Comparison

Hello,

In the article, we would like to compare Unit Protocol with other projects in the DeFi space and clarify the main difference as we see it. We will try to touch the concept part, token economics, and main technological features. It can be not absolutely accurate because the area is developing really fast and some moments can be missed, just our opinion and thoughts. Most likely it is not the final version of the article and will be eventually updated.

The Maker Protocol

Main concept:

Initially, it may seem that Unit Protocol uses a very similar idea to Maker protocol - mint stablecoin based on the locked collateral value. Even if the concept is kinda similar, but the main approach is completely different.

We really would like to scale horizontally and increase the number of collateral assets and make the system work efficiently with them.

These days Maker looks extremely conservative and prefers stability over scalability. Why? It could be several reasons for it:

• Extreme focus on short-term DAI peg
• Complicated governance process
• Some limitations in the architecture (like liquidation auctions for each position etc)

Token economy:

MKR represents the typical "cash-flow" model when part of generated fees going directly into a protocol with buyout our MKR tokens and burning them. The empirical approach shows that the model works, but not so efficient as "value-flow" when token can represent value in the system and not just aggregate operational cash flows.

In Maker that cash-flows come from interest fees and liquidation fees, right now rates are 0% and that flow just represents 0.24% from the current Maker market cap(https://makerburn.com/), which does not look like a strong economic fundamental. Basically, we come to the logic that higher interest rates create more cash flow, but reduce the amount of borrowed DAI in the system and reduce the scalability.

Also, Maker has very low liquidity compare to market price because there is no actual utility except governance. I would say that the governance feature does not give the token significant value, it is more about the obligation to execute some kind of actions like voting for setting change or decision of adding new instruments. My personal opinion that participation in such a system has much more interest to execute the decisions to make the protocol work than any person outside the system to get some kind of benefits from it.

In Unit Protocol we use $COL as partial collateral, it allows to reduce interest rate fees(in most cases there will be no need in it). You can compare it with staking when you stake your tokens and receive system provided utility for free.

Aave

Main concept:

The main concept is very different, it is like a common pool where you can provide any asset from the list and borrow another asset from the same list. There is no own stablecoin. Aave works with different high liquid tokens, as well as centralized stablecoins, so it accepts all the risks of censorship, etc.

They have a bigger set of available tokens for collateral, but still, the list is very limited and there are strict rules for asset choice (https://docs.aave.com/risk/asset-risk/risks-per-asset), but no governance so far.

Token economy:

It is the same cash-flow buy-burn model. There is a fee for borrowing and 80% of that fees used to swap and burn LEND token. Overall is burned about 0.16% of the supply. (https://aavewatch.now.sh/lend). It seems like a very low organic value flow compare to market cap.

Synthetix

Main concept:

Users can lock SNX token and mint synthetic assets based on the value. Basically, the possible value of minted assets is restricted by the value of their own asset. It was possible to mint Synth with ETH, but right now such an option is not available. Such an approach doesn't allow to scale, also creates significant risk because most of the stablecoins are backed only by one volatile and low liquid asset.

Unit protocol aims to provide utility to a variety of other token holders and utilize the value inside their tokens, we think such an approach will allow scaling and will be more sustainable due to collateral variety.

Token economy:

People buy SNX to mint Synths and on weekly basis claim their portion of total fees generated by the system. The total fees came from additional SNX emission and swap fees between synthetic assets.

Basically, then more tokens swaps => then more fees=>then more people would like to stake=>then more swap. Before ETH collateral was implemented(but not in use now) it was all inside a limited ecosystem of 1 token.