Ethereum gained a new entrant to its decentralized finance (DeFi) ecosystem today: Saddle, an app for swapping pegged-value tokens without tanking their price.
Ethereum’s ‘synthetic‘ Bitcoin assets (ERC-20s backed one-to-one by BTC) have grown in popularity for their cheap and quick nature — but demand often outweighs supply which makes it difficult to trade larger amounts.
So, the San Francisco-based Saddle directly competes with the likes of Curve Finance and Uniswap. It’s another ‘automated market maker’ built for keeping peer-to-peer trades efficient compared to centralized exchanges like Coinbase.
Saddle founder Sunil Srivasta told Protos that users can initially trade up to the equivalent of 150 BTC ($5.6 million), but says those restrictions will be relaxed “in the coming weeks.”
Saddle’s backed by $4.3 million raised from industry insiders Polychain Capital, Framework Ventures, and Electric Capital. Saddle itself spun out from the a16z-backed Thesis (which actually built tBTC).
Saddle wants Curve Finance’s billions
As is the case with most DeFi platforms, Saddle encourages users to become ‘liquidity providers’ by depositing crypto to earn rewards for keeping the exchange running smoothly.
To help poach the billions of dollars backing projects like Curve, Saddle promises a fee model designed to incentivize staking crypto for longer periods of time.
Saddle doesn’t have its own native token, but a deal with Keep Network (also built by Thesis) sees 125,000 KEEP ($43,000) per week set aside to pay Saddle’s liquidity providers.
When Saddle’s reaches its total value locked limit (150 BTC), the company says stakers can expect around 30% annual yield on their deposits, which are initially restricted to 1 BTC (36,700) per address.
“We are also placing a greater emphasis on treating tokenized BTC as a first-class citizen in DeFi when it comes to features and support, which is why we are launching first with tokenized Bitcoin pools,” said Sunil.
For now, only pre-approved addresses can deposit assets. Saddle is undergoing what it calls a “guarded launch” to help protect user funds. There’s currently no word on when the general public can stake.
Security-minded readers might be wondering: who has the keys to the crypto locked inside Saddle? Just five figures control Saddle’s reserves, but they can only make decisions with three signatures.
“This multisig has capabilities to pause new deposits and trades in case of technical emergencies,” reads Saddle’s docs. “User withdrawals, however, are always available regardless of new deposits being paused.”
The real trick for Saddle is delivering what it promises to DeFi — but today’s liquidity injection worth millions is surely a great start.