Pickle Finance, latest DeFi yield farming sensation pursues reduced volatility for Stablecoins

The DeFi protocol distributes PICKLE tokens to yield farmers for providing liquidity to below-peg stablecoins pools thereby driving sell pressure on above-peg stablecoin pools.

By · Sep 17, 2020 . 8min read

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Photo by Drew Geraets on Unsplash

Just when you think the food farming frenzy has plateaued, yet another one surfaces with mouth-watering features stacked upon any of the older projects it seems to be mimicking. The latest kid in the the “DeFi block” is Pickle Finance and it aims to solve volatility in stablecoins by making lower-pegged stablecoins more attractive.

Pickle Finance is incentivizing liquidity into the DeFi’s four largest stablecoins: Dai, USDC, USDT and sUSD. Adopting an experimental approach, Pickle Finance employs yield farming and pVaults (now rebranded as ‘pJars’) to bring stablecoins to their peg. Its mantra is “off peg bad, on peg good”. Hence it offers greater rewards to below-peg stablecoins pools and lesser rewards to above-peg pools. The DeFi protocol distributes PICKLE tokens to yield farmers for providing liquidity to below-peg stablecoins pools, thereby driving sell pressure on above-peg stablecoin pools. Consequently, the above-peg stablecoins prices correct to their $1 peg, the greater good.

Although stablecoins may trade above their peg presenting great arbitrage opportunities, mainly Whales and not the regular Joes of crypto cash-in on this. Hence, according to Pickle Pico paper, its style is to cause “people to sell above-peg stablecoins and buy below-peg stablecoins”.

Pickle Finance, latest DeFi yield farming sensation pursues reduced volatility for Stablecoins
Source: Pickle.Finance

What more from Pickle Finance apart from Stablecoin volatility chase-off?

Is that all with Pickle Finance? Another DeFi project, specifically Defidollar, does this but uses a different approach. PICKLE holders will be able to participate in on-chain governance as usual. But as it has become the trend, holders seldom exercise their voting right to save the whales. And with just a few whales calling the shots is the protocol really that decentralized? Pickle Finance seems to be out to solve this problem. It uses the quadratic voting technique to whittle down the powers of large PICKLE holders (Whales). This is done by taking the square root of each vote cast rather than adopting the nominal count approach.

Even Vitalik finds the project interesting and asked:

More features like pJars look-alike Yearn Finance’s yVaults.

Even though Pickle Finance developers are anonymous, the DeFi protocol seems ambitious and ready to make a difference by applying real use-cases. It recently announced PickleJars modelled after Yearn’s yVaults. Although pJars is a fork of yVault, with added features, its code is still largely unaudited. Each ‘pJar’ will employ a different alpha-seeking strategy such as flash loan arbitrage for the best returns. As soon as LPs deposit collateral asset into pJar, they are issued pAssets. This is then sent into an alpha-seeking strategy to generate returns which are further redistributes it to the pool. This, in turn, makes the pAssets appreciate in value while also supporting governance and PICKLE holders through fees.

Additionally, Pickle Finance protocol is structured to distribute the fees in the following ways:

  • 3% to governance for subsidized gas event
  • 0.5% to the function caller as a reward for triggering the strategy
  • 1.5% to buy and burn PICKLEs from the market
  • 0.5% withdrawal fees
Source: Coingecko

As at press time, PICKLE is trading slightly above $72 with $27.2 million trade volume on PICKLE/ETH pool on Uniswap.

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