learn more at app.savvydefi.io/mmc 
  • Participate in Savvy’s LBP on Fjord Foundry scheduled for August 8th, 2023 More information to come. Read more on Savvy’s community-first fair launch here

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