What is Saber Finance?
To explain Saber Finance protocol, it’s important to mention that its general mechanisms apply to every other dapp. Saber Finance is made out of a collection of smart contracts governed by the community.
Smart contracts are automated pieces of code that mediate the interaction between a user and the dapp. Whenever you interact with Saber Finance, crypto tokens always remain in your possession. In order to access the protocol, users have to manually approve the smart contracts. You can think of it as a bot that performs the action you agree with based on a strict set of rules. This is an important difference compared to traditional finance, where the money is placed with a third party.
With smart contracts, there is no risk of a person running away with users’ money, or even worse, locking up the money for any reason. Furthermore, anyone can access Saber Finance regardless of their geography, political views, or religion — Saber Finance doesn’t require KYC.
Transparency and decentralization are powerful tools to enable a thriving DeFi ecosystem. With the traditional limitations out of the way, an important question arises: “How does Saber Finance become self-sustaining?”
Saber Finance mainly derives its value from issuing slippage-free stablecoin swaps. In exchange for the service provided, Saber Finance receives a small fee that goes into maintaining the protocol. Upon consulting with the community, core developers are usually in charge of implementing the protocol upgrades. This ensures Saber Finance stays safe from hacks and the protocol adapts to the market conditions.
As the number of transactions increases, the fees quickly add up. A portion of these fees goes into the protocol treasury, which pays for the developers, audits, and future products. The rest of the fees are shared between the liquidity providers.
While anyone is free to open his own pools on Saber Finance, there is a minimum vetting process by the Saber team to ensure the newly formed pool has enough starting liquidity.
The Saber Finance treasury is secured by a multisig that is being held by the core team and key members of the Saber Finance DAO. The development team aims to eventually transition to on-chain governance, giving the Saber Finance DAO complete control of protocol parameters.
The open nature of DeFi encourages protocols to cooperate and innovate. Saber Finance is a unique protocol that has been in the making since early 2021. However, the protocol can be vulnerable to hacks and exploits. As easy as it is for developers to review each others’ code, hackers can just as easily spot a vulnerability and take advantage of it.
The code is publicly available to verify. Those who are tech-savvy can audit the code for themselves and see precisely what the smart contracts do. Less technical users can indirectly assess the safety of Saber Finance protocol based on audits and reports issued by technical community members. Saber Finance has never been hacked.
How does Saber Finance work?
Saber is an automated market maker and liquidity pool on Solana designed for extremely efficient trading between similarly pegged assets i.e. stablecoins.
One of the biggest hurdles in enabling stablecoin pools is slippage. For instance, when doing a swap there is always a slight price difference between when you submit a transaction and when the transaction is confirmed on the blockchain. Experiencing slippage on stable assets swaps results in losses. Therefore, Saber Finance has created its own mechanism.
Building an AMM specialized for stablecoin swaps requires a different model than the one we see in DEXs like Uniswap or Raydium. Saber is inspired by the proven Curve Finance model and achieves the lowest possible slippage.
Why need a stablecoin swap in the first place? The value of Saber becomes evident as more cross-chain bridges like Wormhole get released. When a user sends USDC from Ethereum through Wormhole, they receive a wrapped version of USDC (Wormhole USDC) on Solana. However, in order to interact with Solana dapps, they’ll likely need to swap to the native Solana version of USDC.
There is currently very little liquidity to switch between Wormhole and native versions of tokens on Solana. Saber Finance is the first touchpoint of liquidity for cross-chain bridges, enabling more activity within the Solana ecosystem.
How to make money on Saber Finance?
The primary method of making money on Saber Finance is by providing liquidity for its various stable asset pools. As an LP you are entitled to a portion of the trading fees. Because stablecoins have some of the highest transacting volumes, the fees quickly add up. Furthermore, being an LP on Saber Finance offers risk-free profits due to the low volatility of the stablecoins. All you need is some USDC or USDT, and you are good to go!
To add liquidity on Saber Finance, follow these steps:
1. Open the Saber Finance app
2. Click on the "Pools" tab
3. Select the pool and click "Deposit"
4. Input the amount of USDT or USDC you would like to offer
5. Click "Deposit"
6. Confirm the transaction
7. Profit
In addition to providing liquidity, you can also use Saber Finance for regular swaps. Think of Saber as your best place to swap stablecoins on the Solana ecosystem.
Saber Finance Farming
Farming on Saber Finance is done via the Quarry app. The only requirement is that you have some SBR tokens that you can lock up.
To farm on Saber Finance, follow these steps:
1. Open the Saber Finance app
2. Click on the "Farms" tab
3. Select the staking pool of your choice and click "Stake"
4. Input the amount of SBR you would like to stake
5. Click "Stake"
6. Confirm the transaction
7. Profit
Price Prediction for Saber Finance — Can it hit $1000?
Buying and hodling SBR — the native token of Saber Finance— is one way of potentially making money on Saber Finance.
By looking at its current price, it’s natural to think about the chance of SBR hitting $1000 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 SBR token by analyzing its tokenomics. SBR’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} SBR tokens being in circulation today, that means a price of {PRICE} per SBR.
How did we come to that calculation? It’s quite easy, the price of an SBR 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 SBR 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 SBR 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 SBR to hit that price.
At a price of $1000 per token, that means the current market cap of SBR would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.
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. SBR’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} SBR 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 SBR? Taking into account the current price of an SBR token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. SBR 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 SBR token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the SBR protocol fully diluted market cap.
These are all crucial details to know when calculating if SBR can reach the price of $1000 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 SBR depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some SBR to your portfolio, the most trusted places to get some are Binance and Coinbase.