Those who have been involved in the Solana blockchain ecosystem for a while might have come across the project called SolFarm. Launched in April 2021 as SolFarm (from “Solana Farming Protocol”) was the first Yield Aggregator Decentralized application built on the Solana blockchain network. Tulip Protocol supports compounding vaults from Orca, Saber and Raydium. The auto-compound strategy will do automatically harvest the rewards of a user. The user does not need to do anything, they can simply hold and enjoy the interest generated.
Tulip Protocol or SolFarm?
SolFarm was the initial name for Tulip protocol. A rebranding to Tulip Protocol was announced on the 15th of October, 2021. Since then, everything concerning SolFarm was rebranded to Tulip Protocol.
Investments in Tulip Protocol
With over $1.02 billion of Total Volume Locked on Tulip Protocol, it is one of the most valuable Decentralized Finance project built on Solana. On the 27th of October, an investment in Tulip Protocol was made. This was led by venture capital firms like Jump Capital, Alameda Research, Amber Group, Cadena Ventures and many more with an interest in helping projects reach mainstream adoption.
One of the investors from Jump Capital, Saurabh Sharma said “Navigating DeFi could be daunting for new users who most of the times enter the price through lure of yield farming, Tulip’s aggregation and optimization layer as well as user friendly interface streamlines the farming experience while slowly graduating users onto sophisticated offerings all on the same platform.”
Tulip Protocol currently has three working products. These are the Auto-Compounding Vault, Leverage Yield Farming and the Lending services. Future plans for more products include Collateralized borrowing, managed vault strategies and the TULIP token staking.
Users can deposit the LP tokens they have into the Vault section of Tulip Protocol.
Users can deposit their LP tokens into the vault and the strategy will auto-harvest rewards and add to LP via selling the rewards and adding LP technique.
To avoid users hopping in and out of vaults to game rewards, there is a requirement that ensures you keep your funds in the pool for at least 2 hours to avoid any penalties. If you withdraw your assets from this pool before this period elapses, you will forfeit any rewards accumulated during that time.
One of the benefits of depositing your crypto asset using this method is that you get to earn farm emissions from the pool. Asides from this, you are also entitled to receiving a share of the trading fees collected from those who swap tokens.
Tulip’s auto-compounding strategy runs every 30mins to 1hour. Instead of trying to manually compound it yourself, Tulip Protocol automatically does this and helps you achieve higher returns on your investments.
Leveraged Yield Farming exposes a depositor to some risks that can cost them. But if you want a low-risk tool on Tulip Protocol, you can go for the Lending service. This type of Yield-earning has no risk of impermanent or liquidation. With this, you can deposit your single assets like SOL, ETH, BTC, SRM, RAY, ORCA USDC, USDT etc.
Tulip Protocol takes 10% on any interest that is charged.
What are tuAssets?
TuAssets are the tokens received which represents a user’s share in the lending pool. When you deposit into the lending pool, you are entitled to receive the collateral token which is represented as the tuAsset token.
For every lending pool on Tulip Protocol there is the tuAsset for it. By depositing SOL into the SOL lending pool for example, you will be receiving the tuSOL token.
Leveraged Yield Farming
A user can farm with up to x3 leverage on Tulip Protocol. By engaging the good old technique in lending and borrowing, people can effect this kind of trading on the Tulip Platform. Lenders deposit their cryptocurrency assets to earn interest while borrowers deposit their collateral to be able to borrow from the platform.
Users get to receive tuAssets which is a representation of their respective shares of the lending pool rewards.
There are many risks associated with leveraged trading and inexperienced trader should beware of this. The following are some of the risks involved in Leveraged Yield Farming on Tulip Protocol:
- Impermanent Loss
- Liquidation of assets if the loan-to-value is above 85%.
- Smart Contract exploitations can be carried out by hackers if there are errors in the Protocol’s code.
The TULIP token, with a maximum supply of 10,000,000 has a little above 1.4 million currently circulating in the market. As at the time of writing, it currently trades at $25.21 per TULIP with a Market Cap of $35,438,274.
Even though on-chain governance is not yet available on Solana, when it eventually developed, the TULIP token will function by giving the holders a right to the decision-making processes that shapes and govern TULIP Protocol itself through Treasury Usage, deciding on Protocol Improvement, Pool reward mechanisms and many more
As described in the image above is the allocation process for the TULIP token from the maximum supply of 10,000,000 TULIP.
- Team: 2.000.000 – 20%
- Advisors: 200.000 – 2%
- Treasury: 1.200.000 – 12%
- Liquidity Provision: 500.000 – 5%
- Strategic Partners & Growth: 1.200.000 – 12%
- Liquidity Mining and Ecosystem Rewards: 4.800.000 – 48%
The Fees charged to a depositor is not on the principal that is being deposited. The fees are taken from the yield that is being generated after a deposit has been made or from the compounding value that is being generated to the depositor.
Possible Risks on Tulip Protocol
As with most of the projects constantly innovating in the blockchain space, most of the code is experimental and there could be a case of an exploit or an occurrence of errors in the smart contracts used in the creation of the protocol. Even though there is this possibility, the smart contracts have been reviewed by reputable development teams in the Solana Ecosystem. Users and depositors should take note.