Introduction

Pangolin is a decentralized exchange (DEX) which runs on Avalanche, uses the same automated market-making (AMM) model as Uniswap, features a native governance token called PNG that is fully community distributed and is capable of trading all tokens issued on Ethereum and Avalanche. In a crowded marketplace with multiple contenders, Pangolin offers three critically important benefits: fast and cheap trades, community-driven development, and a fair and open token distribution.

First, Pangolin can finalize trades quickly and cheaply. Since Pangolin is built on Avalanche, it enables users to swap assets while enjoying sub-second transaction finality and transaction fees as low as a few cents. Oftentimes, trades on Pangolin will feel as fast as trades on centralized exchanges. Second, beyond the significant performance upgrades to the technical status quo, Pangolin is community-driven. The native governance token, PNG, enables the community to drive the development of the product in full. Third, but not least, Pangolin features a 100% community-focused token distribution model, meaning that all tokens are distributed directly to the community, without any allocations to team, advisors, investors, or insiders.

Users of existing AMMs, such as Uniswap and Sushiswap, are already familiar with their mechanism of action. Therefore, the rest of this post does not discuss how Pangolin achieves its trading capabilities. Instead, we discuss the PNG token in more detail, including its distribution mechanism and governance rules.

Pangolin is a response to these two critical issues that other AMMs face: subpar performance and governance controls that benefit a few large holders. With Pangolin, users will be able to enjoy centralized-exchange-like speeds without having to compromise access to their existing portfolio of assets and without having to give control to large insiders.

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Pangolin Liquidity Market (PLM)

Pangolin Users are able to deposit their assets and earn interest based on the market demand for borrowing those assets. Deposited assets can be used as collateral to allow users to borrow other assets. Suppliers will receive PNG as a representation of their asset balance supplied to PLM which will be required to withdraw supplied assets from the protocol. The minted PNG are based on the underlying asset supplied to the protocol.

Users can withdraw assets as long as those funds are not actively being used to borrow, and withdrawal of those assets would not cause a liquidation of their loans.

If users want additional capital, they are able to borrow based on their current asset being deposited in the protocol as collateral. The deposited value and the available liquidity determine the maximum amount a user can borrow if their Health allows it. The collateral vs loan value ratio is shown as Health. There is no fixed time period to repay loans. As long as the user's Health is greater than 1, borrowing can be done for an undefined period. When collateral decreases in value or when the borrowed debt increases in value against the collateral, the user’s Health might drop below 1 which results in deposited assets being liquidated. Users can repay their loans or deposit more assets to increase their Health and prevent liquidation. Repayments are only able to be done with the same asset borrowed

Pangolin Liquid Staking (PLS)

In a Proof-of-Stake (PoS) network, users stake the native token of that network on validator nodes for a predetermined time to secure the network, and also earn profits. On Avalanche, this is done on the P-Chain. By doing so, the capital of users gets locked up and they are unable to utilize their tokens on DeFi protocols. Liquid staking is the solution for authorizing users access to their tokens. PLS tokenizes the staked AVAX tokens into sAVAX tokens on the Avalanche C-Chain and allows them to utilize these tokens within the Avalanche DeFi ecosystem while earning passive returns from the staking itself, without running a full node or locking up AVAX on a validating node. Currently, there are no fees for staking and unstaking AVAX on PLS and the source of the protocol’s earnings is 10% of the rewards generated by the validators.

The price of sAVAX increases relative to the amount of total AVAX staked (including accrued AVAX rewards) in the pool.

sAVAX Price = total AVAX staked / total sAVAX minted * AVAX price

> Avalanche C-Chain: The Avalanche Contract Chain is the default smart contract blockchain on Avalanche and enables the creation of any Ethereum-compatible smart contracts. This blockchain is for applications that require total ordering and is the main blockchain on where Decentralized Finance dApps are built on. > > Avalanche P-Chain: The Avalanche Platform Chain is the metadata blockchain on Avalanche and coordinates validators, keeping track of active subnets and enabling the creation of new subnets. This blockchain is where Avalanche Validating and Staking is done.

Governance

As Pangolin continue to develop, it will go through a progressive decentralization in which the founding team relinquishes their control by degrees and over time. Eventually, the protocol will be governed by a decentralized autonomous organization (DAO) with a governance structure both on-chain & off-chain.

The PNG token, as a native asset on Avalanche, is the governance token of Pangolin and allows its holders to participate in the voting process of Pangolin Improvement Proposals (PIPs). The holders are able to decide the key parameters of the protocol such as its economics, security, and development by either initiating or voting on proposals.

The protocol’s interest rate model, the addition of assets that meet the risk requirements of the protocol, risk parameters for over-collateralization and liquidation, changes to the Liquidity Mining Program to adjust incentives depending on market conditions, and Improvements to the protocol’s smart contracts and governance processes are some examples of key parameters that could be voted on.

Methodology

The required data for this analysis were collected from the fact_event_logs and fact_token_transfers tables of the core schema of the avalanche database. In this dashboard, the liquidity market, liquid staking, and governance of Pangolin protocol have been investigated using their corresponding token addresses.

To analyze the liquidity market on Pangolin, the transactions on the fact_event_logs table were filtered using the addresses of PNG. There are four types of actions that result in the inflow and outflow of capital into liquidity pools. First, users deposit a token into a pool and increase its liquidity. Then, they can borrow a token based on their collateral which decreases the liquidity. After that, they have to repay their loans which flows liquidity into the pool. Finally, if they withdraw their deposited tokens, they remove their assets from the pool. These four actions register a transaction with Mint, Borrow, RepayBorrow, and Redeem event_name on the blockchain, respectively. After filtering the subsequent transactions, their transferred amount was obtained by using the mintAmount, borrowAmount, repayAmount, and redeemAmount keys of the event_inputs column. The proper decimal for each token was selected by matching the transaction data with SnowTrace Avalanche C-Chain Explorer. Ultimately, the liquidity of each token was calculated using the formula below.

> Liquidity = Supply - Borrow + Repays - Redeems

For the analysis of liquid staking, the sAVAX transfer data on the fact_token_transfers table from the NULL address has been taken into account as an indication of minting of sAVAX token in exchange for the staked AVAX token. The proper decimal of the token was determined using the explorer.

Besides governance, the PNG token has been used to reward the users of the protocol. After users claim their PNG rewards in the application, a transaction initiates by the Controller Smart Contract and transfers the reward amount into the user’s wallet address. This amount was calculated using the data in the fact_token_transfers table.

It is worth mentioning that the transaction type of each action was double-checked not only by manually checking each address on the explorer, but also by the author’s direct interaction with the protocol. However, since only recent data are available on the database, the calculated liquidity does not present a proper value. While negative liquidity is not practically possible, due to the fact that many users might deposit tokens prior to the registered data on the tables, they had the credit to borrow tokens during the available period. This is also true for repayments and withdrawals. It is possible that loan repayment is connected to borrowing before the start of data entries, or tokens deposited before the entry time and redeemed during the measured period. Even limiting the users to those who deposited tokens during the measured period did not solve the issue, because again, the borrowed amount exceeded the deposited value regarding the borrowing power of those users based on their previous deposits. Nevertheless, despite being inaccurate, both results have been included in this dashboard.

Analysis

⏳ Findings

Regardless of the liquidity amount, stablecoins have had the highest activity on the protocol. Besides USDC, USDT, and DAI, the native tokens of AVAX and sAVAX have had a supply and borrow amount close to the stablecoins.

In terms of users, while the suppliers of AVAX and sAVAX have been much larger compared to the other tokens, USDT has had the highest number of borrowers among all tokens.

There has not been too much liquidation on the network during the measured period. USDT.e has been the most borrowed token that got liquidated. It was collateralized using itself as well as AVAX and WETH.e tokens.

⏳ Findings

The daily analysis of supplies, borrows, repayments, and redeems has demonstrated that the protocol has had a steady trend in terms of the number of transactions and the number of users. There were three periods with a drastic increase in the protocol’s activity on the 7th of July, late June, and 13th of June. They were the result of the collaboration of CIAN, opening of BTC.b deposits, listing of sAVAX on AAVE, and collaboration with Dragon Crypto Gaming, respectively. However, it is worth mentioning that the increase in the activity of users with these hyped events did not directly reflect the inflow and outflow of tokens on the platform. While the volume decreased from late June through mid-July, it has adopted an upward movement in line with the overall uptrend in the crypto market.

⏳ Findings

The analysis of AVAX liquid staking on Pangolin has indicated that around 3.89M AVAX has been staked in the measured period in exchange for the liquid sAVAX token by around 12.03K stakeholders. The steady daily volume and transaction activity of the protocol were majorly disrupted by the collaboration with AAVE and other DeFi protocols, which resulted in a massive jump in the number of transactions, the number of users, and the staked volume.

⏳ Findings

Users of the protocol are able to earn rewards by using the protocol and/or depositing their Pangolin DEX Liquidity Provider (PNG) tokens. These rewards are paid in PNG tokens. During the measured period, more than 4.3k users claimed their rewards of around 116.9M PNG tokens. While the daily number of claims and users has had a slight upward trend, the volume of the reward has had a cyclic trend and has remained in a similar range.

Conclusion

In conclusion, the analysis of Pangolin finance has demonstrated that despite the massive drop in the whole crypto market, the protocol has had a stable and steady inflow and outflow of capital into its ecosystem. As one of the largest liquidity protocols on Avalanche, it hosts a large number of token suppliers and borrowers. The stablecoins as well as the native tokens of AVAX and sAVAX have had the highest volume during the measured period. Besides that, the liquid sAVAX token encourages many users to not only stake their AVAX tokens and earn interests, but also use the sAVAX tokenized staked tokens on the Avalanche DeFi ecosystem. It is worth mentioning that the collaboration of Pangolin with other DeFi protocols, especially AAVE, has brought massive attention to its platform, which increased both the number of users and the inflow of tokens.

⏳ Findings

The "Daily Number of Supply, Borrow, Repay, and Redeem Transactions" and "Daily Number of Supplier, Borrowers, Repayors, and Redeemers" charts show interesting information about the state of the market during the crisis. Pay attention to May 11. What has happened? Why have investors preferred to leave Pangolin? 790 repay transactions have occurred. And in contrast, 214 borrowing transactions have occurred. One of the main reasons for leaving Pangolin on May 11 was the crisis that occurred in one of the largest blockchains and algorithmic stablecoins. The Terra crisis hit the headlines on May 11 in the crypto market and plunged the market into crisis. Especially the "DEXs" suffered a lot. This crisis made users wonder if it is the turn of which Defi platform after Terra. Many investors went bankrupt during the Terra crisis. This has caused many users to repay in Pangolin in May. After the Terra crisis, another crisis occurred in the crypto market. The announcement of the increase in the inflation rate by the Federal Reserve caused the market to fall completely and many investors were afraid to invest in the crypto market. We can clearly see the impact of these two news on the market situation in May and June in the charts. We see in the charts, From May to June 28, users do not want to participate in the pangolin pools. But on June 29, the number of "supply" transactions reached 2,110 tx. Pangolin won the trust of users due to the market crisis. Compared to other platforms, Pangolin did not change its policy and showed more willingness to support users, assuring users in several statements on its official Twitter that their capital will be protected. Note that at the same time, Celsius temporarily were closed withdrawal transactions from its platform.

The pie charts show the state of the pangolin pool tokens very well. 36.5% of "supply transactions" are related to AVAX token. The share of other tokens is 28.4% of sAVAX and 18.8% of USDC respectively. 47.3% of "borrow transactions" are related to USDC token. The share of other tokens is 21.6% of AVAX and 8.39% of USDT respectively.

27% of "repay transactions" are related to USDC token. The share of other tokens is 16.6% of AVAX and 16% of USDC.e respectively.

35.9% of "redeem transactions" are related to AVAX token. The share of other tokens is 19% of USDC and 13.5% of sAVAX respectively.