New asset listing alert! Following the success of Umee Proposal #27 Cosmos DeFi users will finally be able to leverage their ETH, BTC, and DAI on Umee.
WETH and WBTC are both ERC-20 tokens pegged to ETH and BTC respectively. As highly composable representations of the two largest crypto assets by market cap, WETH and WBTC are used in a wide range of DeFi strategies on Ethereum. Avid DeFi users often post WETH or WBTC as collateral to borrow against their ETH or BTC stash.
DAI is an ERC-20 crypto-backed stablecoin which is pegged to the US Dollar and issued by the decentralized MakerDAO protocol on Ethereum. As an over-collateralized stablecoin, Ethereum users can mint DAI by depositing a greater value of high-quality assets (like ETH or wBTC) as collateral on Maker. With a market cap of over $5.4B, DAI is currently the most popular and arguably the most censorship resistant stablecoin in existence. Since DAI isn’t issued by a centralized entity like many other stablecoins, it’s a top choice for Ethereum DeFi users in search of some price stability.
axlWETH, axlWBTC, and axlDAI are Cosmos-native versions of WETH, WBTC, and DAI which are issued 1:1 by Axelar when a user bridges ERC-20 WETH, WBTC, or DAI on Ethereum. The price data is supported by the technology behind Ojo Network, a decentralized price oracle blockchain using diversified sources of price information from both on chain and off chain exchanges. As Cosmos-native assets, axlWETH, axlWBTC, and axlDAI can all be used seamlessly across the entire Cosmos DeFi ecosystem, including on Umee, Osmosis, and Evmos.
Cosmos DeFi users can finally put their WETH, WBTC, and DAI to work without leaving the Cosmos ecosystem! Umee has teamed up with Axelar to make it easy to securely transfer axlWETH, axlWBTC, or axlDAI from other Cosmos chains like Osmosis or directly from Ethereum without introducing any centralized intermediaries.
Anyone can transfer and deposit their axlWETH, axlWBTC, or axlDAI on Umee and immediately start earning lending interest without any lockup required or risk of impermanent loss. Cosmos DeFi users will be able to access several new yield strategies by borrowing up to 77.5% against their axlWETH collateral, 75% against their axlDAI collateral, and 70% against their WBTC collateral supplied on Umee.
This section contains potential strategies Umee users may choose to participate in at their own will. All strategies contain different levels of risk, and users should always do their own research before deploying funds. DeFi users should never deposit funds they cannot afford to lose, and should always closely monitor their positions in order to minimize chances of liquidation. These strategies absolutely SHOULD NOT be interpreted as financial advice.
A Cosmos DeFi user who’s bullish on ETH may consider using Umee to leverage their axlWETH holdings. Umee users can gain greater exposure to ETH without the need to purchase more by depositing WETH as collateral, borrowing a stablecoin (like axlUSDC or axlDAI) against their WETH collateral, and taking the borrowed stablecoin to a decentralized exchange like Osmosis to trade it for more axlWETH. Users with greater risk tolerance can further gain exposure to ETH by supplying the newly acquired axlWETH on Umee and repeating the steps. If ETH increases in value, the leveraged user can trade the axlWETH back for stablecoins to pay off the outstanding loan(s) and keep the additional proceeds.
DeFi users interested in growing their exposure to native Cosmos assets like ATOM can now leverage stablecoins, ETH, or BTC on Umee in order to participate in leveraged staking strategies. After providing collateral users can take advantage of the opportunities provided by Cosmos DeFi and borrow Proof of Stake assets like ATOM or UMEE which can then be staked to earn low-risk and steady staking yield. As long as the user stays properly over-collateralized and borrow rates remain lower than staking rates, leveraged staking can allow borrowers to increase their exposure to PoS assets without the need to purchase them.
Cosmos DeFi users will also be able to leverage their ETH, BTC, or other preferred collateral assets on Umee in order to access stablecoin farming opportunities on protocols like Crescent or Curve. Umee users who borrow stablecoins against axlWETH or axlWBTC collateral can supply the borrowed stablecoins in a stablecoin pool in order to capture a portion of trading fees generated by the pool in addition to liquidity mining incentives with minimal risk of impermanent loss. This provides an opportunity for DeFi users to gain exposure to tokens being issued as liquidity mining rewards (like CRE or CRV) without having to exchange any assets.
A Cosmos DeFi user who’s bearish on BTC, for example, can use Umee to short BTC against other assets like stablecoins or ETH. To short BTC with Umee users simply need to deposit an asset they expect to outperform BTC as collateral, like axlUSDC, axlDAI, or axlWETH. Bearish users can then borrow axlWBTC against their collateral and take the borrowed axlWBTC to Osmosis to exchange it for an asset they expect to outperform axlWBTC, like the asset provided as collateral. Users with greater risk tolerance can supply the newly acquired asset as collateral to borrow more axlWBTC and repeat the process. If BTC decreases in value relative to the collateral asset, the user can trade back to axlWBTC in order to pay off the outstanding loan and unwind the position and keep the leftover funds.