An overview of the CREAM Finance ecosystem, its background and history, the CREAM token, CREAM lending and borrowing services, CREAM Finance liquidity mining, CREAM Finance Swap, CreamY, its governance mechanism, and many more.
Decentralized Finance (DeFi) projects have exploded in popularity in the last year, taking the whole space by storm. There are a couple of DeFI protocols, which have given birth to countless forks with varying modified parameters. A few regularly forked projects are Compound, Balancer, Uniswap, and Yearn.Finance.
Forking is actually encouraged by many members of the community since it increases choices for the user and helps with composability. CREAM Finance’s core is forked over from Balancer and Compound protocols. And the inspiration from many of it’s features comes from YFI and Uniswap. The question is, what’s under the hood of CREAM Finance?
Background And History
Launched on August 3, 2020, Cream Finance is the brainchild of Jeffrey Huang. The Taiwanese entrepreneur is well known for also launching another Ethereum-based protocol, the Mithril platform.
Initially supposed to launch on the Binance Smart Chain, it was instead deployed to Ethereum.
It has three other experienced developers and wide collaborations with other DeFi projects. The project adheres to DeFi’s signature “move fast and break things” and “continuous experimentation” approach. It has been run with unaudited code, for most of its life. However, there are plans for one.
What is CREAM Finance?
An acronym for Crypto Rules Everything Around Me, CREAM Finance is a blockchain-agnostic, smart contracts-powered combination of DeFi protocols. It offers a wide variety of general blockchain-based financial services, with the aim of making DeFi more accessible and inclusive than its traditional counterpart, CeFi.
The platform offers services for lending, derivatives, payments, exchanges, market making, and asset tokenization. It is currently available for Ethereum and Binance Smart Chain. CREAM Finance’s salient feature is its support for the Ethereum Virtual Machine (EVM), which allows for greater compatibility and composability.
CREAM Finance’s governance and utility token is also called CREAM. The token is based on Ethereum’s well known ERC-20 standard. It had a max supply of 9 million, which was later burned to around 3 million, however currently very little of it (less than 150K tokens) is in circulation.
The token allows holders to participate in governance and is generated as a reward for providing funds to the platforms for various purposes. It’s token model is inflationary and favors participants more than speculators. Further, the value capture mechanism is well defined.
CREAM is traded on major centralized and decentralized digital exchanges. It’s token distribution is as follows: 61.5% for liquidity providers, 23.1% for team and advisors, 7.7% for Compound Finance and 7.7% of seed investors. The token holders receive a portion of interest as well as transaction fees collected, as rewards.
CREAM Lending And Borrowing Services
Chief amongst CREAM finance services is the lending protocol, where users supply assets and farm yields to generate income. Consequently, users can borrow funds and pay interest. It is available for both Ethereum and Binance Smart Chain (as pegged tokens). The tokens available for lending are extensive and the list is significantly larger than other similar protocols.
The borrowing carried out on the protocol is generally over-collateralized, which means that the borrowed amount is lesser than the asset supplied. This ensures capital protection for lenders. Depending on the governance parameters, the collateralization ratio can change.
CREAM lenders are incentivized to provide their assets to pool with varying interest rates based on risk assessment determined values. They can take out their funds at any time, there is no time limit for borrowers to pay the loans either.
CREAM Finance Liquidity Mining
CREAM Finance allows users to participate in liquidity mining. The users earn a percentage of the fees, acquired through supply of those assets in the Cream Finance Swap decentralized exchange. The protocol ran a liquidity mining program before, which had since ended.
Liquidity mining ensures that idle funds are turned into productive assets. Liquidity provision incentivizes yield farmers to supply sufficient liquidity available for the users, and allows swapping assets on the DEX. The workings are designed similarly to other platforms, so the impermanent loss can occur with usage. Furthermore, the funds can be withdrawn at any time.
CREAM Finance Swap
The native Uniswap-like general asset swap service is called CREAM Finance Swap. It is described as a fork of Balancer with the Uniswap UI/UX. The orderbook-less automated market maker (AMM) functions similarly to Bancor, Uniswap, and Balancer.
Like all AMMs, CREAM Finance uses a combination of liquidity pools and algorithms to determine the price/exchange ratios. The service offers industry-leading low trading fees of 0.25%, of which 0.20% goes to liquidity providers and the rest is deposited in the platform’s treasury.
CreamY Stablecoin or Wrapped Token Exchange
CreamY is CREAM Finance’s second automatic market maker (AMM) featuring a low slippage design. However, unlike CREAM Finance Swap, this caters exclusively to stablecoins and wrapped assets. It can be understood as the Curve equivalent in the ecosystem.
Like Curve, CreamY provides pooled liquidity using advanced bonding curves. The liquidity providers make profit through the fees paid for swaps on the network. It can also supply assets to lending protocols, so suppliers can earn interest and acquire additional profit.
It is a dynamic, stable, capital-efficient, and single-sided design. CreamY updates the supported tokens list dynamically, prefers stable and yielding versions, trades with a large set of assets than fragmented subsets, and allows for the provision of liquidity using a single asset. CreamY v2 will be introduced soon and feature more volatile crypto assets.
CREAM Finance Governance
While it hasn’t launched yet, the CREAM Finance governance will be powered by a decentralized autonomous organization (DAO) at some time in the future. The CREAM token holders will have the right and opportunity to vote on important matters.
The governance mechanism is likely to be borrowed from a multitude of projects. Its charter has been officially described as “The CREAM DAO will exist to control, govern, manage, and direct all CREAM-related decisions on behalf of the CREAM token holders”.
CREAM holders will be able to vote on the addition/removal of liquidity pools, assets, parameter modifications, etc. The governance is eventually to be passed on to the community, as is the norm with DeFi projects.
CREAM is a general-purpose, but innovative and cutting-edge DeFi protocol combinator. Its salient feature is that it improves upon the existing protocols while providing all the core services. The platform has gained significant recognition and adoption in a short period of time.
Its code hasn’t been properly audited but carries the validation from several DeFi leaders and a clear example of a successful test in production. Despite having no clear roadmap, it’s likely to continue to innovate and experiment with new ideas as the team and community move forward.