What is Ellipsis? Based on the online Merriam-Webster dictionary, it is “the omission of one or more words that are obviously understood, but that must be supplied to make a construction grammatically completed.” An example would be saying “Begin when ready” instead of “Begin when you are ready.” But you didn’t come here to know what the word ‘Ellipsis’ meant. You came here to learn about Binance Smart Chain’s newest DeFi protocol, Ellipsis.finance. But what is it? Is it just another project from among many other projects that are constantly popping up, or does this project have something up its sleeve that could make it stand out?
This Ellipsis Finance review article will analyze what Ellipsis.finance is, what unique features it has, where it is going, and whether or not it has what it takes to stand the test of time.
What is Ellipsis.finance?
Simply put, Ellipsis.finance is an exchange for stablecoins on the Binance Smart Chain (BSC), allowing users to swap stablecoins with very low slippage and fees. It was launched on March 24, 2021, making it relatively new.
What is really interesting about this project is that it is an authorized fork from Curve Finance. Yes, you read that right! Unlike other projects whose teams merely fork the code from other protocols to use as their own, the team behind Ellipsis.finance actually sought not only approval but also support from the Curve team to start it. In turn, the Ellipsis team will commit to Curve Finance’s core values:
- Having a trustless and decentralized architecture
- No deposit or withdrawal fees
- No lockups on liquidity, and
- Extremely efficient stablecoin swaps
There is a reason why this article started with defining what the word ‘ellipsis’ is. From this writer’s understanding, although Ellipsis is its own relatively independent protocol with its own native token, it is nevertheless an authorized fork from Curve finance, meaning that it not only had to receive approval from the Curve team to fork its code, but it is even receiving support from them.
Why would the Curve Team approve of this? In return for using their code and architecture, all veCRV holders will receive 25% of the total supply over the next 12 months through a weekly airdrop.
Similar to Uniswap or PancakeSwap, Ellipsis uses liquidity pools for their markets and offers rewards to those who supply liquidity, also known as liquidity providers. A small fee is charged for every trade on Ellipsis.finance, and a portion of this fee is split evenly between all liquidity providers. Trading fees are 0.04% and are evenly split (50/50) between liquidity and EPS stakers.
How Does it Work?
In order to earn the highest amount of APY, Ellipsis.finance has multiple steps on how to provide liquidity, where to deposit your LP tokens, what type of pools best suit you, and where you can stake your EPS. It is not like PancakeSwap, where users can provide liquidity in just a few steps. Let’s begin.
The platform currently supports the following pools:
The protocol has two types of pools. The first are base pools which are 3pool that support US-based stablecoins, notably BUSD, USDC, and USDT, and the ren BTC (BBTC + renBTC). The second are metapools, which are DAI, TUSD & FUSDT. Metapools allow for one token to trade with another underlying Base pool. That means that users could seamlessly trade fUSDT between the three coins in the 3Pool (BUSD-USDC-USDT). This is helpful in multiple ways, including preventing the dilution of existing pools, allowing Ellipsis to listless liquid assets, and providing more volume and more trading fees for liquidity providers.
A Metapool consisting of [fUSDT, [3EPS]] would contain fUSDT and 3Pool LP tokens. This means that liquidity providers of the 3Pool who do not provide liquidity in the [fUSDT + 3pool] Metapool are shielded from systemic risks from the Metapool.
How to Provide Liquidity
To simply things ,we will be using the 3pool as an example of how to provide liquidity
deposit any of the three coins in the Ellipsis 3pool: BUSD, USDC, or USDT. The first checkbox, “Add all coins in a balanced proportion,” allows you to deposit all three coins in the same proportion they currently are in the pool. If you don't want to add all your stable coins, just click the “Use the maximum amount of coins available” checkbox and enter the number of coins you wish to deposit and click “Deposit and Stake.” If you deposit one stable coin, it gets split over all three coins in the pool, which means you now have exposure to all of them.
It should be noted that deposits with the smallest shares will amount to the smallest bonuses.
Press “Deposit” as described above and then complete the two transactions that follow:
- Approve the contract.
- Deposit your tokens.
After depositing in the pool, you receive liquidity provider (LP) tokens. They represent your share of ownership in the pool, and these can be staked for EPS.
When it comes to depositing into the metapool, it is similar to the 3pool. Depositing the coin with the smallest share in the pool will result in a small deposit bonus. The distribution of the coins you deposit has no effect on the number of fees you will receive.
Just like with 3pool, If you deposit one stable coin, it gets split over all four coins in the pool, which means you now have exposure to all of them.
The first checkbox, “Add all coins in a balanced proportion,” allows you to deposit all four coins in the same proportion they currently are in the pool. The “Deposit wrapped” option lets you deposit the base pool token (usually 3Pool). If you don't want to add all of your stable coins, click the “Use the maximum amount of coins available” checkbox and enter the number of coins you wish to deposit and click “Deposit.”
After you approve the contract and press the “Deposit” button, you will receive liquidity provider (LP) tokens. They represent your share of ownership in the pool, and these can be staked for EPS.
Staking LP tokens to earn EPS tokens
As stated previously, EPS is needed and staked in order to earn a portion of the trade fees generated by the protocol.
To stake your LP tokens, you will need to hop on over to the staking page of the website. Choose the appropriate pool for your LP tokens and click “Deposit” to transfer them into the rewards contract. You will begin earning EPS immediately, with your claimable EPS balance increasing each time a new block is mined. LP tokens can be withdrawn at any time; however, they will no longer earn EPS; they must be staked to earn EPS.
According to their docs, Ellipsis doesn’t charge a fee for depositing and withdrawing from the rewards contract, and your LP token are not locked.
Users can also earn EPS tokens by staking PancakeSwap EPS/BNB LP tokens.
To stake your EPS/BNB CAKE-LP tokens involves a longer and a bit more complicated process. You will first need to have an equal value of EPS and BNB. Then hop on over to PancakeSwap and “Add Liquidity,” and then deposit into the pool. You will receive CAKE-LP tokens in return, which you can then go back to the staking page on the Ellipsis.finance website and deposit those CAKE-LP tokens.
Vest EPS tokens
In order to receive some of those fees from the protocol, you will need to vest your EPS. After you deposit your LP tokens, you will then have the option to vest your EPS. Click where it says “Vest EPS,” and your earned EPS is now minted and automatically deposited into the fee distribution contract.
Once that is done, you will begin to earn those fees from the protocol. HOWEVER, this also means that you have locked your EPS token for 90 days. While the protocol does allow you to withdraw your EPS beforehand, users who choose to do so will incur a 50% early exit penalty fee. This means that you are at risk of having your earned EPS tokens slashed by 50%! Those that wait after 90 days can then safely withdraw them without penalties.
If you decide to withdraw your earned EPS after 90 days into your wallet, or if you just purchased some, users have the additional option to “lock” them within the fee distribution contract. Locked EPS cannot be withdrawn for 90 days – it is NOT possible to pay the penalty to withdraw locked EPS early.
So what’s the benefit of this feature? This type of locking demonstrates a commitment to the long-term vision of Ellipsis. Along with receiving the regular trade fees, users who lock EPS receive 100% of the penalty fees paid by users who withdraw vested tokens. Distribution of exit penalty fees begins immediately when a vested user withdraws early and is released evenly over the following seven days.
According to their introductory Medium article, the total supply of their native token, EPS, is 1 billion. This will be distributed within five years as such;
- 25% to all veCRV holder – weekly airdrops
- 55% to LP rewards
- 20% to the team – vested for one year
Strangely, unlike other utility tokens, EPS doesn’t seem to be a governance token but a revenue earning token. This means that any EPS holder can stake their token to fees from the Ellipsis protocol.
Because Ellipsis’ codebase was forked by Curve Finance, which has been audited, the Ellipsis team nevertheless went ahead for an audit to be conducted. Hacken was selected, and on April 1, 2021, it was completed.
You can view the full audit report here, but the two highlights from the report were the issue of the Ellipsis team potentially having access to the EPS rewards. This was mitigated by issuing a multisig safety mechanism. All Ellipsis contracts are controlled by a 3-of-5 Gnosis Safe multisig, which has been deployed at 0x93E004080Fe6D967Eb01Bd294C8da12F970FeAb5.
They have even outlined their names as seen below:
The other highlight was the assurance that the protocol is non-custodial by adhering to Curve Finance’s highest standard of blockchain development and decentralization.
Tutorial & Additional Information Videos
In case if the step-by-step process in this article was not clear enough, below are a few videos that offer a visual view on how to provide liquidity and deposit your LP tokens.
Thus far, Ellipsis.finance seems to be a nice project. But alas, it is not without competition. While other DEXs such as PancakeSwap, BakerySwap, and others seem to be its competitor when it comes to swapping stablecoins, it’s a more serious one thus far, Nerve Finance.
Nerve finance is another automated market maker that is specifically designed to swap stablecoins with low price slippage. It also non-custodial with great plans for massive expansion. Its key advantage over Ellipsis is Nerve’s cross-chain bridges. Currently, it has bridges on BSC, Ethereum and will soon be launching another one with Solana. This could be a fatal blow to Ellipsis.finance since it currently has no bridges and, based on their 2021 roadmap, has no plans to build one.
However, the EPS token has the advantage of having a financial incentive. Instead of it being another governance token, it is used to earn some of the fees that the protocol earns. Currently, the NRV token does not have such a benefit. It is only a governance token.
Ellipsis Finance Review – Conclusion
Ellipsis.finance seems to have potential. Just collaborating with Curve Finance is enough to instill a strong sense of confidence in the project. And this writer is particularly interested in those EPS tokens. It is really interesting and unique for a protocol to issues native tokens that offer holders a share of the profits generated by the protocol.
Nevertheless, a word of caution needs to be outed. Because it is a new project, there is no telling if it will succeed. Even if they are currently ranked #4 on defiestation and have $162 billion in total valued locked, which does bring some confidence, it could easily be overthrown by another upcoming project such as Nerve finance or even planet.finance who has its own token similar feature and it is deflationary.
But then again, everything about this space is new, and so long as the Ellipsis team and its growing community continue to innovate and market to newcomers, it could very well not only succeed but see the price of EPS go parabolic.
Ellipsis Finance Review
Ease of Use
- Offers low slippage when swapping
- Has been audited
- The protocol is in collaboration with one of the most well-known Ethereum based DeFi projects: Curve Finance
- Multiple staking opportunities for your stablecoins and LP tokens.
- Vesting schedule entices users to lock their EPS tokens for some months
- Not user friendly, the process on how to deposit your stablecoins and LP tokens is long and confusing
- Relatively new project; high risk