Entangle Protocol: A Yield Optimizer for Liquidity Staking Tokens
Entangle Protocol: Optimizing Liquidity Staking Tokens
Written by: Viktor DeFi
Compiled by: DeepTechFlow
Entangle Protocol, a yield optimizer for Liquid Staking Tokens (LST), increases users’ LST yield by 1-3x. In this article, researcher Viktor introduces the problems it solves, protocol mechanisms, product, use cases, and token economics.
Overview
DeFi can still operate normally to this day because there is liquidity to drive transactions. In fact, it is liquidity that drives the market and growth. However, DeFi is still struggling with liquidity fragmentation.
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Liquidity is isolated and does not flow freely between protocols, affecting projects and users. This is where Entangle comes in. Entangle aims to raise the standard of cross-chain liquidity supply and capital efficiency by supporting a liquidity-centered sublayer for native and external applications. The platform is addressing three long-standing issues in DeFi:
• Liquidity is isolated and fragmented;
• Protocols lack liquidity reserves;
• Users have low capital efficiency.
Most other protocols are also addressing similar issues, but Entangle’s approach is unique.
Infrastructure
The platform addresses these issues through the Entagle Blockchain and distributed oracle solution.
The Entangle Blockchain is built using the Cosmos SDK and aims to allow for seamless connectivity between EVM and non-EVM blockchains. It also facilitates oracle transactions.
The Entangle Distributed Oracle Solution (EDOS) is the engine that powers the platform’s cross-chain dApp Synthetic Insurance Vault. EDOS eliminates the security risks associated with using third-party cross-chain bridges and oracle solutions, making Entangle more efficient and effective.
Synthetic Insurance Vault
Turning to Entangle’s flagship native dApp, the Synthetic Insurance Vault. It is currently launched on Avalanche, Polygon, Ethereum, BNB, Fantom, Optimism, Arbitrum, and MultiVersX. It allows for the optimal use of liquidity position assets (xLSD) across multiple chains.
Let’s demonstrate how to increase your yield with an example:
Pete provides liquidity on CurveFinance and earns corresponding LP tokens, which he then stakes on Entangle. Entangle then automatically compounds the LP tokens onto ConvexFinance for additional yield. Afterwards, Entangle issues Pete LP tokens for LSD to hedge loans/borrowings on other protocols. This doubled Pete’s crypto asset yield, sometimes even tripled, and resulted in multiple forms of yield.
In other words, as a yield optimizer for LSTs, Entagle easily fits into the narrative of LSD. Users can unlock multiple layers of yield using Synthetic insurance vaults instead of relying on just one layer of yield from their LSTs.
By the way, Entangle infrastructure is not only for users, but also reveals innovative use cases for dApps and builders. Allowing them to build applications such as guiding protocols with sticky liquidity, utilizing yield strategies, building games and prediction markets with EDOS, and more.
Token Economics
$ENTGL is the primary token of the Entangle ecosystem, used for gas fees, running keeper oracles, validating transactions, and more. Its total supply is 1 billion, with an impressive 45.6% allocated to community/infrastructure.
Revenue
Entangle creates real revenue for the protocol by:
• Automatically compounding staked assets;
• Execution fees for insurance vaults;
• Entangle internal Dex trading fees;
• Gas fees for the Entangle Blockchain;
• Entangle oracle solutions fees.
Partners
As mentioned earlier, Entagle has already partnered with 8 major chains. Recently, it has formed close partnerships with SeiNetwork and Curvance, and more partnerships are emerging.
The project has gone live on the testnet.
My Thoughts
DeFi is constantly evolving and if we want to grow and attract more users, then we need to address the pressing needs of the ecosystem. That’s where cross-chain liquidity comes in as one of the solutions. It’s very important because it’s a double-edged sword that can maximize user asset yield and make the protocol launch liquidity faster.
