SnowSwap – Low Slippage Swaps for Yield-Bearing Stablecoins, BTC and ETH2

Chaz Schmidt
Jul 14, 2021
|6 minutes read

Many would argue that generating yield with stablecoins is currently one of DeFi’s biggest use cases. So it’s no wonder we’ve seen a flurry of different stablecoins, yield aggregators and vaults entering the market, each with their own tokenized representation of yield-bearing stablecoins. You can almost picture these yield-bearing tokens like snowflakes; each similar at a glance but entirely unique when examined closely. When snowflakes are combined they become an indistinguishable mass that can be shaped to create something more like a snowman or igloo. Whether you prefer to look at protocols and tokens like snowflakes or money legos, there are undeniable benefits to combining and layering different DeFi protocols to create something new. This is precisely the logic behind SnowSwap which aims to be the defacto way to swap yield-bearing assets like stablecoins, tokenized BTC, ETH2 staking tokens and other similar assets.

What is SnowSwap?

Imagine you have USDC deposited into yEarn’s yUSDC vault but you notice you could be earning a higher yield using yDAI. You could pay the gas required for all the transactions to withdraw your USDC, convert it to DAI, and then re-deposit your DAI into Yearn or you could save yourself the hassle and use SnowSwap. SnowSwap, based on Curve’s AMM model, allows users to easily enter and exit yVaults and other yield bearing tokens for only the cost of a swap fee. Increasing liquidity for similar yield-bearing tokens makes it easier for users to speculate on their yield or performance. SnowSwap’s first pools, yVault USD (yDAI, yUSDC, yUSDT, yTUSD) and yVault Curve (yUSD, ybCRV), were focused on yield-bearing stablecoin tokens. It didn’t stop at stablecoins though; the btcSNOW pool (YcrvRenWSBTC, FcrvRenWBTC) features yield-bearing tokenized versions of BTC from yEarn and Harvest Finance.

The next step in SnowSwap’s journey went even further by introducing a new pool called eth2SNOW designed to incentivize Eth2 adoption. SnowSwap’s eth2SNOW pool aims to create new markets and utility via the ability to enter, exit, and swap between popular eth2 staking services with low slippage. This pool includes vETH2, aETH by ANKR, CRETH2 by CREAM, WETH. eth2SNOW provides a few key advantages for users:

  • Enables users to conveniently enter and exit Eth2 staking services using WETH
  • Allows users to optimize for the highest APY % with low slippage swaps
  • Alleviates minimum ETH entry required for aETH
  • Liquidity providers gain exposure to Eth2 staking and earn a portion of swap fees

In general, providing liquidity to SnowSwap’s pools provides a simpler and more cost effective way to gain exposure to a basket of yield-bearing assets with the added benefit of receiving a portion of swap fees. When a user provides liquidity to a SnowSwap pool, they receive either ySNOW, ycrvSNOW, btcSNOW, eth2SNOW tokens depending on the pool. Liquidity providers can stake these tokens to earn additional yield in the form of SNOW, SnowSwap’s governance token. 80% of the total SNOW tokens will be distributed to SnowSwap liquidity providers via liquidity mining rewards designed to bootstrap liquidity as well as the SnowSwap community.

Progressing towards decentralization with The Snow DAO

The SnowSwap team envisions The Snow DAO to play an important role in the future of SnowSwap. In this vision, SNOW would grant users the ability to vote on governance proposals to modify or add to the SnowSwap protocol. For example, a future proposal could be voted in that distributes swap fees to SNOW holders. Nonetheless, the SnowSwap team also believes that poorly executed token governance can slow down the growth of a protocol. For this reason,  they want to explore the possibilities with the community and collaborate to forge a path towards decentralization together. For example, one idea floated by the SnowSwap team was having community-based executives. In the meantime, the SnowSwap team covers the cost of development via the 10% of SNOW given to the Dev Fund on a 3-year vesting schedule. Additionally, 8% of SNOW was issued to the SnowSwap Foundation, a treasury used to fund initiatives and incentivize the growth of the ecosystem such as security audits, partner programs, and grants.

Growing the SNOW community with positive-sum feedback loops

At its core, SnowSwap is exploring the possibilities of forging symbiotic relationships leveraging the positive-sum nature of DeFi. Its pools provide liquidity between tokens staked in various DeFi protocols, creating a market to swap these tokens which had previously been so fragmented and illiquid. This encourages users to engage with these tokens and in turn creates additional utility for their respective communities. Members of these communities who use SnowSwap, earning them SNOW rewards, then also become members of the SnowSwap community. You can probably see where this leads… the more projects SnowSwap provides utility to, the more the communities grow, and so on to form a positive sum feedback loop. 

In line with this positive-sum mentality, The SnowSwap Foundation will invest in initiatives and teams which add value to the SnowSwap ecosystem. This strategy referred to as ‘Offensive Forkability’ supports community experimentation and encourages innovation. For example, grants could be funded to explore protocol design experiments. The goal of this strategy is to create network value by collaborating with SnowSwap to disincentivize vampire attacks. In other words, the strategy embodies the phrase: “If you can’t beat them, join them.”

So what’s in store for SnowSwap?

SnowSwap is keeping busy between new partnerships and crossing community milestones. The self-proclaimed army of “White Walkers” continues to grow with recently launched dedicated communities for its SnowSwap users in Bangladesh, Vietnam, and India. Quantstamp reviewed SnowSwap’s contracts clearing the path to more major partnerships. Meanwhile, the eth2SNOW pool made in partnership with ANKR now has over 1000 ETH tokens. And now, it’s been announced that 1inch is integrating SnowSwap’s liquidity pools. SnowSwap pools will likely see increased trading volume from DEX aggregators and earn more trading fees for liquidity providers as a result. 

From the sound of it, there’s even more brewing behind the scenes. SnowSwap told us that they have 5 major partners that they plan to reveal in the near future. So don’t be surprised to see new potential pools, tokenized assets and/or other developments coming soon. To be the first to hear about these new partnerships, we recommend you follow SnowSwap on the platform of your choice: Discord, Telegram, or Twitter.

If you haven’t already, we recommend you go check out SnowSwap and see how its low slippage AMM design can offer you more convenience and utility.

Disclosure: This post is part of our paid promotional DeFi Pulse Drop series; We’ve partnered with SnowSwap to help educate and inform the community about their protocol. As always, we’re committed to providing the entire community with quality, objective information, and any opinions we express are our own.