Defi Insight: InstaDapp protocol
Launched in 2019, InstaDapp could be described as a swiss army knife for DeFi tools. The protocol is in the top 10 DeFi protocols with 2.5 billion dollars of Total Value Locked (TVL). InstaDapp incorporates a DSA (DeFi Smart Account) at its core, which offers users flexibility beyond a regular wallet. The DSA is essentially a smart contract controlled by the user. The main benefit of DSA accounts is the ability to execute multiple actions in a single blockchain transaction. The immediate benefit of consolidating actions in one transaction is the associated costs. Instadapp offers exceptional ease of use for managing your open DeFi positions. For example, with a single click, the DSA could swap debt from one collateral type into a different collateral type within the same protocol all in one transaction.
Authors: Valentin Kalinov, Christian Viehof
InstaDapp is trying to build a middleware protocol. You can think of InstaDapp just like Stripe, where all different payment methods, from credit card payments to cryptocurrencies, are integrated into one layer with API access for developers. Just like Stripe, Instadapp is trying to bring all different DeFi protocols under one roof and provide developers with easy-to-use tools to build their solutions. While Stripe focuses only on payments, Instadapp covers the whole DeFi ecosystem from payments, stablecoins, AMMs, and lending protocols. The goal of Isntadapp is to become the Web3 bank account for users and developers looking to get into DeFi. Before InstaDApp, users would manually track their assets and identify optimal interest rates, collateralization ratios, and other parameters on each platform which takes a lot of time and effort.
To get e better understanding of the potential future, let’s take Fintech as an example. The Fintech industry is very centralized and resides in silos. So if a user wants to move their loans from one provider to another, it is not possible in today’s financial world. Instadapp is trying to be blockchain agnostic, allowing users to use any protocol as they wish and even transfer their DeFi loans from one provider to another.
InstaDapp is always introducing new features to its portfolio. Here is a list of interesting features offered by the protocol:
- Interop — cross-chain transfers of positions (lending, debt positions, or AMM positions).
- Assembly — aimed at developers Assembly is the open-source dashboard for the InstaDapp Protocol.
- Refinance — refinance your DeFi positions between protocols by utilizing flash loans.
- Flashloan aggregator — Many flashloan providers charge different fees (eg Aave, MakerDAO, Balancer, etc.). Instadapp has aggregated all these different routes along with other complex ways to get flashloans giving developers the ability to get access to the flashloans with the lowest fees. Additionally, by combining the liquidity of all pools, the aggregator could provide deeper liquidity to the user.
Instadapp Lite is an easy way for users to deposit to earn interest from the most popular DeFi strategies on the market. The Lite version of the protocol utilizes Strategy Vaults to reduce the complexity and gives users the easiest way to earn interest on their assets. A Strategy Vault is a smart contract containing the specific DeFi strategy the vault utilizes. After users deposit their assets, the protocol uses these assets by deploying the optimal yield optimizing strategy. This can involve a series of on-chain transactions such as swaps, migrating funds, leveraging protocols, claiming staking rewards, and other market-related activity.
Blockchain and especially DeFi are still high-risk industries, especially when deploying DeFi strategies. While InstaDapp is trying its best to stay secure, the protocol still depends on the security and liquidity of the different DeFi protocols they integrate with. One recent example is the meltdown of Terra/Luna. The crash impacted many DeFi protocols directly and indirectly. While the market was experiencing one of its most significant downturns, Lido Finance’s stETH price began to depeg from ETH. Because InstaDapp used yield optimization with Lido, users’ funds got temporarily frozen by the team, and withdrawals were not allowed. To solve this problem, the team and investors added additional collateral ($35m) to the protocol vaults in order to support the peg of stETH. To cover its losses, the InstaDapp team is introducing a 1% management fee for Lite vaults starting in July 2022.
The INST token
InstaDapp launched its network governance token (INST) in June 2021 on Ethereum. The idea behind the token is to gradually move toward forming a Decentralized Autonomous Organization (DAO). INST token holders would be able to vote on protocol upgrades, new features, and allocation of ecosystem funds. The INST token is also part of the protocols’ Grants program, where contributors and developers can apply for funding in exchange for services.
The classification of INST according to the ITC:
Economic Purpose (EEP): INST is listed as a Settlement and Governance Token (EEP22TU03), similar to the other stablecoins in the industry.
Industry Type (EIN): The issuer of INST is active in the field of Decentralized Lending, Saving and Asset Management (EIN06DF02).
Technological Setup (TTS): INST is an Ethereum ERC-20 Standard Token (TTS42ET01). The Class “Ethereum ERC-20 Standard Token” captures every token that is implemented by means of the ERC-20 Standard on top of the Ethereum blockchain.
Legal Clam (LLC): The INST token does not entitle its holder to any legal claim or rights against the issuing organization; therefore, it is listed as a No-Claim Token (LLC31).
Issuer Type (LIT): The dimension “Issuer Type” provides information on the nature of the issuer of the token. INST is built by InstaDApp Labs LLC, its Issuer Type is a Private Sector Legal Entity (LIT61PV).
Regulatory Framework (EU) (REU): The dimension “Regulatory Status EU” provides information on the potential classification of a token according to the European Commission’s proposal for a Regulation on Markets in Crypto Assets (MiCA, Regulation Proposal COM/2020/593 final). The INST token qualifies as a Utility Token (REU51UT) according to the definition provided in Article 3 (5) of Regulation Proposal COM/2020/593 final.
The International Token Standardization Association (ITSA) e.V.
The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.
- The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
- The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to the market capitalization of classified tokens.
- ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.
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Valentin Kalinov is an Executive Director at International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database, including a classification framework and unique token identifiers and locators. He has over five years of experience working at BlockchainHub Berlin in content creation and token analysis, as a project manager at the Research Institute for Cryptoeconomics at the Vienna University of Economics and token analyst at Token Kitchen. You can contact Valentin via firstname.lastname@example.org and connect on Linkedin if you would like to further discuss ITSA e.V. or have any other open questions.
Christian Viehof is an Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database including a classification framework and unique token identifiers and locators. He completed his Bachelor in Economics at the University of Bonn, the Hong Kong University and the London School of Economics and Political Science with a focus on Behavioral Economics and Finance. Currently pursuing his Master of Finance at the Frankfurt School of Finance and Management, you can contact him via email@example.com and connect with him on Linkedin, if you would like to further discuss ITSA e.V. or have any open questions.