Saddle and Ondo integrations results to utilize Ondo’s LaaS to launch their $SDL token. On April 23, the Saddle community passed SIP-13 with 6.1M (73.64%) positive votes to unlock their SDL token and launch liquidity via Ondo’s Liquidity-as-a-Service (LaaS) offering. Saddle will become the first project to utilize LaaS for the launch of a token.
Saddle will supply 16.66M SDL to the variable tranche of Ondo’s liquidity vault. Frax will match the tokens to supply 5M FRAX to the fixed tranche, resulting in a liquidity pair with an implied initial price of $0.30 per token.
The liquidity pool (LP) will be available to trade on Sushiswap.
What is LaaS?
LaaS helps DAOs and other token issuers ramp up their liquidity in a cost-efficient way. Ondo unbundles LP positions using a vault with two tranches for single-sided deposits.
The senior (fixed-yield) tranche receives a stable APY for providing liquidity to the vault. The junior (variable-yield) tranche receives a dynamic APY which fluctuates based on the performance of the liquidity pool. In this instance, Frax will receive a fixed APY, while Saddle will receive a variable APY.
Once a vault is created, Ondo supplies the liquidity on a decentralized exchange; in this case, Sushiswap. After a fixed duration, Ondo will withdraw the liquidity and pay the fixed-yield depositor (Frax) their principal along with the fixed annualized return. The variable-yield depositor (Saddle) will then receive all remaining returns from the pool in the form of their native token (SDL).
How does LaaS benefit SDL & FRAX?
With LaaS, Saddle will achieve twice as much liquidity from the same amount of capital. This allows for a deep LP during the launch of the SDL token, with a total LP value of $10M. As quoted in SIP-8, “tokenomics are a critical missing piece for bootstrapping the protocol, TVL, and volume. There must be enough SDL liquidity to mitigate undesirable price action and negative feedback loops.”
Saddle is combining deeper liquidity with vote escrowed (ve) tokenomics, which lets users lock their governance tokens for different lengths of time in order to gain increased voting power.
For Frax, the vault will provide a stable APY while minimizing the risk of impermanent loss. Their FRAX stablecoin will also benefit from additional liquidity and will be the only token that SDL can initially be traded against.
Saddle is a decentralized automated market maker (AMM) on the Ethereum blockchain, optimized for pegged value crypto assets such as stablecoins and wrapped BTC. Saddle enables cheap low-slippage swaps for traders, and high-yield pools for liquidity providers.
Frax is the first fractional-algorithmic stablecoin protocol. The Frax protocol is a two-token system encompassing a stablecoin, Frax (FRAX), and a governance token, Frax Shares (FXS). FRAX is partially backed by collateral and partially stabilized algorithmically.
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Ondo Finance is an open, permissionless, decentralized investment bank. Ondo’s core business is to service and connect various stakeholders in the emerging DeFi ecosystem.