Osmosis Ecosystem Spotlight: Quasar Finance

Osmosis Ecosystem Spotlight: Quasar Finance

The Osmosis DEX suite is growing exponentially, and it can be hard to keep track of all the teams building new features. This series of Ecosystem Spotlights allows you to get to know the teams in their own words (lightly edited). To see more, check out our other posts or the Osmosis Ecosystem website.

What is Quasar Finance?

Quasar is building a DeFi vault appchain that will make it easy for passive investors to get yield from anywhere on the interchain. These vaults can be used to run decentralized hedge funds, custom ETFs, VC DAOs, treasury management, and more — almost any automated strategy you can imagine is possible. With Quasar, users will have full, native, non-custodial exposure to complex DeFi investments with just two clicks.

Why is Quasar important? Who will use it?

Quasar vaults will make it easier for everyone to earn yield in interchain DeFi. We just closed a $5.4m funding round in a bear market, suggesting that institutional investors agree.

The vault concept has already been proven on Ethereum with the popular Yearn protocol. Quasar improves on Yearn vaults by:

  1. providing access to yield across the interchain
  2. allowing users to keep custody of their funds
  3. leveraging the sovereignty we have over our appchain to offer users control over vault creation and parameters, including fees.

Retail users can use Quasar to access yield opportunities without having to understand advanced finance and blockchain concepts. Experts can gain upside on their capital without needing to actively manage their portfolio and stay up to date on everything in the ecosystem. Ultimately, we think everyone will end up using interchain vaults as their means of interfacing with DeFi — individual users as well as investment institutions. Even established firms like Fidelity will be able to use Quasar as the backend for their crypto strategies.

How does it work?

Quasar users, as liquidity providers, will deposit assets into the vault of their choosing. Each vault will be powered by a different yield aggregation strategy, curated by the vault’s creator or governors. Decision-making within the vault can be collective as well — administrators alongside liquidity providers — by using a vault-specific token for governance. The same token is used to track pro-rata shares of the vault’s returns. There will be no deposit or withdrawal fees, but each vault can have custom asset management fees set by the strategy creator.

Vaults will be able to handle multiple strategies at once and switch between them. Strategies will operate with varying time horizons, rebalancing thresholds, and other automatic reactions to different market conditions. All of this will be manageable through the Quasar UI.

Initially, the only strategy creator will be the Quasar team — with input from the community. However, permissionless vault creation is the ultimate goal so that anyone can start vaults, develop strategies, and solicit deposits from interested users while charging a performance fee if desired. The code for this will be developed after the initial round of protocol-created strategies is up and running.

Creators and strategists will not have to pay the Quasar protocol directly beyond a modest vault creation fee in $QSR — the chain’s gas and value accrual token. Vaults can, however, enter into a profit-sharing arrangement with the protocol by sharing a portion of their strategy profits with the Quasar treasury to access certain benefits.

What safety concerns exist, & what are your mitigation strategies?

Smart contract exploits are our number one concern. To that end, we are being audited by Halborn, arguably the best auditors in the industry. Not only are they auditing our smart contracts, they’re also engaging in Layer 1 and Web App penetration testing, providing real-time updates on any new threats, and generating reports that will be made public. So far, they’ve reported that all of their medium and above concerns in our QBank and QOracle modules have been solved. We will continue to engage in more audits periodically.

To prevent spamming and potentially fraudulent vaults, we’re requiring vault creators to delegate a minimum sum to our validators. This aligns the incentives of creators with safety and sustainability and is a great example of how we’re taking advantage of being an appchain. CosmWasm itself is also part of our mitigation strategy — its actor model design prevents reentrancy attacks, a known issue in some Ethereum smart contracts. Further, we expect to use the IBC rate limiting developed by the Osmosis team in order to limit the scope of any potential exploits.

II. Team

What are your origin stories? What got you into crypto and DeFi?

I (Valeyo, Co-Founder) have been in crypto since 2016, and almost everyone on our team has been exploring DeFi for years. What excites us most is permissionless value exchange, generation, and transfer on a global scale.

Each member of our nine-person team is from a different country, and almost every one of us has been financially disadvantaged due to circumstances beyond our control: corrupt policy-makers in Bulgaria, Turkish and Argentine hyperinflation, and the sanctions on Russia over its conduct in Ukraine. We therefore care deeply about spreading financial freedom, which for Quasar, means allowing mass access to sophisticated DeFi yield strategies.

Similarly, my parents grew up in communist countries, so they had to learn about free market economies, competition, private savings, financial planning, and risk management later in life. Having seen how hard it was for them, I empathize with people who come from backgrounds or countries where lower financial literacy is the norm. We’re building Quasar for users like them.

III. Building on Osmosis

What attracted you to Osmosis? Why build here?

We are building our own appchain in order to have total sovereignty over our feature development, our Cosmos modules, and our chain security. Building a one-stop shop for expert-driven investing in DeFi requires a chain specifically designed for our use case. Our first products will launch on Osmosis because it is the clear home of the majority of IBC-enabled value generation: the center of the interchain.

How do you see yourself developing within the Osmosis ecosystem?

New and varied strategies will continue to be introduced on Quasar: conservative stable farms, degen yield-chasers, arbitrage plays, and more complex, actively-managed products such as liquidity anticipation (JIT). This last example will fit well with the concentrated liquidity order books soon launching on Osmosis.

You are planning to launch as an appchain?

Yes! Our internal testnet is already live and will be slowly opened up for validators and users on a monthly basis. Our public testnet, or Questnet, will launch on February 10th.

This Questnet will showcase a basic version of a vault and the auto-investment feature. Of course, everyone is invited, and we hope that users will also report any bugs they find!

How will Quasar integrate with Osmosis?

Our strategy vaults will follow the increasingly familiar outpost model being pioneered by Mars Protocol and Osmosis. Participating chains will host Quasar’s outpost contracts (CosmWasm), and these will communicate with each other and the Quasar chain over IBC using interchain accounts, authz, cross-chain swaps, and more.

We expect to work very closely with Osmosis in integrating vaults for passive users. We want to use automation in ways that benefit both the Osmosis ecosystem and individual liquidity providers. Use cases include re-staking or re-delegation of stake rewards, automated staking into multiple LPs, auto-compounding of LP rewards, and automated LP rebalancing. Our native vault builders will also be incentivized to look throughout the interchain ecosystem for yield opportunities, plugging users into apps across the interchain.

IV. Token / Governance

Which features of your app require governance, if any? And how do you expect that governance to be conducted?

We will have two governance layers — the chain and the vaults. On-chain governance will be handled by stakers of $QSR. Strategy vaults will be independently governed by their creators and participating liquidity providers by using vault-specific tokens. Issues of security and chain-level decision-making will thereby be separated from the strategy decisions of individual vaults, which are independent, sovereign investments.

Will you have a token?

We are happy to announce that the $QSR token will be conditionally airdropped upon mainnet launch later this year, details TBA. Likewise, though the $QSR tokenomics are fully designed, we are keeping the full details under wraps until closer to mainnet. We will share additional info about tokenomics in the documentation available on our new website. For now, we can say that $QSR is optimized for chain security and governance: it will not be required to invest in Quasar vaults.

V. Roadmap & Additional Features

After mainnet, what are your plans for the next steps and additional features?

In the longer term, as part of our grand vision to make DeFi strategies “so easy that your grandmother could use it,” we will be integrating a fiat on-ramp so that users can access passive, sustainable yield generation strategies directly from their bank accounts and credit cards.

In the shorter term, we will be focused on spinning up more vaults, more strategies, and more IBC connections. To expedite this process, we are aiming to onboard tradfi quants, researchers, and strategists and group them together with CosmWasm developers. We expect these teams to run strategies in a profit-sharing agreement with the on-chain treasury and the vault depositors.

We are also excited about a future Polkadot-IBC connection, which will allow permissionless vault creation from Keplr Wallet (for example) on Polkadot IBC-enabled chains.

Where do you see Osmosis and the interchain ecosystem going in the near to mid future?

When the next bull market comes, the Cosmos hype train will be right behind it. Right now, the interchain has to compete against monolithic would-be world computers, but when the appchain model catches on, it’s game over. IBC will be the interoperability layer connecting blockchains, and Osmosis will be the liquidity layer and connective tissue tying it all together.

For more details, you can keep up with the project on our Medium, follow us on Twitter, or check out our newly redesigned website!