MEXC Research：DeFi Aggregator+Middleware Protocol — InstaDApp Project Analysis

Instadapp

Instadapp is a DeFi aggregator that operates primarily on its portal website. The Instadapp protocol (DSL) is the core of the project. It serves as the middleware in DeFi and can aggregate multiple DeFi protocols into an upgradeable smart contract layer.

A DeFi aggregator refers to the platform that aggregates transactions, loans, management, insurance, and other businesses in the DeFi market. It is essentially the front end of a centralized DeFi ecosystem and can significantly reduce the entry threshold for users, especially non-technical users.

The main functions of DSL are account extensions and upgradability. The unique upgradability means that upcoming and new extensions will be upgraded, maintained, and managed by INST governance. The DSL also includes a new operational layer that acts as an “Account Extension”. These extensions allow users to access new and unique features of their DSL accounts. The evolution of these extensions and platforms forms a DeFi Center through which new use cases and extensions can be created. Some examples of possible use cases include flash modules, permission extensions, L2 extensions, and others.

The currently integrated DeFi protocols include Maker, Aave, Compound, and Uniswap. Users can trade in InstaDApp and manage their own LP (Liquidity Pools) in Uniswap, while lending the LP to leverage financing in the platform-supported lending protocols.

InstaDApp connects its products to assets held by users on various DeFi platforms and keeps obtaining the prices in order to display them on the operating interface. Before InstaDApp, users were required to manually write down the prices on each platform to find out the optimal interest rates, loans, and others. At the same time, when the user determined the optimal asset management position, previously a series of complex transactions were needed to transfer assets, and these steps were needed to be completed on each platform. InstaDApp hands over operations such as user transfer of assets to a smart contract designed for automatic execution. Currently, no fees are charged. Users only need to provide the funds to pay for the transfer of assets.

InstaDApp stores all transactions and assets in a contract wallet (DSA) that is fully managed by smart contracts. All data is publicly visible and InstaDApp does not hold any of the user’s assets.

TVL（Total Volume Locked）$5.2 billion USD, ranked 5th（Data from June 22）

Instadapp has achieved remarkable success in the DeFi field, creating nearly 55,000 Instadapp DSAs; the TVL is currently over $5 billion; InstaDApp is arguably the project with the highest number of flash loans ever developed and wrapped for direct use by users. Over 50% of flash loans in Ethereum are generated through Instadapp.

Flash Loan

Flash Loan allows borrowers to borrow without any collateral, which greatly increases the utilization of funds. Flash Loan completes the loan and repayment in a chain transaction without collateral. Compound, Aave, and others all have Flash Loan support. The repayment is subjected to pre-set rules for smart contracts and usually requires a certain handling fee. Because a single transaction in a chain can contain many operations, developers can add other on-chain operations between borrowing and repayment, which gives this kind of borrowing more room for imagination.

For example, the founder of DForce mentioned that with the help of Flash Loan, Uniswap transaction fees were reduced from 0.3% to 0.05%, and the following can be done in a single transaction chain:

1. Use a lending platform to borrow ETH worth $25 million USD

2. Put ETH worth $15 million USD in MakerDAO and borrow DAI worth $10 million USD

3. Provide liquidity to DAI with the $10 million USD DAI to Uniswap (providing DAI liquidity with 82% Commission rebates)

4. In Uniswap, perform any DAI-related trades you want to

5. Repay the original ETH loan

In this way, the fourth step in this trade needs only 0.05% of the handling fee, not 0.3%.

DeFi Smart Layer (DSL)

The DeFi Smart Account (DSA) was upgraded to the Open DeFi Smart Layer (DSL) in February this year. The DSL consists of the smart contract account standard (DSA), composable connectors to base DeFi protocols, and an authorization framework that allows extremely modular permissions.

Smart Account: An upgradable contract account where assets are stored and DSA can perform composed transactions across connectors.

Connectors: Used primarily by developers to develop functionality for smart accounts (DSAs), such as cross-protocol transactions, through standardized modules that interact with various protocols.

Authority: Users can use it to set up managers or automation robots to manage their DSAs. Permissions can be modular to the connector level. For example, users can allow specific addresses to rebalance their assets to minimize interest payments or maximize returns.

DSA’s Functions

DeFi Smart Account (DSA) is a separate smart Wallet.

Multi-account and sub-permission management: On Instadapp, you can create different wallet accounts and assign different permissions such as trading, voting, multi-signing, lending, and others.

Multi-user permissions work together: supports account management for different DeFi protocols and functions, and introduces a number of identity verification modules to ensure security.

Multi-protocol: currently supports Maker, Aave, Compound, Uniswap, and Polygon asset migration, cross-protocol operations.

Supported Aggregator Functions

Collateral lending: Lending assets and borrowing assets.

Collateral swap: Transfer of collateral on different protocols.

Debt swap: Transfer of debt over different protocols.

Auto-refinancing of debt: Automatically transferring collateral from one protocol to another to avoid large liquidation fines. (Currently only in Maker)

Tokenomics

INST（DSL Governance Tokens）

Total Supply: 100,000,000

Community and Ecosystem Development：55%，55,000,000 (Of these, 15% are used for ecosystem incentives in the 6.16 announcement.)

Current Team Members: 23.7% 23,794,114 (4-year vesting)

Investors: 12.07% 12,078,714 (4-year vesting)

Ecosystem and Future Team Members: 7.85% 7,851,941

Advisors: 1.27% 1,275,231 (4-year vesting)

INST Incentives (15% of Total Supply)

Airdrop:

On June 16, Instadapp announced the INST Token Airdrop Program, with 10% of its total supply to be used in airdrops to users (about 310,000 users) who hold positions on Maker, Compound, and Aave mainnets through Instadapp and 1% for users (about 50,000 users) who manage Aave positions on Polygon. The number of airdrops is linked to the position size. Users who use Instadapp to manage their positions will double their net value after calculation. Users can receive an airdrop by upgrading their account to DSA V2 on the Instadapp protocol and moving their positions to B2. About 36,000 users are eligible.

Liquidity Mining (June 16 to September 16)

After upgrading the account to DSA V2 under the Instadapp protocol, users will be entitled to participate in a three-month liquidity mining process. A total of 3 million INST tokens will be distributed proportionally based on the net value of users’ positions on MakerDAO, Compound, and Aave on the Ethereum mainnet.

UNI-v3 Staking (June 16 to September 16)

0.01 ETH/INST~0.04 ETH/INST, the liquidity pool is eligible for a reward of 250,000 INST.

0.04 ETH/INST~0.1 ETH/INST, the liquidity pool is eligible for a reward of 750,000 INST.

Since Instadapp is a centralized to decentralized process, there are some parts of governance that need attention. Initially conducted by teams and investors, the project will be decentralized when INST is officially released (launched on June 17) through liquidity mining and developer incentives. On June 17, after the INST governance was online in Ethereum mainnet, all protocol upgrades will be conducted transparently through public discussions in the community and votes by INST holders to achieve decentralized governance.

Current DAO Governance：

1. Submitting governance proposals requires 1% of the INST supply, or 1,000,000.

2. 4% INST of the supply is required to reach the quorum, with a minimum of 4,000,000 pieces.

3. A voting period of approximately three days.

4. Timelock delay for about two days on execution.

Practical Scenario Analysis：

​Use cases:

Participate in DAO Governance

DAO Governance, there may be a fee for some components of the platform (INST as the fee)

Liquidity Mining

Governance, Loans, Voting

Risks:

Partial cash out of incentives and airdrops

Partial cash out by team members