Acala DeFi: Benefit from Polkadot’s interoperability

What is Acala DeFi? It may ring a bell since we mentioned the winner of the second parachain auction on Polkadot in this article before. Today we will take a closer look at the tools of an all-in-one decentralized financial network. As you’ll find out, Acala is not just a stablecoin on Polkadot.🙂 For a more practical experience, try apps.acala.network.

The connection is currently available through the basic Polkadot.js interface (don’t forget to restore this extension). However, for a clearer and better user interface, the good news is that Acala is working with the Talisman wallet. So far, only the English version of the site is configurable. Although, it is likely that other language variants will be added over time.

We would like to emphasize an interesting option — the so-called priority token, i.e. the token from which the transaction fees will be deducted. We have left ACA and Polkadot.js connection for this demo.

The home page outlines the current user options. Except for “Polkadot staking” (it will be added later) there is a “Bridge”, “Earn” and “Mint” option.

Bridge

Currently, it is possible to move only the DOT token via the bridge. Moreover, it is possible only unidirectional, i.e. from the Polkadot chain to the ACA chain. This important information is available for the user (who confirms its perusal) before each use of the bridge. The reason for limiting this bridge functionality is the current process of upgrading the XCM protocol, after which it will be perfectly possible to bridge both from the DOT chain and back.

If you want to use Acala DeFi with your DOT tokens, bear in mind that the usage of your tokens will be restricted only to this platform for some time. We especially advise Ledger users not to use their Ledger DOT addresses, as Ledger is NOT COMPATIBLE with Acala. The same goes for other hardware DOT addresses. Therefore, if you do not want to have problems like some Ledger users during DOT crowdloan, we recommend using DOT addresses within polkadot.js (WITHOUT CONNECTION WITH LEDGER). In case you would quickly click on this important message and you did not pay enough attention to it or you prefer other than a text alert, we have prepared this simple pictorial guide ;-)

The bridge itself is then simple and very clear. Just enter the number of DOTs you would like to bridge and press “Transfer”. Transfer fees are comparable to crowdloan contributions (if not even lower) and are paid in DOT from the transferring DOT address. The bridge is very fast and in the app, you have the opportunity to look at the history of your transactions.

Earn

How to earn on Acala DeFi? There are two possibilities available: LP staking and Collateral staking. You can even organize your embedded assets clearly using accessible details about your deposits, APR value, or other information about a specific instrument.

Currently, 3 LPs operate with total liquidity of app 50 mil. USD, of which the highest APR (approximately 34%) is provided by a pair of ACA-aUSD. There are also aUSD-LCDOT and DOT-LCDOT pools. If you are missing any of these assets, use the SWAP function available on the left side of the toolbar. The advantage is the existence of quality couples when you do not have to worry about the so-called impermanent loss. You can collect earned rewards at any time but think twice! Acala DeFi offers an interesting so-called Loyalty Bonus that boosts your rewards by more than 50%! We are pleased with this bonus, so we have not yet chosen the rewards :)

Collateral staking offers almost 10% APR. It is worth a thought, as the total liquidity of over 70M USD. You can also take advantage of the loyalty bonus and at the same time, you can mint some of those aUSDs, while ACA tokens will serve as security.

If you are not afraid of higher risk and want to take advantage of the current market or your ACA and DOT tokens without directly swapping them for aUSD, you can mint them on Acala DeFi. LCDOT can also be used as collateral but it is considered not as interesting as the primarily designed ACA and DOT. You can enrich your Earn options with an additional aUSD without spending additional resources. However, you need to pay attention to the prices of your security in order to avoid liquidation. During the bull run, however, it can be quite a profitable solution. 🤓

Conclusion

It’s clear that Acala DeFi is not yet fully operational. However, almost 165,000 users do not consider this an obstacle. 🙂 We are very much looking forward to the availability of Liquid Staking, Governance, not to mention the bridge of other projects or other options known from the related Karura network.

We hope we have lured you and, like us, you can no longer wait for the full launch of the Acala DeFi project!

We are active validators and collators in the Dotsama ecosystem. Consider supporting us by nominating your tokens to our Kusama and Polkadot validator or to our collator of your favorable parachain (we cover most of them) by the POLKADOTTERS name.