This article is sponsored by TRON.
DeFi is growing on the Tron network. Several independent applications are developing decentralized financial solutions on the network and introducing enthusiasts to self-custody alternatives to traditional financial systems. According to DefiLlama, the TVL on the Tron network sits at over $8.1 Billion at the time of writing, a 182% growth from the previous year’s figures.
As one of the major platforms on Tron, applications within the Sun ecosystem now contribute ~4.5% of Tron’s total TVL. Join us as we dive into the inner workings of the Sun Ecosystem and how it intertwines with the larger DeFi scene on Tron.
The Sun Ecosystem
Sun Ecosystem is a hub of interrelated DeFi applications and protocols. It unifies several decentralized products to present a one-stop platform for routine financial applications. In the fourth quarter of 2021, Sun.io acquired JustSwap and has since then continued to build optimized applications that leverage similar technologies. With over $300 million worth of crypto assets locked up across applications in the Sun ecosystem and an average of $35 million of daily asset trades, Sun Ecosystem is developing a liquidity-efficient and best-in-class DeFi facility for the Tron network.
Core Goals of the Sun Ecosystem
Community Ownership and Control
Sun Ecosystem is owned by the SUN DAO and its community. Sun token holders constitute the DAO. Members of the DAO take up the role of making decisions on core aspects of the ecosystem. This cuts across technological, administrative, and marketing developments. The Sun governance structure is designed to promote participation by every member of the Sun and Tron community. Apart from a DAO portal where community members can submit and vote on proposals, Sun also runs a diversified governance system with support for external communities. External communities are invited to lock up a minimum amount of Sun tokens and participate in the governance mining activity. This opens up the ecosystem to as many people as possible.
Performance and security
The Sun ecosystem hopes to be a model for DeFi on the Tron network. It is doing this by ensuring that every application in its hub is optimized for high throughput and scalability. Sun ecosystem applications are high-capacity and built to scale elastically to serve fluctuating demands. Developers in the ecosystem also appreciate that these applications manage significant financial assets and operations. With a high emphasis on security, each smart contract is subjected to a strict testing routine With every new update, the developers are also adding new features and improving its security.
Optimal experience and adoption
Liquidity efficiency in Sun ecosystem applications means that users can perform their activities with the lowest possible slippage. The ecosystem is designing liquidity-building programs through incentives and tokenomics and also intuitive interfaces to allow users to grasp the basic operations at a glance. These are meant to deliver the best experience to existing users and invite users from outside the Tron community to embrace DeFi on the network.
Key Applications of the Sun Ecosystem
SunSwap
SunSwap is the Sun ecosystem’s flagship automated market maker (AMM) decentralized exchange. It serves a pivotal role in the ecosystem, and the V3 upgrade has introduced several interesting features to the DEX. TVL in SunSwap pools totals over $320 million. SunSwap is permissionless, meaning users can perform swaps without giving up custody of their assets. New assets can also launch their tokens on the platform without paying a listing fee to any central body.
The liquidity pool and AMM system provide users an opportunity to participate in DeFi and also earn passive rewards in the process. Users can lock up their assets in the liquidity pools on Sunswap and earn passive income from trading fees paid by users. Liquidity providers also receive LP tokens, which can be further staked in yield farming pools to earn specified rewards. The yield farming program offers up to 23% APY in rewards. USDT pairs of JST, WIN, NFT, and BTT tokens are supported by the yield farming program.
Some of the new features of SunSwap following the V3 upgrade include segmented liquidity and a tiered fee rate. Segmented liquidity allows users to provide liquidity at specific price ranges. The tiered fee rate features allow users to set trading fees according to the assets' volatility. Users can select higher fee rates for more volatile and (or) less traded assets and vice versa.
The Sun.io team claims that these features make SunSwap V3 a flexible and efficient asset management tool that provides higher returns for investors
SunCurve
Experience smooth swaps between your favorite stablecoins on the SunCurve platform. Over $20 million worth of stablecoins are locked on SunCurve at the time of writing. SunCurve is an AMM Swap, similar to SunSwap, but a major difference is its preference for stable assets. Liquidity pools on SunCurve support only stablecoins at this time. This is in line with providing a low slippage, low volatility, and overall stable exchange for users on the Tron network.
SunCurve’s stablecoin pools, consisting of USDD, USDT, TUSD, and USDC, present users with a platform to swap between stablecoins. As part of the incentive system, liquidity providers receive rewards on the asset supplied to the pool. Additionally, liquidity provision is also extremely flexible, as users can choose between supplying multiple assets in equal proportions or supplying just a single asset.
USDD Peg Stability Module (PSM)
USDD is a pivotal asset in Tron’s DeFi ecosystem. The stablecoin is issued at a 1:1 ratio with the US dollar and is meant to maintain this position regardless of market conditions. The Tron DAO is constantly working on means to not only strengthen the USD peg of the USDD stablecoin but also to realize an over-collateralized stablecoin system. The idea is to provide multiple approaches to maintaining the peg and ensure battle-tested stability for the USDD stablecoin. The PSM Module is one of these strategies.
Tron DAO claims that strategies similar to the PSM mechanism have been used in several other instances in the industry and fit the USDD system as well. Here’s how it works:
PSM is a modification of the initial issuance and distribution mechanism of USDD. It is a fixed ratio swap module for the USDD, allowing USDD to be swapped at a 1:1 ratio with other stablecoins like USDJ, USDT, and USDC without any debt and management risk. It is structured in such a way that users pay no handling fee and swap assets with zero slippage. This ensures that no extra charges are incurred in the process and tightens the 1:1 swap ratio.
The PSM also introduces a SafeVault and a smooth remittance process that utilizes conversion between TRC-10 and TRC-20 USDD. It moves authorized but unissued USDD to the SafeVault and serves swap requests from the vault. Upon user request, it converts TRC-10 USDD to TRC-20 USDD and transfers it to users. Conversely, it also converts TRC-20 USDD to TRC-10 USDD and moves it into the SafeVault. Tron DAO claims that this mechanism doesn’t affect the USDD supply statistics but ensures a fixed exchange ratio for stablecoins, promoting a more stable collateral base and, hence, a stronger USD peg.
The PSM provides a market for the USDD and an opportunity for arbitrageurs to gate-keep the peg while making significant profits. For instance, when the price of USDD goes below $1, an arbitrageur can purchase USDD and redeem it at $1 through any other supported stablecoin. The reverse also applies when the value of USDD goes above $1. The PSM governance system regulates certain aspects of the protocol, such as fees and swap limits.
Farm
The Sun ecosystem offers exciting rewards, not just through yield farming programs on the decentralized exchanges but also through the exclusive governance farming program. The governance farming program offers rewards to community members who lock up their Sun token. The farming program consists of the Sun locking incentive program and the liquidity pool farms. These are related.
Users who lock their Sun token get veSun tokens in return. veSun allows holders to vote on governance proposals and also enjoy benefits such as 50% of all the stablecoin pools’ trading fees (distributed amongst all stakers accordingly), as well as boosted mining APY on other pools. Sun.io team claims that veSun holders enjoy 2.5X improved rates in liquidity mining.
The liquidity pool farms offer varying APY for the different pools. Users stake the LP token of the assets supported by each pool and enjoy the stipulated reward. Rewards are paid out in USDD. As part of the governance mining program, veSun holders can improve their rewards by voting on their pools and using the booster feature. The governance weight of each pool determines the booster effect.
Conclusion
The idea behind the SUN ecosystem is simple - build a hub of decentralized applications and optimize their operations on the Tron blockchain through interoperability between themselves and applications from other networks. The ecosystem is a one-stop platform for DeFi enthusiasts on the Tron network and the crypto space at large. It is optimized for yield farmers, stable and non-stablecoin stakers, and anyone looking to be part of decentralized governance. Sun ecosystem, through its governance structure, transfers control of the platform to its token holders.
The Sun ecosystem is building a model for decentralized finance on the Tron network, and each application in its hub is not only open for general use but also a prototype for other developers hoping to build similar applications on the network. The interface is designed for easy comprehension. Regardless of the users’ technical background, they will be able to carry out basic operations on the platform.
According to information from the project, every contract that controls the operation of these applications has been audited for technical stability and security, as these applications manage significant amounts of user funds. With continued development and growth, there will likely be even more applications added to the ecosystem in the future.
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