What is Francium?
Looking for a nice and cosy platform to multiply your yields on Solana? We got you covered! Francium Protocol is making the best out of yield farming and sprinkles some extra leverage on top. Launched in 2021, Francium is one of the handful leveraged yield farming protocols on Solana.
Their niche is so hot that the project received a grant from Solana and Serum. Contrary to the common belief, building up a DeFi protocol from the ground up takes a lot of work and auditing. Specifically, the leverage element requires extra attention to the risk factor. This is because yields are not always guaranteed, and the users who lent their crypto need to be sure liquidations happen fairly. If Alice borrows $1000 from Bob to farm SRM, Bob needs to be assured that he will get his money back if the price of SRM goes south. Alice will also have to pay interest on her loan before enjoying the yield profits.
The protocol has also integrated a stop-loss feature to mitigate impermanent loss or a significant price drop of the supplied token. In our example, Alice can specify a maximum amount of equity she is willing to lose. And when the threshold is reached, the position will be closed automatically to avoid further loss.
Francium protocol makes all these separate actions happen seamlessly via smart contracts, which are automated pieces of code. Every instruction is encoded into the platform, making it possible to take into account all the variables i.e leverage, prices, fees, liquidity pools, and execute the instructions based on the agreement. This creates a window of opportunity for hackers to exploit the protocol if they find a vulnerability.
Francium has never been hacked to date, and this is no coincidence. Their team is made out of blockchain experts and DeFi power users. Thanks to the constant community feedback and communication with industry builders, Francium never went through security breaches.
The protocol followed the typical development evolution: have an idea, gain funding, work your ass off during hackathons, and make sure to reward your loyal supporters. This is the part where they advertise their native tokens. Surprise! They haven't yet released their own token, but they implied it will happen at some point.
Instead, early supporters have been rewarded with boosted APR on the newly liquidity pools on Francium. In addition, the community has full control over protocol management including product updates, parameter changes, and so on. The governance participation threshold is accessible too: users have to hold at least $10 in equity on Francium Protocol.
From a safety perspective, the Francium team is solely responsible for implementing the security updates for the protocol. Contributors can make their mark by participating in bug bounties. Overall, Francium's record track deems it safe to use. This doesn't mean the protocol is safe in perpetuity, and you should always approach DeFi services with a degree of caution.
How does Francium work?
Francium is a complex DeFi protocol under the hood. Although its main product is leverage yield farming, its architecture has some interesting features such as auto-compound, auto-rebalance vaults, as well as some template strategies.
From a user's standpoint, the platform is user-friendly and gives detailed guides as to how their strategies work. Before we jump into how to create your own strategy on Francium, it is important to cover the general architecture of Francium.
Francium Core Modules
As previously mentioned, Francium offers a general framework for users to create their leveraged yield farming strategies. Leveraged yield farming takes traditional yield farming and increases the farming power with the addition of leverage.
At the base of the system we have the Efficient Leverage Module, which is a leverage feature based on a liquidity pool with dynamic interest rate. Lenders can deposit crypto in the liquidity pool for interest and receive LP tokens in return which can also be traded on DEX. For borrowers, they can enlarge their profit with leverage in the yield aggregator with an efficient strategy.
Enter the Creative Yield Aggregator Module. With this module, users can create their own yield strategies that can be shared with the community. After careful review, the community can approve a certain strategy and help others make profit. Because Francium doesn't have its own token (yet), contributors are granted higher voting weight based on their participation.
Francium plugs into two underlying AMM protocols (Raydium and Orca) for various liquidity providing options. The protocol has expanded its available farming assets to include blockchains like Ethereum, BNB Chain, or other network. So far, the main cross-chain asset is ETH, with more crypto assets to come.
How to make money on Francium?
What better way to explain how Francium works than by going though the money making methods? Francium's core product is leveraged yield farming. As we are about to find out, there are many ways you can multiply your profits using their service, and it all starts with the strategy. It's not the portfolio size that matters, it's how you use it.
Francium Lending
In order for someone to leverage their position there needs to be a lender. As a lender on Francium, your job is easy: lend money for users to leverage yield farm and get paid the interest. This is by far one of the least risky methods to make money on Francium.
There is an important consideration: the interest model varies from asset to asset. The team has devised two different interest models for volatile cryptos (SOL, stSOL, weWETH) and large market cap assets (USDC, USDT, mSOL, BTC, ETH).
Due to their volatile nature, cryptos charge a higher borrowing rate as the utilization of the liquidity pool increases. For example, the RAY/SOL liquidity pool charges up to 152% borrowing interest at 100% utilization rate. Meanwhile, the ETH/USDC liquidity pool charges up to 100% borrowing interest at 100% utilization rate. This should give you an idea about the potential opportunities and risks that arise with each particular liquidity pool.
Another important consideration is that if the utilization is too high and most of the assets in the pool are occupied, users may not withdraw their deposits on time until leveraged farmers repay their debt.
In order to lend on Francium, follow these steps:
1. Open the Francium app
2. Click on the "Lending Pool" tab
3. Choose the asset you want to deposit, and click "Invest"
4. Confirm the transaction
5. Profit
Francium will help you reinvest your profit to boost your APY. LP tokens staked in Raydium will earn profit continuously. Making use of the profit will greatly increase the capital efficiency.
Francium Yield Farming
Leveraged yield farming can be a great way to increase your yields on an asset your are confident it's going to rise, or fall in price. Essentially, you are increasing your buying power via leverage, and then farm the token for boosted yields. Ideally, you should be able to pay the borrowing interest with the yields and keep the remaining profits for yourself.
With traditional leverage, you can only earn profits from a price hike/drop, but with yield farming, you can also earn LP tokens apart from the price drop. Francium helps you earn profits by depositing your crypto assets into the leveraged LP farming pool. There's no need to obtain LP tokens before farming, and they do that for you! Francium will automatically convert your assets into LP tokens through their smart engine.
To leverage farm on Francium, follow these steps:
1. Open the Francium app
2. Click on the "Farm" tab
3. Choose your farming pool
4. Once you click "Farm", you specify how much of the two assets to deposit as principal. If you have just one token, the Francium engine will automatically convert your token into a 50/50 position.
5. Adjust the leverage position (up to 3x leverage) and set stop-loss
6. Click "Farm" and approve the transaction
With your position opened, you can see its stats in real-time on the Francium app. The interface shows you how much $ you are farming per day and it does a good job at showing you the risk exposure. You can adjust your position by adding more collateral or repaying your debt. This may come in handy if your strategy goes in the red and you would like to persist or close your position altogether.
If this is your first time leverage yield farming, Francium offers you three templates in opening farm positions: 3X Long Farming, 3X Short Farming, and Neutral Farming. You can choose different templates based on your own forecast of the market.
Pseudo-Delta Neutral Hedging Strategy
This strategy sounds complicated in terminology, but it's actually quite simple. The PDN strategy combines a long and short position in an asset simultaneously, allowing you to obtain high returns while minimizing your portfolio risk when the asset’s price fluctuates.
The biggest advantage with a PDN strategy is that you are safe from liquidation, and it's really simple to use.
Follow the steps below to invest in an Auto-Rebalance Vault:
1. Open the Francium app
2. Click on the "Vault" tab
3. Select the vault you want to invest in
4. Input the desired amount you wish to invest and click “Invest” button
5. Approve the transaction
6. Profit
Navigating a volatile market with simultaneous long and short positions requires a lot of fine tuning. For this reason, only a few pools using the PDN pools have been approved. The "Vault" tab may not appear if there are no such strategies available. But that won't stop you from creating your own PDN strategy.
Leverage Yield Farming Wizardry
With Francium protocol you are never confined by the existing liquidity pools. The protocol has been designed to let users create their own strategies using all the features existent of Francium.
The money making methods outlined previously don't make justice to how complex Francium can get. If you are a DeFi power user, we recommend using the "Yield Calculator" available on the Francium app. This tool helps you simulate different scenarios for your strategy before deploying it.
Here's a hint: if you make your strategy public, you will receive an NFT that entitles you to dividends. This is a sweet way to incentivize contributors and to help new users make money on proven strategies.