Parallel Finance:
Defi Super App for Polkadot
If you read my previous article regarding Acala, you will find some overlap between Acala and Parallel finance. An individual might see them as competitors in their own space. The truth is they need similar features to accomplish differing goals. You’ll notice immediately it has features such as a dex and liquid staking, just like Acala. However, we need to remember Acala has its features to support the aUSD stablecoin. Parallel is more like a financing protocol with some extra additional features.
The Bad
Even though I am Bullish on this project, there are few things that made it feel a little salty for me. I simply want to get the negatives out of the way before I get to the goodies of this project.
My first complaint will be about coinmarket listing. When you go to places like coinmarketcap, you’ll find very little data about this project. Even places like coingecko and nomics do not have any information. I couldn’t even go on and find the price of the Para token. I like to have third party data to study a project.
My second complaint is onboarding. In order to buy PARA tokens, you need PARA tokens to actually perform transactions. At the moment, there is no support from any major centralized exchange. However, I did a little digging to solve this problem. According to a message I got on Telegram, if you transfer 5 DOT or more onto parallel finance, you’ll be provided some free Para tokens. When you consider DOTs historical price performance, that can be anywhere between $25 to $275. That reminds me of ethereum Gwei prices during the bull market. The other method is going to their Discord server and using their faucet. In the long run, we should expect this to be a moot point and expect a release on major exchanges. Quiet honestly, I would like to be able to swap my DOT for PARA out of the gates.
Price speculation
Just like I said in my previous article, in which Acala will likely become the app that onboards people into the polkadot ecosystem, I expect Parallel finance to be the source that has much of the economic traffic in the polkadot ecosystem.
As of writing this, the price of PARA is about $.03 with the total number of tokens in existence is 10,000,000,000 (10 Billion). This makes its Market capitalization around $300,000,000, making it a mid-size market capital asset. If we match it to something like AAVE, this would give us a conservative 5x on our money. If we want to get a little more bullish, we could see a 23x on PARA once the bull market comes into full swing again. As my mentor Cultivate Crypto would say, “Not too shabby.”
Investors
This is definitely a project with some deep pockets behind it. One of the investors involved makes me extremely bullish, an investor who is very curated about what he invests into. Right off the bat, there is a lot of silicon valley money backing this project. With most cryptocurrency projects, you tend to see venture capital money deeply tied to crypto as the main investors.
Some unusual names you’ll see are Sequoia Capital and Breyer Capital as far as silicon valley investors are concerned. However, the firm that should catch your eye is the Founders Fund, founded by Peter Thiel. There is a reason why they would want to get into this project. They are trying to make an app to appeal for large institutional investors. Try to imagine Wall Street and family offices investing billions of dollars to use this protocol.
On the crypto capitalist fund, you have the likes of Alemeda Research, Coinbase Ventures, and Pantera Capital. The first two are a little more important. Alameda Research and Coinbase Ventures have ties to the centralized exchanges FTX and Coinbase, with a potential exchange listing.
I mentioned earlier that there is a possible 23x in the PARA coin. It might be a little too modest of an expectation.
The Premise of Parallel Finance
The main premise of Parallel Finance is to become the major defi hub of the polkadot ecosystem. It has some of the usual expected features of a defi product in crypto these days; a dex, a lending market and liquid staking. However, there are a few other features unique to it thanks to being on polkadot; a parachain auction crowdloan protocol, a payments system, and a cross chain swap.
The DEX
As far as dexes are concerned, there isn’t much going on. You have a selection of the following coins to swap, DOT, sDOT(Staked DOT), PARA, and cDOT(Crowdloan DOT). Once you get your faucet PARA, it will be important to swap some DOT for PARA to pay for transactions. What will be interesting will be the trading ratios between sDOT, DOT, and cDOT. You can use that to increase your position in DOT in the long run. I’ll show you what I mean.
What this means is that 1 DOT can be traded for 1.5 DOT in the future if you hold cDOT in your portfolio. But is it worth it? How does 1 cDOT compare to yielding in kind for DOT? Let us assume DOT can yield an APY of 16% to 20% with the crowdloan lease being a total of two years. This means you should have 1.3 to 1.44 in a two year time span for every 1 DOT you stake. This makes DOT for cDOT an easy steal and increase on your DOT position.
Money Market
This part serves two purposes; a way to create a borrowing and lending market for the polkadot ecosystem and as an incentive program to lend assets as well as farm yield assets. One unusual feature about this app is the liquidation free loan which allows you to use your LP tokens that are pooled with your crowdloan DOT.
This does give some interesting yielding strategies. The one that appeals to me the most is lending your DOT to farm PARA rewards.
1)Lend your DOT and yield in kind(The Nice benefit is that the APY can sometimes be greater than staking your DOT)
2)Gain PARA farming rewards
3) Farm PARA tokens
Liquid Staking
In the realm of Liquid staking, this app isn’t unusual. You stake your DOT and get sDOT as a receipt for your staked DOT. The cool thing is that you get additional PARA rewards to yield farm in addition to the staking yield on DOT.
Crowdloan
Have you ever thought about contributing to the polkadot parachain auction? You should look into Parallel Finance’s crowdloan section. There are a series of benefits that come from using this dapp over directly contributing to a crowdloan. One of the incentives is gaining PARA tokens as a bonus in addition to the token that is being issued for the crowdloan. Unlike normal parachain auctions, you get cDOT tokens as a receipt for contributing to the crowdloan. You can use it to exchange it for DOT or attempt to use it for defi applications.
DAOfi
DAOfi is basically a payments tool on the polkadot ecosystem. It is really intended for simplifying payments for larger institutions and projects. It permits for things like airdrops to communities and a payroll system in place.
Cross Chain
The nature of the cross chain is to allow the transfer of assets between the Parallel parachain and the Polkadot parachains. Right now it only permits the transfer between Polkadot and Parallel. However, we should expect more assets to be transferable over time. There might even be a DOT to KSM bridge in the making. If they did, it would make the crosschain app a killer app.
Concluding thoughts
If you had to add another altcoin position in your portfolio based in the Polkadot ecosystem, Parallel could be a nice addition. We are talking about a kind of infrastructure play for the polkadot ecosystem. Having a lending protocol is one of the necessary additions every ecosystem has.
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