Iron Finance

Last updated

Iron Finance was a decentralized finance (defi) protocol based on the Polygon blockchain. [1]

Contents

History

Iron Finance was founded by anonymous developers as a fork of the Frax project. [2] [3] Its early investors included Mark Cuban. [2]

In June 2021, the value of the tokens plummeted to zero after crypto whales began liquidating their TITAN stakes at its peak value, causing the prices of both the IRON stablecoin and TITAN token to drop sharply. [4] [3] The situation worsened when the smart contract, the underlying code governing the stablecoin, temporarily malfunctioned which made impossible for holders to redeem their coins. [4]

Tokens

IRON was an algorithmic stablecoin backed by 75 percent USDC and 25 percent TITAN. The Target Collateral Ratio (TCR) defined the ratio of USDC to $1 worth of IRON minted. [1] The remaining value was provided by TITAN tokens at the prevailing price, requiring fewer tokens when TITAN's price was high. [1] Users could redeem IRON for USDC and TITAN, with the Effective Collateral Ratio (ECR) indicating the ratio of USDC to $1 worth of IRON redeemed. [1] These ratios could vary based on IRON's price relative to the $1 peg and the level of USDC in the protocol's reserves. [1] Consequently, IRON was supported by the combined value of USDC and TITAN, with the required amounts depending on their market prices. [1]

TITAN, a native token issued by Iron Finance without specific rights, had two primary functions: it was necessary for minting IRON and could be staked with a companion token in liquidity pools. [1] These pools provided liquidity for traders engaging in token transactions. [1]

The protocol's reliance on partial collateralization contributed to its failure. [5] A rapid increase in TITAN's value triggered a large-scale sell-off by major holders, creating a "negative feedback loop" or "death spiral." [5] This caused TITAN's value to collapse to nearly zero and IRON to lose its dollar peg. The incident resulted in approximately $2 billion in losses and has been referred to as the first major "bank run" in the DeFi space. [5] [6]

Liquidity pools

Iron Finance operated four pools across three token pairs: USDC-IRON (two pools), TITAN-IRON, and TITAN-MATIC. [1] [6] Liquidity providers earned TITAN as incentives. [1]

Tokenomics

Iron Finance planned a total issuance of 1 billion TITAN tokens, allocating 700 million as rewards over 36 months and 300 million for protocol sponsors, to be vested linearly over 12 months. [1]

See also

Related Research Articles

<span class="mw-page-title-main">Cryptocurrency</span> Digital currency not reliant on a central authority

A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.

Circle is a peer-to-peer payments technology company that now manages stablecoin USDC, a cryptocurrency the value of which is pegged to the U.S. dollar. It was founded by Jeremy Allaire and Sean Neville in October 2013. Circle is headquartered in Boston, Massachusetts. USDC, the second largest stablecoin worldwide, is designed to hold at or near a stable price of $1. The majority of its stablecoin collateral is held in short-term U.S. government securities.

<span class="mw-page-title-main">Stellar (payment network)</span> Cryptocurrency

Stellar, or Stellar Lumens (XLM) is an open-source, decentralized cryptocurrency protocol for digital currency to fiat money low-cost transfers which allows cross-border transactions between any pair of currencies. The Stellar protocol is supported by a Delaware nonprofit corporation, the Stellar Development Foundation, though this organization does not enjoy 501(c)(3) tax-exempt status with the IRS.

<span class="mw-page-title-main">Augur (software)</span> Decentralized prediction market platform

Augur is a decentralized prediction market platform built on the Ethereum blockchain. Augur is developed by Forecast Foundation, which was founded in 2014 by Jack Peterson, Joey Krug, and Jeremy Gardner. Forecast Foundation is advised by Ron Bernstein, founder of now-defunct company Intrade, and Ethereum founder Vitalik Buterin.

<span class="mw-page-title-main">Cardano (blockchain platform)</span> Public blockchain platform

Cardano is a public blockchain platform. It is open-source and decentralized, with consensus achieved using proof of stake. It can facilitate peer-to-peer transactions with its internal cryptocurrency, ADA.

Tether is a cryptocurrency stablecoin launched by Tether Limited Inc. in 2014.

A cryptocurrency bubble is a phenomenon where the market increasingly considers the going price of cryptocurrency assets to be inflated against their hypothetical value. The history of cryptocurrency has been marked by several speculative bubbles on a boom to bust cycle.

A stablecoin is a type of cryptocurrency where the value of the digital asset is supposed to be pegged to a reference asset, which is either fiat money, exchange-traded commodities, or another cryptocurrency.

<span class="mw-page-title-main">Tron (blockchain)</span> Blockchain computing platform

Tron is a decentralized, proof-of-stake blockchain with smart contract functionality. The cryptocurrency native to the blockchain is known as Tronix (TRX). It was founded in March 2014 by Justin Sun and since 2017 has been overseen and supervised by the TRON Foundation, a non-profit organization in Singapore, established in the same year. It is open-source software.

USD Coin (USDC) is a cryptocurrency stablecoin which is issued by Circle. It is pegged to the United States dollar, and is distinct from a central bank digital currency (CBDC).

Decentralized finance provides financial instruments and services through smart contracts on a programmable, permissionless blockchain. This approach reduces the need for intermediaries such as brokerages, exchanges, or banks. DeFi platforms enable users to lend or borrow funds, speculate on asset price movements using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts. The DeFi ecosystem is built on a layered architecture and highly composable building blocks. While some applications offer high interest rates, they carry high risks. Coding errors and hacks are a common challenge in DeFi.

<span class="mw-page-title-main">Dai (cryptocurrency)</span> Stablecoin cryptocurrency

DAI is a stablecoin token on the Ethereum blockchain which uses smart contracts designed to control supply to keep its value as close to one United States dollar as possible. DAI is maintained and regulated by MakerDAO, a decentralized autonomous organization composed of the owners of its governance token, MKR, who may propose and vote on changes to certain parameters in its smart contracts.

<span class="mw-page-title-main">Uniswap</span> Decentralized cryptocurrency exchange

Uniswap is a decentralized cryptocurrency exchange that uses a set of smart contracts to create liquidity pools for the execution of trades. It is an open source project and falls into the category of a DeFi product because it uses smart contracts to facilitate trades instead of a centralized exchange. The protocol facilitates automated transactions between cryptocurrency tokens on the Ethereum blockchain through the use of smart contracts. As of December 2024, Uniswap is estimated to be the second largest decentralized exchange and the seven-largest cryptocurrency exchange overall by daily trading volume.

<span class="mw-page-title-main">0x (decentralized exchange infrastructure)</span> Cryptocurrency

0x is an open-source, decentralized exchange infrastructure that enables the exchange of tokenized assets on multiple blockchains. Developers can use 0x to incorporate exchange functionality into their applications, and market makers can use 0x to create markets for cryptocurrencies and tokens. ZRX, an Ethereum ERC-20 token, is the native governance and staking token of 0x. Individuals who own ZRX can vote on protocol changes and stake their tokens to earn liquidity rewards in Ether (ETH). The project's creator and core developer is 0x Labs.

Hodlnaut is a Singapore-based cryptocurrency lending and borrowing platform that lost 69% of the cryptocurrencies that users deposited onto the platform.

Stacks, formerly Blockstack, is a layer-2 blockchain that extends the use of Bitcoin to include smart contracts, decentralized finance ("DeFi"), non-fungible tokens (NFTs), and decentralized apps ("DApps"), while still maintaining Bitcoin finality. Stacks, like the Lightning Network, Merlin Chain, Rootstock Infrastructure Framework (RIF) and Dovi, is aimed at improving the functionality of Bitcoin.

<span class="mw-page-title-main">Solana (blockchain platform)</span> Public blockchain platform

Solana is a blockchain platform which uses a proof-of-stake mechanism to provide smart contract functionality. Its native cryptocurrency is SOL.

Terra is a blockchain protocol and payment platform used for algorithmic stablecoins. The project was created in 2018 by Terraform Labs, a startup co-founded by Do Kwon and Daniel Shin. It is best known for its Terra stablecoin and the associated LUNA reserve asset cryptocurrency.

<span class="mw-page-title-main">PancakeSwap</span> Decentralized cryptocurrency exchange

PancakeSwap is a decentralized exchange (DEX) built on multiple blockchains. As of 2024, it is one of the major DEX on Binance Smart Chain and has more than $2.3B in total value locked.

Aave, formerly known as ETHLend, is an open-source decentralized finance (DeFi) protocol which was initially built on the Ethereum blockchain and released in 2020. It is one of the largest cryptocurrency liquidity protocols. The Aave Protocol uses smart contracts to automate processes, including distributing funds and handling collateral.

References

  1. 1 2 3 4 5 6 7 8 9 10 11 Saengchote, Kanis (16 July 2021). A DeFi Bank Run: Iron Finance, IRON Stablecoin, and the Fall of TITAN (Report). SSRN   3888089.
  2. 1 2 "Mark Cuban DeFi: Iron Finance Crashed 100%". Bloomberg. June 18, 2021. Archived from the original on 18 June 2021.
  3. 1 2 Saengchote, Kanis; Samphantharak, Krislert (June 2024). "Digital money creation and algorithmic stablecoin run". Finance Research Letters. 64: 105435. doi:10.1016/j.frl.2024.105435.
  4. 1 2 Sigalos, MacKenzie (June 24, 2021). "Why the crash of crypto token 'titan' that burned Mark Cuban may not foretell a bitcoin plunge". CNBC.
  5. 1 2 3 Di Maggio, Marco (2024). Blockchain, Crypto and DeFi: Bridging Finance and Technology. John Wiley & Sons. pp. 198–199. ISBN   9781394275908.
  6. 1 2 Ross, Robert (2022). A Beginner's Guide to High-Risk, High-Reward Investing. Simon and Schuster. pp. 241–243. ISBN   9781507218235.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.