What is Apricot Finance?
Solana's stellar rise to fame made it a fertile land for DeFi protocols. In 2021, Solana captured the attention of the public with its cheap fees, high throughput and sub-second finality. As DeFi degends say: where attention goes, money flows. Solana was the perfect chance for new projects to ride the wave and experiment with improved DeFi services.
Apricot Finance was able to spin up their platform in Silicon Valley-style just as the TVL on Solana was growing. Following the lessons from the 2020 DeFi summer, the team came together in 2021 and agreed on a more borrower-friendly lending model. Their idea required a fast blockchain, which made Solana the winning option.
To explain Apricot's value, it is important to expand on the dynamic between borrowing and lending. One of the challenges with DeFi is that users are required to overcollateralize their positions in order to borrow. The overcollateralization starts from 100% and can go up to 200%. This is because the mechanics of DeFi are subject to higher risk than traditional finance. Periods of high volatility can disrupt liquidity pools, which often result in unfair liquidations.
Apricot Finance aims to reduce the borrowing risk by ensuring liquidations happen at their fair price. Apricot Finance brings much needed predictability to the world of DeFi. Thanks to Solana's high throughput sub-second finality, the DeFi experience becomes as reliable as we are used to seeing in traditional finance.
Wait, if the experience is similar to traditional finance, where do we include decentralization? Apricot Finance describes itself as a decentralized protocol. While there are levels to decentralization, it's fair to say that Apricot Finance is striving towards the ideal rather than achieving it.
Decentralization means there is no third party involved. The action between the user and the protocol is mediated by smart contracts, which represent automated pieces of code. Whenever you interact with Apricot Finance, crypto tokens always remain in your possession. Interacting with Apricot requires manual approval of their smart contracts, and from there, the code executes.
From this standpoint, Apricot is decentralized ✅
Another component that leads to full decentralization is governance. While Apricot has its native governance token called APT, their plans for Apricot DAO are in limbo. This means that the Apricot team is in solely in charge of adjusting the protocol parameters. In the event of an insider changing the protocol parameters to profit for himself, the community will helplessly watch.
While Apricot's plans to form its DAO is commendable, they have been shy of sharing any details since the public token sale. A small source of assurance is that Apricot received seed investment, therefore, the team is doxxed to the investors. As a user, it takes trust that the team will act in the protocol's interest.
Apricot has never been hacked to date, but they've experienced an incident. Following a pricing mechanism update on the Raydium LP, their API deviated from Raydium's pricing data. Due to the incorrect LP prices, a portion of the users got liquidated. To make things right, the team refunded its users within 24 hours. One can say that a governance structure would have noticed the mistake, but the Apricot team acted swiftly, and the losses were minimal.
Apricot Finance mainly derives its value from leveraged yield farming on Solana. With leverage being involved, Apricot implemented a couple features to make risk management easier.
One of them is a user-friendly interface. From the borrower's viewpoint, knowing the price at which you get liquidated is crucial. The Apricot team made a simple visual representation of your risk by implementing the Apricot bar. Similar to a life bar, you can check in real-time the safe borrowing limit for your crypto.
The second feature is Apricot Assist, a background program that constantly monitors your account's borrow limit. If you get close to liquidation, Apricot Assist will notify you and will sell/redeem some of the tokens in your deposits to repay your debt. The trigger level is manually adjusted by the user and comes with more configuration options. With the upcoming Apricot Assist 2.0, the engine will be able to repay you non-stablecoin debt. For now, the program works only with stablecoin debt.
How does Apricot Finance work?
Apricot Finance is a lending protocol that supports leveraged yield farming on Solana. Its purpose is to maximize yield for lenders while protecting against downsides.
Apricot Cross-Farm
Apricot X-Farm provides cross-margin leveraged yield farming for users looking to multiply their gains. The idea is that users don't even have to own the asset they want to farm. Instead, they can collateralize their non-stablecoin assets to borrow the stablecoins with up to 3x leverage, and start farming right away.
To take the edge off leveraged yield farming, Apricot has designed a helping tool called Apricot Assist. Its purpose is to help manage leveraged yield farming positions to avoid liquidation.
For example, Apricot Assist will notify the user when his position is close to liquidation and reduce his borrowing limit. It can also lower the leverage position based on the user's choice.
How to make money on Apricot Finance?
As of 2023, the only available features on Apricot Finance are from lending & borrowing, and staking.
Apricot Lending
Lending on Apricot can be a great method to put your idle crypto assets at work. This is a relatively low-risk strategy that requires no advanced knowledge.
Here's how you lend on Apricot:
Open the Apricot Finance app
Select the asset you would like to lend in the Lend tab
Click on the "Deposit" button and input the amount you would like to lend
Approve the transaction
Deposit
On top of the interest, Apricot lenders get rewarded in APRT tokens, which can be sold or staked to gain even more APRT tokens.
Once you have deposited, your crypto assets will start producing interest immediately. Funds can be withdrawn at any time along with the accrued interest. The longer you lend, the higher the accrued interest.
Apricot Borrowing
Borrowing is a useful strategy to increase your buying power while maintaining exposure to the underlying collateral. Unlike lending, borrowing is a more advanced strategy because there's always the risk of having the collateral liquidated.
As of 2023, borrowing on Apricot has been paused 🔒
Price Prediction for Apricot Finance — Can it hit $1000?
Buying and hodling APRT — the native token of the Apricot Finance — is one way of potentially making money on Apricot Finance.
The main utility for the APRT token is to serve as an incentive token for the Apricot LPs. This means the APRT token emissions are directly correlated with the number of users.
Rewards via native tokens aren't a new concept. There is, however, the danger for token emissions to dilute the value of APRT for long-term holders. As a result, APRT holders would rather sell their tokens in the moment than hold on to them.
By looking at its current price, it’s natural to think about the chance of APRT hitting $1 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.
Let’s examine the potential growth of the APRT token by analyzing its tokenomics. APRT’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} APRT tokens being in circulation today, that means a price of {PRICE} per APRT.
How did we come to that calculation? It’s quite easy, the price of an APRT token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each APRT coin.
By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of APRT at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for APRT to hit that price.
At a price of $1 per token, that means the current market cap of APRT would equal ${{CIRCULATING_SUPPLY} * 1}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1.
Now let’s shift our attention to the fully diluted market cap.
Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.
The fully diluted market cap represents the total value of a coin if all tokens were in circulation. APRT’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} APRT which means that no more coins above that number will ever be created.
These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.
How does this impact the price of APRT? Taking into account the current price of an APRT token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. APRT coins that have been burned are not taken into consideration because they have been permanently removed from circulation.
Whether it seems gigantic or not, the number we came to above only takes into account the current price of an APRT token. Doing the same calculation but with a price of $1 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1} for the APRT protocol fully diluted market cap.
These are all crucial details to know when calculating if APRT can reach the price of $1 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.
The future of APRT depends solely on its growth as a network used by tens and hundreds of millions of users. Because APRT is solely used as an incentive token for LPs, its price reaching $1 and beyond by 2030 is unlikely. The team would have to add new products, or integrate a burning mechanism to curb down token inflation.
If you’re looking to add some APRT to your portfolio, the most trusted places to get some are Binance and Coinbase.