In-depth interpretation of Zunami Protocol: decentralized income aggregator, creating more beneficial solutions for stablecoin holders

Overview

The Zunami protocol is a DAO that works with stablecoins, and it solves the main problems of current yield protocols by simplifying the interaction with DeFi, making it easier and cheaper, while improving profitability by differentiating and rebalancing users’ funds. With an automatic revenue-generating mechanism, through the transaction batch and automatic compounding mechanism, the entry threshold is lowered, and the Gas cost is reduced. The Zunami protocol is currently based on the Ethereum blockchain, while also supporting BSC and Polygon. Zunami plans to support Avalanche and other popular alternative chains in the future.


Original intention

Traditional banking can be a frustrating and inefficient process. Interactions with money should be simple and autonomous, enabling everyone to achieve the right to financial freedom. With the rise of stablecoins and DeFi, the financial landscape is changing rapidly. While yield farming is gaining popularity, it is still not widely adopted. So Zunami’s team identified pain points in existing solutions that hinder new users and experienced users of the crypto world. The team’s goal is to bridge the gap between traditional finance and DeFi, and create the ultimate solution for stablecoin holders through the Zunami protocol.

Application

The main problems of the existing liquidity mining interface:

• The current existing DeFi interface is designed for professionals and not friendly for beginners.
• A large number of function pools exist.
• Requires continuous interaction with multiple applications to complete the operation.


Zunami designed a smooth and easy-to-use UI solution based on the above problems: the single-pool system and the new user interface perform all operations in one step, making the interaction with DeFi applications simple and easy to operate.

Yield Aggregator

The Zunami Global Pool enables users to send stablecoins (DAI, USDC, and USDT) in a direct or optimized manner and earn ZLP (Zunami LP token) in proportion to the funds they invest and earn in the protocol. Zunami then stakes the stablecoins into a series of strategies (typically 2-3 running strategies) that put them into the Curve pool as Liquidity Providers (LPs) and earn Curve LP tokens, which then Its collateral is in Convex or StakeDAO reward contracts (Gauges). Direct deposits or withdrawals can be performed instantly, but require users to pay substantial gas fees. On the other hand, by optimizing deposits or withdrawals, users can save gas fees by entrusting aggregate deposits or withdrawals performed once a day by the delegation protocol.

The protocol operator periodically calls Zunami’s automatic compounding method, which collects earned rewards from all strategy contracts and sends them to the reward management contract. A portion of the rewards will be sold and the profits will be reinvested into the Curve pool and the corresponding rewards contract, increasing the value of the user’s ZLP tokens and fully compounding the interest for the user. At the same time, the second part of the rewards, including performance fees and rewards earned for UZD stored in the Curve pool, will be sent to the treasury. In order to achieve decentralized governance, Zunami DAO is responsible for making all important decisions, including adding new policies, rebalancing funds, and setting management fees.


The Zunami protocol utilizes a decentralized revenue aggregator to select the most profitable stablecoin pools and optimally balance funds between them, eliminating the need for ongoing market research and manual transfers.

The community and the Zunami team are constantly analyzing the risk/profit ratio of stablecoin positions and making decisions through DAO voting, strategizing and asset rebalancing to ensure users get the highest possible yield while spreading their funds across trusted pools and dAPPs.

Omni pool

Zunami offers the Omni Pool, a decentralized location where users can deposit USDT, USDC, and DAI. These funds are then allocated to multiple strategies, which can range from 2 to 10 strategies at a time. The selection and rebalancing of these strategies is determined by DAO voting.

The role of the DAO is to identify new strategies, submit them for voting, and ensure timely rebalancing and decentralization of funds. Regardless of which strategy the funds are allocated to, each depositor in Zunami will receive ZLP tokens proportional to their contribution to the protocol. All profits generated by the Zunami protocol will be distributed to ZLP holders, except for a performance fee, which will go to the treasury.


Transaction batch processing mechanism

High commission costs on the Ethereum network are an important issue for the progress and future of DeFi. To solve this problem, the Zunami protocol team developed a Transaction Batching Mechanism (TBM) to optimize costs.

This multi-layer smart contract allows users to deposit funds into the initial contract using the delegateDeposit() function. Then, once a day, the completeDeposit() function automatically allocates user funds to the strategy without incurring any additional fees.


This enables up to 10x lower fees compared to using Curve and Convex directly. Withdrawals and deposits can be delegated by ticking a box in the app. Users of alternative networks can use Zunami through gateways on the BSC chain and Polygon, and the cost of interacting with smart contracts is less than $1.

Strategies and automatic compounding

The DeFi ecosystem is becoming more and more complex, and in order to maximize returns, users need to deposit funds into Curve and obtain LP tokens, which can then be deposited into StakeDAO or Convex. The Zunami protocol simplifies this process and makes it more convenient for users by creating multiple strategies and automating the entire process in one trade.

In StakeDAO or Convex, users are rewarded in tokens, but for users with small deposits, it may not be cost-effective to sell these rewards due to high commission costs or lack of time. Zunami handles the sale of rewards for users, enabling users to fully enjoy the benefits of compound interest.

Knife

Zunami attaches great importance to the opinions and feedback of users and communities in protocol development, so Zunami launched the DAO voting system, allowing early participants in the project to express their opinions on the direction of the project. By depositing funds in Zunami, users will receive ZLP tokens in proportion to their contribution. These tokens can be used to vote in the Zunami DAO, where all important decisions, such as selecting and adding new strategies and rebalancing of funds, will be made. Users who hold GZLP (Zunami BSC gateway users) also have voting rights. Before the proposal goes to a vote, there will be a discussion in the Discord community, which will give everyone a chance to voice their opinion on the proposal.

Treasury

The Zunami protocol has established a treasury system to accumulate funds to cover losses in emergencies and to support the development and expansion of the protocol.

Sources of funding for the treasury include:

• 15% performance fee on earnings collected from depositors using automatic compounding.
• 15% performance fee on earnings collected from APS depositors using automatic compounding.
• Additional accumulated tokens (CRV, CVX, FXS) from the rebase stop in the FRAXBP pool of UZD stablecoins stored on Curve.

DAO tokens will be locked and used to increase the profitability of the UZDFRAXBP pool. Stablecoin revenues allow Zunami to maintain a leading position in the market and mitigate risk during periods of volatility, while providing funding for development and operating expenses. Overall, the treasury is designed to mitigate risk, fund development, and cover operating expenses to ensure the long-term functioning of the Zunami protocol.

Tokenomics

UZD is collateralized by stablecoins stored in the Curve pool, from which income is generated. UZD is also a rebasing token whose value increases proportionally to the APY of the Zunami protocol. It is over-collateralized through stablecoins allocated in the Curve Finance pool and minted using ZLP. UZD will not break away from the anchor, because it can be exchanged for USDT, USDC or DAI at any time. Users can obtain UZD by minting UZD through the Zunami interface or exchanging in Curve.

In the Curve pool, the rebase function of UZD is disabled, and the rewards of CRV, CVX, and FXS are directed to Zunami’s treasury instead of selling to increase the number of UZD. The design of the UZD economy is as follows, the rewards generated are sufficient to pay the next bribe and maintain the pool incentive, thus creating a self-sustaining cycle where the bribe basically pays for itself.


Summary

The Zunami protocol is a platform that distributes stablecoins to users, and the main idea behind it is to create a simple profitable and absolutely safe alternative to bank deposits. At the same time, the Zunami protocol eliminates the challenge of users self-managing their assets, making it easier for users to focus on growing their wealth in the decentralized financial ecosystem. In the process of development, Zunami tries to bridge the gap between traditional finance and DeFi, and tries to create more beneficial solutions for stablecoin holders.