The Algorand crypto project is launching one of its most promising concepts: the Cometa protocol, which according to the platform has all the potential to solve the liquidity-related problem.
ALGO is a blockchain-based cryptocurrency that aims to be secure, scalable and decentralized. In addition, the Algorand platform supports smart contract capabilities and its consensus algorithm is based on Proof-of-Stake and the protocol-defined byzantine agreement.
Algorand’s Cometa: what it is and how it works
As anticipated, one of the most important concepts soon to be launched on Algorand comes from the Cometa protocol.
Cometa allows projects to attract low-cost and sustainable liquidity. It also offers liquidity providers double trading fees and temporary loss protection.
Cometa can also be represented as a one-sided liquidity loan, in which projects borrow stablecoins or native tokens for liquidity and use the projects’ tokens as collateral.
Unlike traditional lending, the collateral does not remain idle but is provided as liquidity to AMM. Thus, it allows for maximizing capital efficiency.
The problem arises because traditional liquidity provision exposes LP to two assets. At the same time, liquidity providers profit from trading fees and incur temporary losses.
So, the combination of these four factors makes liquidity provision rather unpredictable. Therefore, projects need to incentivize pools with many tokens in liquidity mining to offset this risk.
Comet makes it much simpler: projects seeking liquidity provide their tokens on one side and users provide the other.
All trading fees are distributed to the users while the project covers the so-called impermanent loss.
The problem of liquidity in the crypto world
As already pointed out, the liquidity problem for the DeFi world is a significant obstacle. In any case, attracting liquidity is a fundamental worry that existed long before cryptocurrencies.
Be that as it may, its importance has grown in the DeFi universe, especially after the onboarding of more real-world resources.
For example, a traditional way to acquire liquidity in DeFi is Liquidity Mining. Unfortunately, it is very inefficient from a capital perspective and has even been proclaimed dead.
The fact is that providing liquidity is easy but often unprofitable. Indeed, one study shows that half of the liquidity providers underperform a basic buy-and-hold strategy.
Therefore, it is not practical to rely solely on trading fees as incentives for “normal” liquidity providers.
What is important is to provide more reward or less risk. Thus, in order to take DeFi to a new level of stability, it is necessary to find a new way to attract liquidity and users.
Italy’s Algorand research center for blockchain debuts in Brussels
Ace Brain, the Italian research center on blockchain, regulation and innovation, recently landed in Brussels at the European Parliament.
The Algorand research center is a joint initiative of the University of Roma Tre, the Catholic University of Milan, the Ugo Bordoni Foundation and the European University Institute.
Specifically, the research center will focus its activity on analyzing the compatibility between blockchain technology and EU legislation.
It will also be focused on promoting blockchain technology as a pillar of the EU’s future single market and as a foundation for a more democratic, resilient and sustainable society.
The inaugural meeting of the Ace Brain center was convened by European Parliament Vice-President Eva Kaili and hosted leading experts and policymakers from European institutions and national governments.
They discussed topics central to the digital transformation process that is underway in the European Union.
In particular, focusing on the evolution of blockchain toward a more sustainable paradigm, its compatibility with European standards.
They also addressed topics such as possible applications for the single market, with a focus on digital identity, digital wallets and data.
It is worth noting that Ace Brain was among the ten recipients of the international grant sponsored by the Algorand Foundation.
The mission is to enable an inclusive and decentralized global economy based on the Algorand blockchain, a technology developed from the research of Silvio Micali, a pioneer in cryptography, Turing Prize winner and professor at MIT Boston.
Algorand’s crypto performance during the bearish market
Not only does the Algorand crypto represent one of the most technically advanced blockchains, but thanks to the mind of Silvio Micali, founder and one of the best cryptographers in history, Algorand is also one of the best performers during this bearish market.
Nonetheless, ALGO still lost value and did not reach an all-time high, but its TVL did, and more than once in recent months. In fact, when looking at the charts, it is apparent that Algorand is definitely attractive right now.
Algorand’s technology is a big factor in this growth, along with its partnership with the FIFA World Cup. But more importantly, it is the great quality of the builders and innovative projects that flourish on this blockchain that makes Algorand’s potential increasingly attractive to investors.
It is clear that supporting developers is one of the key priorities of the Algorand foundation. For example, there is $10 million allocated for Developer Tooling SupaGrants.
In addition, one of the grant recipients, Reach, has created a uniquely accessible smart contract language that thousands of developers have already mastered. Hence, developers are incentivized to build on Algorand with ecosystem grants.