What is the strangest name you’ve read about a DeFi project? PancakeSwap and Uniswap certainly come into mind. What about BakerySwap, planet.finance, Ellipsis Finance, or Curve. Yes, we’ve all heard of them since they all reside on the Ethereum and Binance Smart Chain. However, there is another emerging ecosystem that is leveraging Ethereum’s security in order to be a ‘go around’ chain to avoid those high gas fees.
That would be Matic, recently rebranded as Polygon, and there is a new project that had just clawed its way out of nowhere and took front row seats in the eyes of many keen investors. And by new, I mean it's really new. It had only just been launched for less than two months since writing this article.
So, what is this new DeFi project? That would be Polycat. Yes, I know, the teams behind these projects are just not trying anymore on coming up with good names. But nevertheless, this project has some serious claws that can nibble and scratch its competitors away. This Polycat review article will take a look at Polycat and what it has to offer. We will discuss its features and services, its tokens’ tokenomics in order to assess if whether or not you should have some of that catnip.
What Is Polycat Finance?
Polycat is a value-oriented, economically sustainable, and decentralized hybrid yield optimizer (yield farm and yield aggregator) running on the Polygon blockchain. That was a mouth full, but in simple terms, it is a protocol that searches for the highest farming yield in other projects. Like, yearn.finance, instead of having to search throughout an entire blockchain ecosystem for the projects that offer the best returns, Polycat will do that for you. It was launched on May 02, 2021, and has seen a steady increase in total value locked.
According to their introductory article posted on Medium, they decided to launch the project on Polygon because of their near-zero transaction fees, as well as being disillusioned by the number of scams and fraud that the Binance Smart Chain is suffering from. They did utilize their testnet to develop the project but ultimately launched it on Polygon.
Even though the project has only been around for less than two months, it already has services and features for users to earn high-yield rewards.
Polycat’s vaults are auto-compounded, meaning that users who deposit their LP tokens or a single token in these vaults will have their reward automatically added into their deposited tokens, thereby accelerating the reward rate. Users do not need to manually collect their rewards and redeposit them. This is for pools or single token vaults.
Currently, the vaults have no deposit fees, but they do have a small 0.1% withdrawal fee for all non-FISH tokens (Fish is their native token. More on this down below).
In addition, 5% of the earnings from standard vaults are used to burn FISH, while 100% of the earnings from burning vaults are used to burn FISH. The APY for vaults includes liquidity provider fees for LPs.
These APYs are a combination of trading fees and pool rewards. Trading fees are given to liquidity providers in proportion to their percentage stake in the LP. Trading fee rates vary but are generally a percentage of all trades on the pair. Trading fees are added to the pool and automatically accrue in real-time. You can claim the trading fees by withdrawing your liquidity in the pool.
For ease, we factor your accrued trading fees into the APY calculations. Pool rewards are auto-compounded every five minutes. They are sold to purchase more LP tokens on your behalf and automatically compounded into your stake. As such, pool rewards increase the amount of LP tokens you own over time.
With compounding, thanks to Polygon’s near-zero transaction fees, the rewards in the vaults are compounded once a minute. One of the team’s goals is to enable the auto-compounding of farms that don't support it. To do that, they add value to other yield aggregators by making them even more performant.
Then there are burning vaults. Because they are used to manage the burn rate of fees, they have their own distinct benefits.
Here is an example. Suppose the protocol has $10,000 in fees to burn. Most other yield farms would just take a portion ($1,000, for example) to buy back their own token and send it to a burn address.
This ends up with $9,000 leftover in fees and a bump in the token price temporarily. Eventually, there won't be any more fees to burn. The price of the token will gradually trickle down to zero, as there is now no price incentive to farm.
What Polycat does differently is that they take some of the burning fees and stake them in a vault, for example, AAVE-USDT. We then burn the earnings from the vault.
So with the $10,000 example, $3,000 is set aside for direct burning, and the remaining $7,000 is staked in a vault, generating a humble but consistent $30 per day. The key here is consistency: it will continuously generate $30 per day.
As deposits increase, the fee vault grows, generating more rewards to burn. The idea is that this avoids the price gradually reducing to nothing, making Polycat farming more sustainable for the long term.
With farming, you can earn FISH, Polycat’s native token, while staking LP tokens. Polycat’s optimised yield strategies ensure users get some of the best competitive rates.
Currently, the protocol supports the following LP tokens:
- FISH-WMATIC (QuickSwap)
- FISH-WMATIC (SushiSwap)
Polycat’s pools are fairly simple to use. They are single token pools, so users don’t have to worry about impermanent loss or having to sell half of their rewards to high further liquidity. This is a great way to earn high yields. Please note that Pools do not auto-compound.
Some pools require users to pay a 4% deposit fee. These fees are then going to:
- 50% goes to the burning vault.
- 25% as the direct burning fee.
- 25% for marketing and development.
Currently, the pools available are for its FISH token, WMATIC, WETH, WBTC, SUSHI, QUICK, DFYN, USDT, USDC, DAI, IRON, POLYDOGE, LINK, AGA, AGAr, TITAN, and KRILL.
The thank feature works as incubators for Polycat’s partner projects. Users simply stake their FISH tokens in one of the pools and can earn tokens from that specific project.
Polycat has a referral program. Users who manage to bring in a friend to the ecosystem can earn 1% of their friends’ fees from Farms and Pools. It should be noted that these referral fees are not taken from their friends’ fees.
Users interested can hop on over to the polycat.finance referral section, here, to see their link. Please note that users will need to connect their wallets in order for the site to display its unique links.
Initial Farm Offering (IFO)
On June 3, 2021, the team announced via a Medium article that they would be launching an IFO.
To recap, an IFO is for a new project to gain exposure and receive funds from potential investors. Polycat burns a portion of the FISH staked into this project, and users receive new tokens as a reward.
The sale of a new project’s token will mainly be made in USDC with a small amount of FISH burned. Because the max supply of FISH is only 3 million, the team did not want to burn too much FAST. In addition, instead of giving the new project all FISH staked, which can cause massive price swings when the project decides to sell them for funds, it was decided for the project to receive USDC instead with only a small portion of FISH burned.
As previously stated, the project’s native token is FISH. Its maximum supply is 3,000,000. Its emission rate is 0.80 FISH/block. By this rate, it is estimated that all FISH tokens will be minted by August 2021.
10% of emission rewards (0.08 FISH) will be sent to the developer’s address. According to their docs, these funds will be used for further partnerships & future development.
Other than that, that is all the information about the token. This is a bit fishy, but it is not yet clear whether FISH is a governance token, or for FISH holders to receive a portion of the earnings that the project makes, or both.
Even though Polycat is only less than two months old, it had already gone through three audits. The first was done by TechRate, which was completed in May 2021. The report found no serious or medium severity issues.
A fourth audit is currently in progress by the well-known firm CertiK.
Although this is a strong indication that the team is taking security very seriously, it needs to be said that auditing is no guarantee that the project cannot suffer any exploits or hacking.
However, for even more security, the team has removed the controversial migrator code, which has can easily be used by developers or hackers to steal users’ funds and added timelock. Timelocks prevent any unseen and immediate changes to the Polycat smart contracts.
Changes are locked for a period of time and can be monitored publicly, alerting users to any changes. Without timelocks, malicious parties can modify smart contracts immediately, giving no warning to the users. Therefore, the team started a timelock of 3 hours and was increased to 6 hours. Their plan is to eventually increase it to 24 hours.
As part of their roadmap, the team is also working on developing leveraged yield farming and their very own Automated Market Maker (AMM).
They are also working on a VaultZap feature, which is similar to yearn.finance’s Zap feature of the fast and cheap transaction. Not surprisingly, the protocol is also working on an NFT house.
Polycat is a new project and thus, faces an uphill battle when it comes to incentivizing users to use its protocol. The Polygon ecosystem has seen an explosion with new Dapps and Ethereum-based Dapps connecting themselves to Polygon.
Some Dapps that will give Polycat a run for its money are Reef Finance, Autofarm, Bonded Finance are all offering similar features. Yearn.finance is also an aggregator that is still very much active and popular on the Ethereum blockchain.
And this is not including the many other Dapp that are catching users’ attention, limiting Polycat to expand.
Thus far, its only real attractive feature is its high yields, but that will inevitably lose its value once all FISH tokens are minted.
Tutorial/How-to-do-it Links and Videos
Below is a link on how to stake your LP Tokens to earn its FISH tokens:
Below is a link on how to move your crypto assets onto Polygon:
In addition, below are videos that further discuss the protocol and offer a step-by-step process on how to use it:
Polycat Review – Conclusion
Polycat has some good tokenomics and offers high yields to users for near-zero fees. It has plans to partner up with other newer projects in order to help more exposure and increase its utility.
That being said, this is still a very new project, with no guarantees that it will last. Furthermore, there is no outline on what the role of its token is, other than as a simple reward token. Although it can be safely assumed that it is also a governance token, usually, the team will specify that on the documentation, and until they explicitly say that, we cannot know for sure.
In addition, Polycat still faces competition from other already well-established Dapps such as Reef Finance and yearn.finance, so it will be up to the team and its infant community to come up with ways to innovate and ensure the protocol lasts for the long term. In the meantime, it is safe to say that users can use it to earn those high yields in the short run.
- Ease of Use
- Long Term Potential
- Offers high yield for pools and vaults
- Good tokenomics, token is deflationary
- On top of Polygon, have near-zero transaction fees.
- Uncertain about the role of its native token
- A very new project, high risk