Cytus is a decentralized finance protocol that aims to solve the yield crisis in DeFi today.
Back in the summer of 2020, the concept of DeFi - a system that does not rely on centralized financial institutions - rose to prominence in crypto. To boost the growth of DeFi protocols, liquidity farming - a mechanism that rewards users of a protocol with the protocol’s tokens - was widely used. For instance, if you deposit your own token into a lending protocol, the protocol will reward you with their own tokens.
By doing so, DeFi protocols quickly accumulated huge amounts of TVL (total locked value) by attracting people who flood to DeFi for token rewards. Higher TVL means more users using the protocol, which then translates into high valuation of the protocol tokens. This method worked extremely well in the bull market and generated billions of profit for yield farmers. In nature, liquidity farming is similar to a VC investment in a startup - users are providing funds to the protocol in exchange for their tokens. If the startup is successful, investors will earn more than e.g. 1000% profit. However, when it comes to a bear market, especially in an environment with tightening liquidity around the globe, the success rate of a DeFi protocol that heavily relies on artificially high APR is extremely low.
Therefore, the high yield in DeFi disappeared when the market turned upside down in Apr 2022, which was triggered by the Fed raising interest rates for the first time in almost a decade. At the time of when this article was written (2022/10/08), yield farming in most of the DeFi protocols (e.g. < 1% for Curve 3pool) generated less yield than the US risk free rate (e.g. 4% for 1-year US treasury). However, there are still tens of billions of dollars in the DeFi system doing yield farming - these capital need a risk-adjusted way to earn better returns. Therefore, Cytus is created to solve this problem - we provide an opportunity for crypto investors to- without offramping - invest their stablecoins into real world debt (such as US government bonds to earn high and sustainable yield that their capital deserve.