NewsCase StudiesThe Rise of Folks Finance: Setting a New Standard in DeFi

The Rise of Folks Finance: Setting a New Standard in DeFi

By

Algorand Foundation

Industry: Finance | Use cases: lending and borrowing, governance, token swaps, cross-chain 

In 2020, DeFi on Algorand was yet to exist - that's what motivated Benedetto Biondi to take action. With the support of software house Blockchain Italia, he pursued a grand vision: build the engine of Algorand's emerging economy. Folks Finance launched on mainnet in April 2022. Less than two years later, it has the most users of any lending protocol in the ecosystem, the highest total value locked (TVL), and is advancing rapidly down a path of powerful integrations, impactful partnerships, and groundbreaking innovation.

Highlights 

  • Over 9,000 monthly users
  • $170 million total value locked (TVL) all-time-high
  • Invented Algo Liquid Governance with gALGO
  • Expanded to BNB and Avalanche chains with the xALGO Liquid Staking token
  • Introduced Lending Pools to address capital efficiency in DeFi
  • Launched the Folks Router DEX aggregator to optimize swaps on Algorand
  • Launched Ultraswap for permissionless access to a liquidity multiplier

Challenge

“A couple of years back, when there wasn't any DeFi on Algorand, we saw the need for a capital markets protocol,” says Biondi. “We recognized it's a must for an economy of any scale, so we just went for it and got to work.” 

The first challenge was to build a versatile lending platform capable of accommodating seasoned DeFi enthusiasts as well as those new to the space. The team had to assess the demand for DeFi on Algorand and identify the needs of potential users. 

Solution

After raising $3 million in a seed round in 2021, Folks introduced a novel DeFi solution. “Through the platform's liquidity provision and borrowing mechanisms, users can get a continuous economic return by providing liquidity, as well as take loans by locking in deposited funds as collateral,” explains Biondi. 

The platform’s loan system is designed to ensure maximum efficiency and flexibility, making it easy to borrow and lend digital assets while maintaining a margin of safety. “Users can choose between stable and variable interest rates; they can collateralize and borrow multiple assets in the same loan and repay at any time with any assets. The loans are always overcollateralized and secured, while preventing borrowers from entering bad-debt positions,” says Biondi.  

Folks strategically chose Algorand as the foundation for its project over other blockchain platforms. “The block speed is a matter of seconds, the throughput is super high, transaction fees are a fraction of a cent, and the consensus mechanism is robust,” explains Biondi. “Moreover, Algorand has a strong smart contract capability, which makes it stand out from the majority of layer-1 networks.” 

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“By leveraging the Algorand Virtual Machine (AVM), Folks has developed a financial business model that can ensure the economic sustainability of the protocol and includes siloed money market liquidity pools, risk-adjusted credit, health factors, and a robust incentive system,” continues Biondi. 

Further development and growth  

Folks is focused on the long-term success of Algorand. In July 2022, Folks launched Algo Liquid Governance to enhance participation in Algorand Governance. This would allow users to participate in Governance and earn rewards while preserving their liquidity through the token gALGO.  

Just months after launching mainnet, Folks released v2 of its platform in November 2022, making major improvements to the user interface and overall system. The protocol recognized that the user experience needed to be seamless and accessible in order to increase usage. By this point, users could easily make swaps and take out flash loans with ease on the platform. 

Folks launched Lending Pools in July 2023 to improve capital efficiency in DeFi. Lending Pools, in collaboration with Pact and Tinyman, are a unique product enabling enhanced returns obtained from lending markets and decentralized exchanges’ liquidity pools. Not only does this benefit the user, but also the ecosystem overall, activating dormant liquidity.  

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In the same month, Folks launched xALGO, a cross-chain liquid staking product bringing Algorand Governance rewards to the BNB Chain via Wormhole technology. As the first cross-chain DeFi between BNB and Algorand, xALGO created exciting opportunities for users to harness their ALGO holdings across two ecosystems. xALGO was then expanded to Avalanche in January 2024. Furthermore, August 2023 brought the release of Folks Router, an in-house DEX aggregator that provides low fees and efficient routes for swapping.

In November 2023, Folks launched support for EURS, the largest euro-backed digital asset. The addition of EURS has allowed Folks to enhance the diversity of assets available on the platform. The protocol expects EURS to entice new liquidity to the platform, which will, in turn, increase the total value locked (TVL).

The listing of tokenized versions of gold and silver in December 2023 was a "pivotal step in bridging conventional finance with decentralized finance, unlocking the utilization of real gold and silver in DeFi loans and trades," explains Biondi. Each token, provided by Meld Gold, is backed by one gram of physical gold or silver. "This listing is a testament to our dedication to expanding real-world asset offerings and making DeFi more accessible to a wider range of users," he adds.

Results

By the end of 2023, Folks had over 9,000 monthly active users and recorded an all-time-high TVL of $170 million, cementing its position as the leading DeFi protocol and demonstrating Algorand's financial capabilities. Folks has received backing from top investors, including Borderless Capital, Jump, Parafi, and Coinbase Ventures. This exponential growth showcases the success of Folks' laser focus on delivering fantastic tools to the Algorand community.

By expanding its product suite cross-chain into BNB, Avalanche, Optimism, Ethereum, Arbitrum, and others to follow, Folks is raising the bar for DeFi applications by elevating the user experience to align and unify a fragmented omni-chain user base. 

See all Algorand case studies.

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