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Thala’s THL token live in Pontem Wallet

Tutorials

Table of Contents

Just days after launch, Thala Labs’s DeFi platform on Aptos has reached almost $10M in TVL. Wejust added THL to the Pontem Wallet  verified tokens list, and the first Liquidswap trading pool for THL has been launched. This tutorial will cover using Thala’s DeFi platform and MOD stablecoin with Pontem Wallet.

TL;DR

  • Thala is a DeFi protocol on Aptos with its own native stablecoin called Move Dollar (MOD), swaps, launch pools, and farming rewards.
  • Pontem Wallet has THL on its verified token list and Liquidswap has a THL-APT pool that you can join as a liquidity provider.
  • MOD is pegged to USD and overcollateralized with APT, USDT, USDC, WETH, etc.
  • THL is Thala’s governance token. Its maximum supply is 100,000,000 THL, of which 10% were released at TGE.
  • ThalaSwap features weighted pools with different weights (50/50 and others), stable pools,  and liquidity bootstrapping pools (LBPs).
  • An LBP is an alternative to an IDO for launching a new token. THL itself was released through an LBP, raising almost $3M.

What is Thala?

Thala is a DeFi protocol on Aptos that features a native stablecoin, MOD, an AMM/DEX, and launchpad pools called ThalaLaunch. The project calls itself a “DeFi HyperApp,” because it contains so many things rolled into one.

Thala went live on Aptos mainnet on April 6. Just a few days later, the protocol had $10 million in TVL and a daily swap volume of almost $1 million.

The dApp supports Pontem Wallet, as well as Petra and Martian. On April 11, Thala launched a THL-APT pool on Liquidswap with rewards for liquidity providers.

Here’s what you can on Thala’s DeFI platform on Aptos:

  • Swap APT, THL, USDT, USDC, MOD, and CAKE
  • Deposit liquidity in swapping pools and earn rewards in THL
  • Stake THL-APT LP tokens on PancakeSwap to earn farming rewards in CAKE
  • Mint MOD stablecoins by depositing collateral in APT, USDC, USDT, etc
  • Lock MOD in the stability pool to get more rewards

Thala Protocol in detail

Move Dollar (MOD)

Move Dollar (MOD) is a USD-pegged native stablecoin on Aptos. This makes it different from other popular stables that have been bridged to Aptos using bridges like LayerZero, Wormhole, and Celer.

MOD is overcollateralized by a basket of assets, including APT, stablecoins, and liquid staking tokens. In the future, DEX LP tokens and various risk-weighted assets may be added. As some of these are yield-bearing assets, the yields will grow the collateral reserves over time.

Users can deposit collateral in the Thala dApp to mint MOD. This is called opening a vault. The process is similar to how DAI is minted by MakerDAO, a model that has proven itself extremely reliable over the years.

Vaults have different collateralization ratios, depending on the collateral token. For example, if the ratio is 120% and you want to mint 1,000 MOD, you’ll need to deposit $1,200 of  of collateral. If you’ve used any other DeFi lending protocol, you’ll be familiar with this system.

You can  also redeem MOD to get the collateral back, which costs a small redemption fee. The fee discourages excessive redemptions, helping to keep collateral in the vaults.

Move Dollar is a collateral-backed stablecoin. Its value is secured by the collateral reserves, which makes it much less vulnerable to market volatility. (See our detailed article on algorithmic vs. collateral-backed stablecoins for more.)

If a user deposits volatile assets (not stablecoins) as collateral, there is a possibility that the value of the vault will drop below the minimum collateralization ratio (MCR). In this case, the user will need to either add more collateral or face liquidation, just like any other DeFi lending protocol.

How will Thala keep MOD stable?

Thala has several tricks up its sleeve to maintain Move Dollar’s peg and keep the system healthy.

Selective MOD redemptions

Redemptions are not available  for all types of collateral at all times. You may be able to redeem only APT or only USDT on a given day, for example. In the near future, you’ll also be able to redeem MOD for the available assets even if you don’t have an open vault. There is a 0.50% redemption fee.

Thala’s selective redemption system helps to regulate collateral reserves and keep them healthy. If a single asset comes to dominate the reserves or a risky asset becomes over-represented, Thala can make it the only redeemable type of collateral so that users take it out of the reserves. Note that the protocol can’t forcibly close your vault.

If you’ve read our article on stablecoins, you’ll remember that during the USDC depeg, MakerDAO introduced an emergency fee on converting DAI back into USDC. This was done to reduce the protocol’s exposure to an unstable reserve asset. Thala’s clever algorithm achieves the same goalon a day-to-day basis.

Supply caps

The protocol can limit the amount of MOD that can be minted using a given asset as collateral. Once that limit is reached, nobody will be able to mint more MOD using that asset until some of it is redeemed.

There is currently a general mint cap of just over 14 million MOD for all vaults and all collateral types.

Interest on loans

Technically, you borrow MOD when you mint it.  Eventually, Thala may introduce interest on these “loans”. They will be different for different vaults, encouraging users to deposit certain types of collateral.

Thala Stability Pool (TSP)

When a user’s vault goes into liquidation, the MOD associated with that vault is burned and the remaining collateral goes into a special Stability pool. You can stake MOD in this pool to earn around 47% APR (as of April 2023).

Oracles

Thala uses two multichain oracles to fetch prices from CEXs and DEXs: Pyth Network and Switchboard. This way, there is a backup if one stops working or is compromised.

ThalaSwap & ThalaLaunch

ThalaSwap is a DEX with several types of pools.

Stable pools are designed for correlated assets like MOD and USDT, APT and stAPT liquid staking tokens, etc. These pools use a different liquidity curve formula from the traditional x*y=k in order to minimize slippage and price impact.

As you may know, Liquidswap also has stable pools – we discussed them in our recent blog post on liquidity pool mechanics. While  Liquidswap adopted the formula pioneered by Solidly, Thala uses the one introduced by Curve Finance. We’ll skip the math for now – you can get into the details here.

Liquidswap and Thala’s stable liquidity curve formulas
The swap fee is 0.10% (vs. 0.04% on Liquidswap).

Weighted pools are for different tokens with different weights. In a regular DEX pool, there are just two tokens, and a liquidity provider has to deposit equivalent amounts of each. But in a weighted pool, you can have two, three, or more tokens, with whatever ratio the pool creator finds reasonable, be it 50/50, 70/30, etc.

The point is to provide more available swap pairs without having to create new pools for each pairing. Weighted pools also reduce impermanent loss.

The swap fee for weighted pools is 0.30%.

ThalaLaunch Liquidity bootstrapping pools (LBP)  are weighted pools where asset weights change over time. LBPs   allow a project to accumulate certain assets in its treasury – and an interesting alternative to an IDO. Balancer was the first DeFi platform to offer LBPs.

For example, the pool creator (the only one who can deposit liquidity) can start with 80% of their own token and 20% of APT, which will make it attractive to sell APT into the pool. Gradually the weights will shift according to a schedule, until the pool ends on a specified date.

ThalaLaunch is  more of a platform for launching new tokens on Aptos than a swap pool. ThalaDAO receives 2.5% of the proceeds from the token sale and end users are charged 1% for swapping.

What is THL token?

THL is the governance token of the Thala protocol. The total supply is 100 million THL, of which 10 million (10%) were released at TGE. 35% will go to the community as incentives , and the rest will go to early investors, advisors, contributors, partners, and the treasury. It will take 6 years to release all the tokens.

THL distribution. Credit: Thala Protocol

THL holders will be able to vote on Thala Improvement Proposals (TIPs), such as swapping and MOD minting fees, how the treasury is used, distribution of the protocol fees, upgrades, and so on. Eventually, Thala should become a full-scale DAO.

The Liquidity Bootstrapping Pool (LBP) for THL opened on April 1 at the starting price of $2.42. The starting weight of THL was 98%, and the final weights were 30% THL and 70% USDC.

The pool closed on April 6 at $0.63, having accrued almost 3 million LayerZero USDC.

How to use Thala with Pontem Wallet

Add THL to the token list

THL is now on the verified token list in Pontem Wallet on all platforms (Chrome, Firefox, iOS, and Android). Click Import Coin on the main screen, and locate THL. Click it, confirm registration,  and pay a small gas fee. (Make sure that your wallet is updated to the latest version.)

If you want to send THL to someone else’s address, that user will also have to register THL first. This is one of Aptos’s security features, and it applies to all tokens.

You can also go straight to Liquidswap or ThalaSwap to buy THL, in which case the token will be registered automatically as part of the swap transaction.

How to buy THL and provide liquidity

1) On Liquidswap

On April 12, the first Thala swapping pool launched on Liquidswap. This is the most convenient way to buy THL for APT. We recommend that you turn on the front-running protection when swapping (available only for Pontem Wallet).

You can  become a liquidity provider at this point to earn passive income from swapping fees. Head over to the Liquidswap Pools page, locate THL-APT, and click on “+”. Enter the amounts of THL and APT you want to deposit in the pool, or click on Balance to enter the maximum amount.

Note: as of April 18, the up-to-date APR for the THL-APT pool wasn’t supplied by Pontem’s API partners yet. This should be resolved very soon. Don’t worry: the pool is working properly and liquidity provider rewards are accumulating.

Click Add Liquidity and confirm. Your wallet should now have THL-APT LPs on the balance, and your liquidity position will be displayed on the Pools page.

To collect the accumulated fee rewards, you’ll need to remove all or some of the liquidity. You can always add more, too.

2) On (Add Liq screenshot)ThalaSwap

As of April 12, ThalaSwap had 8 liquidity pools with more than $1000 in reserves:

  • MOD - USDC (LayerZero)
  • MOD - THL
  • MOD - APT
  • USDC Wormhole - USDC LayerZero
  • USDC LayerZero - USDT LayerZero
  • USDC LayerZero - WETH LayerZero
  • THL - APT
  • APT - tAPT (Tortuga’s liquid staking token)

Just like on Liquidswap, you should always swap into pools with good liquidity. Otherwise. you can get a very unfavorable price and high slippage. Always check the reserves,the expected price,and output before confirming a swap!

Let’s say we want to buy THL with LayerZero USDT. Thala doesn’t provide any liquidity for this pairing yet, so we’ll first have to swap USDT for APT on Liquidswap:

The next step is to swap some of the APT for THL on Thala. Not all, because we’ll want to deposit APT and THL into a liquidity pool later.

The swapping process is extremely similar to Liquidswap, although Thala does not offer front-running protection. On the other hand, Thala features a nice history of recent swaps.

Bridge

If you need LayerZero USDC on Aptos, you can use the LayerZero bridging widget on Thala or Liquidswap. The bridge is exactly the same, only the widget design is a bit different. Refer to Pontem’s detailed bridging tutorial for details.

Important! Don’t bridge until you’ve read the tutorial, because some things (like bridging fees) are not self-evident. If you decide to send funds back from Aptos to Ethereum, BNB Chain, etc., prepare to wait up to 3 days before you can claim them.

How to deposit liquidity on Thala

Just like Liquidswap, ThalaSwap rewards liquidity providers with a share of the swapping fees. In Thala’s case, the protocol retains 20% of the collected fees and liquidity providers get 80%.

(In the future, the DAO will be able to change the swap fees and how they are distributed. As long as you hold THL, you’re a member of the DAO, too, so you’ll be able to submit and vote on  proposals concerning fees.)

On the Pools page, you can sort the pools by current APR. It’s better to choose a pool with decent liquidity: in an illiquid pool, you can own a large share, but few people will swap into it, so you won’t earn much in fees. Also, remember that APRs tend to go down quickly as users add more liquidity.

Don’t be surprised to see two THL-APT pools: on Thala, users can create pools for the same currency pair with different weights.  

Let’s deposit some funds into the main THL-APT pool with $73.7k in liquidity. It’s weighted 50/50, so we’ll need equivalent amounts of each – for example, 1.5 APT and equivalent  THL.

Click on the pool in the list and then Deposit. Enter the amount of tokens to be added, click Add Liquidity, and confirm in Pontem Wallet. You’ll receive Thala LP tokens.

Finally, stake the LPs to start earning yield farming rewards.The LPs will disappear from the wallet balance, and your staked position on the pool overview page will be updated. Rewards in THL will start to accrue immediately.

You can always claim the rewards separately, or withdraw some or all of the liquidity.

How to mint MOD

As of April 2023, the minimum amount of MOD you can mint is 500. When opening a vault, you’ll be charged a 0.25% minting fee – keep this in mind when you calculate how many collateral tokens you’ll need.

At the start, the following types of collateral are accepted: APT, LayerZero USDT, USDC, and WETH, Wormhole USDC and WETH, tAPT (Tortuga liquid staking tokens), and CAKE.

To begin, go to the Vaults page and click on Create Vault. In this example, we’ll open an APT vault. As the collateralization ration for APT-MOD is 150%, you’ll have to deposit at least $750 worth of APT, plus some more to cover the 0.25% minting fee.

Once you’ve entered the collateral amount, the system will calculate how many MOD you can borrow. It’s generally safer to borrow less than the maximum amount, especially if using a volatile collateral asset like APT. If the value of the collateral declines suddenly, you’ll be better protected against liquidation.

We’ll enter exactly 500 MOD, click Create Vault, and confirm in the wallet. The new vault will be displayed together with the total collateral and the current collateralization ratio.

Click Manage to view the liquidation price for the collateral. As you can see, it’s $10.59, which is less than 10% away. A short-term downward wick (which are common in crypto) could make you subject to liquidation, so you should monitor the APT price very carefully or consider adding collateral.

To close the vault and get your collateral back, go to Manage and check the number under “MOD minted”. Remember that you paid a 0.25% minting fee (in this case 1.25 MOD), so the Pontem Wallet balance will read just 500 MOD. If you try to close the vault at this point, you’ll get an error:

Therefore, you’ll need to buy at least 1.25 MOD in the Swap section to repay the debt.

Now you can go back to the Manage Vault page, click on Close Vault, and confirm. That’s it - you’ve got the collateral back!

Deposit MOD in the stability pool

You can deposit some of your MOD in the stability pool to earn over 45% APR in THL.

Go to the Stability Pool page and click Deposit. Enter the amount of MOD to be locked, then Deposit again, and confirm in Pontem Wallet.

Rewards in THL will begin to accrue immediately. You can claim them whenever you like -- just make sure that the claimable amount is bigger than the APT gas fee.

Note that if you withdraw the MOD within 24 hours after depositing, you’ll have to pay a fee. It starts at 2% and falls to  0% 24 hours later.

Thala is a very interesting DeFi project on Aptos, and we are pleased to have it whitelisted on Pontem Wallet and Liquidswap. Do check out the THL-APT swap pool - and stay tuned for more Liquidswap news on Twitter and Telegram, because we have some really big updates on the way!

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