What is Algofi and how does it work?

What is Algofi and how does it work?

What is Algofi and how does it work?

Algofi (algofi.org) co-founder Owen Colegrove told Exodus News & Insights that the DeFi project decided to build on Algorand as the platform “implements an innovative consensus algorithm that facilitates greater decentralization.”

We decided to take a closer look at what Algofi is and what the project is bringing to the crypto space.

    What is Algofi?

    Algofi is a decentralized exchange (DEX) and lending protocol which allows users to lend different Algorand assets to earn interest. In addition to that, users can also borrow digital assets while leveraging the existing assets already placed on deposit as collateral.

    How to use Algofi?

    You can connect to the Algofi DEX through the Exodus Web3 wallet, which now supports the Algorand blockchain, as well as Ethereum and Solana.

    The Algofi platform itself includes a neat feature called Zap. Zapping on Algofi allows the user to convert an asset into liquidity pool tokens with a single transaction. It effectively lets you do a swap and a pull action seamlessly and all at once.

    The project went live with v2 in August 2022, extending the zap functionality so that borrowing and staking can now be carried out in the same seamless manner. Alongside that, support for the Ledger hardware wallet has been added.

    What is the Algofi Vault?

    The Algofi Vault was launched in March 2022, and it enables Algofi Algorand governance. Algorand Community Governance allows holders of the Algorand token - ALGO - to play a direct role in the decision making process related to the development of the Algorand project.

    Through the Algofi Vault, users can deposit ALGO as collateral while committing those tokens to Algofi Algorand governance. On the strength of collateral deposited, users can also borrow assets such as ALGO, STBL, USDC, goBTC and goETH.

    Does Algofi have a coin?

    Algofi has had an over-collateralized stablecoin - STBL - in circulation for some time already. As of August 2022, a v2 of the Algofi token has been launched.

    STBL2 is a more scalable and capital efficient product. The Algofi DEX has found a mechanism to better assist STBL2 in holding its peg. Arbitrageurs can now buy STBL2 and earn interest on it while supplying it as collateral - something that wasn’t possible on the v1 product.

    Both STBL and ALGO are supported in Exodus, and users have the option to add custom tokens from Algorand and many other chains.

    Is Algofi secure?

    Audits have been carried out by Runtime Verification. Algofi DEX also has a bug bounty in place as an incentive for white hat hackers to find vulnerabilities in the code. The co-founders are doxxed meaning that their identities are published online, so that users can have more confidence that a ‘rug pull’ is less likely.

    Having said all that, the default position with regard to any DeFi protocol is always to be cautious. Even with the most honorable of intentions, projects can and do succumb to hacks. That’s likely to be the case for the foreseeable until the technology settles and even better security protocols are devised and standardized.

    Who is using Algorand?

    Developers are being attracted to Algorand as the blockchain is fast, cheap, reliable, secure and green. In addition to that, it’s feature-rich from a smart contract perspective. As Colegrove puts it, “Algorand's AVM is a powerful and secure smart contract language”.

    Notable among recent projects to build on Algorand are the veteran music streaming and file sharing platforms LimeWire and Napster. In March 2022 Algofi partnered with tokenized real estate startup Lofty to enable anyone to use Algorand as collateral to buy fractional ownership in real estate.

    This Algofi crypto project has come a long way in a short space of time, and there’s more in the pipeline according to Colegrove: “Algofi is working towards launching governance” leading into 2023. He added that the project “will be working on improving user experience through more featureful DeFi applications”.

    In the case of Algofi, Algorand and the Algo DeFi ecosystem as a whole, this is a growing ecosystem that may be worth keeping an eye on.

    This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

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