IPOR Protocol 2023 Recap and Looking Forward
The IPOR Labs team spent the year strategizing, upgrading, simplifying, launching products and features, and learning. What are the key milestones of 2023, and what’s coming in 2024?
The end of the year is always a time to reflect on the past 365 days before we look forward to the next stage of development.
The IPOR Protocol has had a busy, exciting, volatile 2023, ending strong with the launch of IPOR v2, the Stake Rate Swap (SRS), and over $4.19b in cumulative open interest traded.
Let’s look back at some major milestones for IPOR in 2023.
🔷 pwIPOR Power Up - Tokenomics and Market
The year started with a bang in January with the launch of the Power Token Liquidity Mining program. The protocol went from $2m in TVL to a peak of $43m, attracting deep liquidity for USDC, USDT, and DAI pools. Since inception, these pools have provided some of the top APR for stablecoin depositors in all of DeFi. The pools were able to sustain around ⅓ of the liquidity as sticky liquidity, ending the year around $13m TVL.
🔸 $IPOR Market
Along with the LM program came the launch of $IPOR pools on Uniswap. As with many liquidity mining programs, there came a price discovery, speculation, and bleeding to equilibrium.
🔸 $IPOR Emission Cuts
During the initial market launch, the IPOR Economic Workgroup was formed, which has led to many protocol stability initiatives, including cuts in LM rewards, changes to the LM curve, and the power to bootstrap new pools.
The $IPOR token ends the year up 10% from where it started but with a 6.5X increase in liquidity and over $4b in traded volume.
🔷 Protocol Technology Upgrade
Major innovations occurred in the upgrade from IPOR v1 to v2. The overhaul of the smart contract architecture led to increased gas efficiency and improved composability, enabling things like Zapping into the liquidity provision with one click, and setting the stage for composable structure products on the roadmap for 2024.
🔸 Branding
The IPOR Protocol also had a major branding change to the Credit Hub of DeFi. The focus moved from the fundamentals of the IPOR Index and the utility of Interest Rate Derivatives to the final product forms focusing on improved experience for depositors and the aggressive 2024 roadmap focusing on sophisticated on-chain credit products that are coming up.
🔸 Audits and Security
On the protocol security side, the IPOR Protocol has undergone five audits in 2023 across liquidity mining, v2, SRS, and various upgrades.
In 2024, you can expect new factory contracts, which will make the launch of new pools, asset management, and instruments fast, secure, and repeatable.
The IPOR Protocol also launched an Immunefi bug bounty program, increasing the number of eyeballs on the protocol with a bug bounty of up to $100K. To date, only one informational bounty has been paid.
🔷 IPOR Instruments
With v2 came the extension of tenors from the initial 28-day swaps to two and three-month tenors. The three-month swaps extended to the launch of the stETH SRS. The extension of rate tenors is crucial to developing a yield curve in DeFi, which is one of the core goals of the IPOR Protocol and can benefit all market participants. A functional yield curve brings maturity and structure to DeFi credit markets.
🔸 Stake Rate Swaps
Not to undermine the importance of the SRS, the instrument is the first IPOR product venturing into LSD land. Where the IPOR Indices focus on the risk-free rate of the DeFi money markets for stablecoins, the ETH staking rate is widely considered the native risk-free rate for DeFi by its fans.
Naturally, a derivative product that allows sophisticated actors to hedge their rate exposure, arbitrage, or speculate has immediate product-market fit, with over $24m traded within the first week of launch.
🔷 Community and Governance
Along with the formation of the IPOR Economic Workgroup mentioned above, there is also an IPOR DAO Marketing Workgroup and Governance Workgroup. These are critical for the phased decentralization of the protocol, moving decision-making and control from IPOR Labs to a fully community-governed Protocol guided by $pwIPOR voters.
🔸 Snapshot
The protocol also had its first governance votes in Snapshot focusing on new entrants to the IPOR Index, authorizing the Economic Workgroup to make decisions on token emissions within a certain threshold, as well as DAO Operations budget for IBI (IPORIAN Basic Income where the DAO compensates key community members for various activities).
🔷 Biggest Challenges
2023 was a difficult year for crypto and DeFi in general, with some light at the end of the tunnel teasing improvement in market conditions and a potential BTC ETF approval. The industry saw a significant outflow of stablecoins for treasuries and some RWA over the year. The IPOR Protocol saw its pro rata drop in depositors simultaneously.
🔸 DeFi Fatigue
DeFi as a whole has seen a decline in interest, as new entrants into the markets have been more or less capped, as seen by the static TVL growth in ETH terms during the majority of the year and cycles focused on meme coins value extracting among same participants over the time.
However, in the past, protocols that have innovated, shipped, and evolved during bear markets tend to be well positioned to be “discovered” and “rediscovered.”
We saw a DeFi rates environment that bottomed out post FTX collapse, seeing sub 1% IPOR Rates while TradFi rates crept over 5%, leading to an outflow of capital from DeFi to TradFi. However, since the end of July, we have seen a return to high-interest rates in DeFi for depositors and borrowers.
This has led to renewed discussion about the cost of capital in DeFi as yield farmers seek risk-adjusted yields but need to control their own cost of capital. If only there were a protocol born to tackle this exact problem…
🔸 Whale Attack
IPOR experienced its first targeting by a whale with the TVL growth and interest in the DeFi markets. This led to many risk management features introduced into the v2 meant to provide robust risk management and agile adaptation to market events. The v1 design and v2 improvements mitigated the whale's actions with LPs funds safeguarded.
🔸 Spread Flexibility
With the rising rates, we’re in a new rate regime in DeFi. As it’s impossible to model every condition on the quant side, the IPOR Interest Rate Swap spreads have also widened, which requires a model upgrade for tighter spreads. The good news is that with the v2 architecture, the spread model updates can be quickly integrated without affecting the smart contracts.
In 2024, look for a formation of an IPOR DAO Markets and Models workgroup, which will govern the introduction of new pricing models and other risk parameters for the IPOR Protocol.
🔸 “Wen L2?”
Gas fees for LPs and traders are rising with a rising ETH price and a return of on-chain activity. The SRS is the perfect instrument, allowing traders to profit from taking a position on gas fees. An IPOR stake rate swap is a great proxy for the Execution Layer rewards component of the staking rates. However, this also pushes activity to L2s where non-ETH whales can afford to play.
The question is often asked, “wen L2?” to which the response is… pay attention to #open-governance on the IPOR Discord.
🔷 The Road Ahead
IPOR v2 is a rolling launch. The SRS was the first part of that post the #IPORv2 upgrade, and will be followed by several new things:
- New pools to get market-leading APRs;
- New instruments for players to trade the TradFi/DeFi yield;
- New one-click products where anyone can access the same strategies that sophisticated actors enjoy;
- A focus on long-term sustainable token dynamics where the IPOR Protocol can become self-sustaining, a decentralized investment bank that can underwrite its own activities into perpetuity.
With a strong foundation forged in 2023 through blood, sweat, and bear slaying, we, the collective IPOR community, look forward to the next generation of the Protocol with uptake in the instruments for the very market the protocol was envisioned.
Thank you for your continued support, and to a bright 2024!
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