Zethyr Finance - Crypto Academy / S4W8 - Homework Post for @fredquantum.

Zethyr is a DeFi application in the Tron ecosystem. It has two branches of decentralized finance:
(a) Zethyr Exchange
(b) Zethyr Lending Protocol

(a) Zethyr Exchange uses a DEX aggregator to match the best economical price for the end-user across centralized and decentralized exchanges.

It is also connected with major exchanges like Binance to aggregate the liquidity. The exchange fee is charged 0.1% flat for both buyer and seller.

(b) Zethyr Lending Protocol: It has a total of four markets: USDT, TRX, WIN, BTT. It has both supplies and borrows pools.

The lenders can supply their assets into the supply pool and earn supply APY. The Borrowers can take a loan from the borrowing pool by collateralizing their assets.

Supplier- Deposit the listed token into the Supply pool; earn interest in return for providing liquidity.

Borrower- Deposit a token, collateralize it and take another asset as a loan, and pay interest.

Zethyr finance is listed in dapp.com, ranked 8th based on last "24-hour volume".

Features of Zethyr Finance

(a) zToken
(b) Collateralisation Ratio, Liquidation Ratio, Credit Line
(c) Liquidation
(d) Utilization of idle tokens and liquidity for flash loans
(e) Cross-chain stablecoin swap

(a) zToken
As Zethyr is a DeFi application, it interacts with the user or wallet with a smart contract. Externally it is as simple as supplying a token, locking it, and taking another asset as a loan. Internally, it is not as simple as putting an asset and taking another asset as a loan. It works differently but is similar to JustLend.

Supplying an asset is minting an asset. Example in Zethyr:

• Supply TRX to mint zTRX
• Supply BTT to mint zBTT
• Supply USDT to mint zUSDT
• Supply WIN to mint zWIN

In short, zToken can be zTRX, zBTT, zUSDT or zWIN.

zTokens will remain unlocked for the Supplier; the user can trade the zToken, too, a TRC20 token. If the Supplier wants to become a borrower, then zToken has to be locked to borrow from the Borrow Pool.

All the interests accrued in the Supply pool are given in zTokens. Daily interest is updated every day at 0:00 Hrs, Eastern Time. If the borrowers do not pay the interest daily, it will be compounded.

zTokens are minted upon supply and burned when the borrower/supplier de-supply.

The protocol fee is 5%, which is charged at the time of interest payment or withdrawal. Some borrowers do not pay daily interests; for them, a protocol fee is charged at the time of withdrawal.

(b) Collateralisation Ratio

The collateralization ratio is different for a different market, and it is not a fixed ratio.

This ratio is defined as the worth of Collateral in USDT to the maximum loan value in USDT.

𝐶𝑜𝑙𝑙𝑎𝑡𝑒𝑟𝑎𝑙𝑖𝑠𝑎𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑖𝑜 = 𝐶𝑜𝑙𝑙𝑎𝑡𝑒𝑟𝑎𝑙 𝑣𝑎𝑙𝑢𝑒 𝑖𝑛 𝑈𝑆𝐷𝑇/ (𝐿𝑜𝑎𝑛 + 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑣𝑎𝑙𝑢𝑒 𝑖𝑛 𝑈𝑆𝐷)

Liquidation Ratio is the minimum collateral worth needed to protect the principal; it will change every day with interest accrued.

𝑐𝑟𝑒𝑑𝑖𝑡 𝑙𝑖𝑛𝑒=𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑒𝑑 𝑑𝑖𝑔𝑖𝑡𝑎𝑙 𝑡𝑜𝑘𝑒/𝐿𝑖𝑞𝑢𝑖𝑑𝑎𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑖𝑜

The minimum liquidation ratio in Zethyr Finance is 200%.

Zethyr also has the feature to lock multiple assets to take a loan.

(c) Liquidation

If the borrowing exceeds the credit line, then liquidation triggers. Any leftover is credited to the borrower's zethyr account.

Liquidation can be either due to accumulated interests or compounded interests or may be due to price fluctuation.

(d) Utilization of idle tokens and liquidity for flash loans

This is one of the best features of Zethyr Finance.

Not all the users are borrowers; some of them are suppliers only. There may always be a few idle tokens. Zethyr stake the idle token(TRX) in Super Representative to optimize their use to earn a certain APR.

Zethyr also leaves 5% of the idle tokens for flash loans and withdrawals.

(e) Cross-chain stablecoin swap

Interacting with a different blockchain and keeping a bridge is always an advantage, enhancing the exchange liquidity. Zethyr has added a feature of Stablecoin swap from TRC20 USDT to ERC20 USDT.

This feature allows users to access from Tron DeFi to Etherum DeFi. Etherum is the largest network in DeFi and Tron is an emerging network in DeFi with the low-cost transaction and high transaction throughput.

Users who want to switch to Etehrum DeFi can utilize Zethyr Swap; it has a 10 USDT exchange fee feature to make users swap their TRC20 USDT to ERC20 USDT.

Considering ETH at 4300 USDT, the average ETH gas fee is much higher, so the 10 USDT swap fee is reasonable.

How it works

^{Prepared by me in Canva}

The Zethyr based Smart contract in Tron interacts with the Zethyr based smart contract in Etherum. Zethry utilizes the relays to match the value and then exchange the value between Tron USDT and Etherum USDT. The liquidity network of the Tron blockchain connects and interacts with the liquidity network of Ethereum blockchain by a smart contract, and the transfer of value happens.

What's your understanding about DEX Aggregator?

The exchange has gone from centralized to decentralized, and the DEX boom happened with an automated market maker; no order book is needed to make an exchange in DEX.

All the DEXs are web-3 dapp. They all are powered up with the smart contract. All the DEXs do not offer the same rate of exchange between two particular assets simultaneously. They may vary. A user who wants to make an exchange may manually check all the DEXs and then find out which one offers the best competitive rate.

Manually what he has to do:

• Check the lists of dApps
• Check the prices and exchange rate of a particular pair
• Finally, pick the best one with a competitive rate.

The manual job is not scalable and not feasible in the web-3 world. The highly dynamic exchange prices and smart contract-operated DEXs can be dealt with by a DEX Aggregator.

The DEX Aggregator will do the same thing as you manually do and find the best rate for you in the quickest possible time.

^{Prepared by me in Canva}

DEX Aggregator finds the liquidity from a list of DEXs, matches the best rate at a time, reduces slippage, offers optimal swap rate, etc.

There are three exchanges Uswap, Justswap, Unified. DEX Aggregator algorithm matches the best rate for the End-user for TRX-USDT swap.

DEX Aggregator is nothing but an algorithm. The various DEXs, if integrated into this algorithm, can attract volume because any user will be attracted to the best swap rate from the list of DEXs.

DEX establishes the path to the best swap rate for the end-user.

Go to https://zethyr.finance/#/markets. Scroll down to All Markets.

There are four different markets in Zethyr Finance: TRX, USDT, WIN, BTT.

I have tabulated the APY values.

Pool	Supply APY	Borrow APY
TRX	3.92%	10.80%
USDT	21.49%	8%
WIN	5.67%	23%
BTT	4.80%	20%

If I want to get maximum profit or return, I will choose an asset giving the highest APY. If I want to take a loan, I will look for the lowest borrowing cost.

USDT is the best asset to earn 21.49% APY, the highest of the four assets, and USDT is also the lowest in Borrow APY. So USDT is the best token to both supply and borrows pool.

In Zethyr Finance, you need to lock your asset to borrow an asset. A borrower has first to supply the token, lock the token, and then borrow another token.

If the Supply APY in the supply pool is higher than the borrowed asset in the Borrow pool, net APY will be positive.

Example

Let's say dharamps locked 100 USDT in Zethyr Finance, and he wants to take a loan in TRX (40 USDT worth). USDT supply APY is 21.49%, and TRX Borrow APY is 10.8%.

Net APY for Dharam= 21.49%-10.8%(40/100)= 21.49%- 4.32%= +17.17%

Despite taking a loan of 40 USD worth TRX, Dharam is earning a net APY of +17.17%.

Interests accrued daily at 0:00 Hrs Eastern time. If the Borrower does not pay daily, it is compounded.

First, Search the tronscan on the Google search bar or directly visit the Link. It will take you to the main website. Simply click on MY PORTFOLIO at the right top of the page.

Now a popup of the Tronlink wallet extension will appear, asking you to connect the wallet to complete the connection. Hit the Connect button.

Your wallet is now finally connected to the Zethyr web portal.

^{Source: https://zethyr.finance/}

^{Source: https://zethyr.finance/}

^{Source: https://zethyr.finance/}

zTokens are generally minted in Zethyr Finance when an asset is supplied. It is always pegged 1:1 with the corresponding pool token.

Supplying an asset is minting an asset. Example in Zethyr:

• Supply TRX to mint zTRX
• Supply BTT to mint zBTT
• Supply USDT to mint zUSDT
• Supply WIN to mint zWIN

When the user de-supply it, the zToken is burned.

The interests accrued are also given in zToken, so daily interests are calculated, and the equivalent number of zTokens are minted.

This type of token is needed for the internal operation of the lending protocol. This is a TRC20 token, similar to the pool tokens.

I have also explored JustLend dapp in a task of Prof Sapwood, and a similar token called jTokens was issued for supplying the listed assets of JustLend. But that was not pegged to 1:1; the calculation was different. So it is not precisely similar to JustLend protocol's jTokens.

Another project, previously known as ETHLend and now AAVE, also uses a similar protocol token, and it is also burned upon de-supply. The token name is aToken that is a protocol token issues against the supply of the listed assets. zToken and aToken are similar protocol tokens as they are pegged 1:1 with corresponding assets of the pool.

Purpose of zToken

zToken is a protocol token that is needed for handling and managing the interests in Zethyr Finance. Zethyr can not mint the underlying asset; they can not mint TRX, USDT, or any other token because their contracts differ. And to pay interest, they need to add the asset regularly if they want to pay in the original asset.

That is why they need another token called zToken, which is the contract of Zethyr, and they can mint an equivalent value to pay interest and burn the equivalent amount upon de-supply.

Before starting real supply transactions, we have to connect our tronlink wallet to zethyr finance. Then visit the supply market where we can see an interface on which it shows the amount of TRX we hold in our wallet. For supply transactions, I will be choosing TRX. So click on the TRX option given on the left side in market supply.

^{Source: https://zethyr.finance/#/my-portfolio}

---

Now to proceed first, we have to enable the TRX market for TRX supply. It will ask you to enable TRX supply; click on enable option given on the popup screen as you can see on the same screen that my APY is 3.92%.

^{Source: https://zethyr.finance/#/my-portfolio}

---

After enabling the TRX market, a new notification will pop up, which warns us about insufficient energy. It says that we don't have enough energy to carry out the transaction, so we have to burn around 20 TRX. Click on the ok button and move further.

^{Source: https://zethyr.finance/#/my-portfolio}

---

While signing the transaction, we can see that the fee estimated is around 30.55 TRX, with resources estimated at 313 bandwidth + 329 energy. Hence, we can see actual transaction fee is more than the message appears. Finally, we sign the transaction, and our TRX gets enabled.

^{Source: https://zethyr.finance/#/my-portfolio}

---

As our TRX supply is now enabled, we are now again on the main interface of the supply market. Click on TRX, and it will now directly ask you to supply the amount of TRX. For this task, I am supplying 10 TRX coins, and my current APY is 3.92%. Click on the supply option given below on the same screen.

^{Source: https://zethyr.finance/#/my-portfolio}

^{Source: https://zethyr.finance/#/my-portfolio}

---

Once again, the same warning appears that says we don't have enough energy for the transaction; hence we have to burn 20 TRX. Click ok and move further.

^{Source: https://zethyr.finance/#/my-portfolio}

---

Now again, sign the transaction. This time we are signing transactions to complete the power supply. The previous signature was to enable the TRX market. As you can see here, the estimated fee is around 31.9 TRX, and the estimated bandwidth is 350 while only one energy is consumed. Click on sign and move further.

^{Source: https://zethyr.finance/#/my-portfolio}

---

Now our supply of TRX coins is completed, and we can see the supply balance change to $0.96 from $0. Now my net APY is 3.92%. In the supply market, you can see the supplied option gets updated by $0.96, which is 10 TRX.

^{Source: https://zethyr.finance/#/my-portfolio}

---

Now let us verify this transaction on tronscan. Copy your transaction address and go to tronscan. You can see much different information, like my total bandwidth used or consumed is 350 while my consumed energy is 114,245. The value of the transaction is 10 TRX. You can see that my consumed energy comes only from consuming contract owners' energy and not from burning TRX, as burning Trx is already completed for enabling the TRX supply.

^{Source: https://tronscan.org}

Hash: https://tronscan.org/#/transaction/93bcc4a34d325af3841f0e8b865b129fd91d56be941bef0033f5b1924dc5c7e6

Collateralize

Now, we have to collateralize our TRX coin; for that, click on the Collateral option given on the right side of your TRX asset in the supply market.

Once again, it will ask you to enable collateral which shows a certain amount of borrow limit which we can enable. Click on use TRX to collateral and move further.

^{Source: https://zethyr.finance/#/my-portfolio}

^{Source: https://zethyr.finance/#/my-portfolio}

---

Once again, the same energy alert pops up on the screen, which shows that we don't have enough energy and need to burn 20 TRX coins. Click ok and move further.

Now to enable collateral to sign the transaction, as you can see, it will cost transaction fees of 13.96 TRX, which is less than 20 TRX. Extra energy cost is two and bandwidth cost 313.

^{Source: https://zethyr.finance/#/my-portfolio}

---

Finally, our collateral is enabled, and also if we check, our borrow limit is also updated.

^{Source: https://zethyr.finance/#/my-portfolio}

Borrow

Now, let us borrow in Zethyr finance. For this phase, I will be choosing USDT.

Click on USDT ass having APY 8.00% available in Borrow market on the right side of the supply market.

Now, as we did in TRX, the same we have to do here. First, enable the USDT market by clicking enable option available just after we click USDT. Here you can see borrow APY is 8.00%.

^{Source: https://zethyr.finance/#/my-portfolio}

^{Source: https://zethyr.finance/#/my-portfolio}

---

Again we receive the same energy alert popup on the screen, which shows that we don't have enough energy and need to burn 20 TRX coins. Click ok and move further.

Now to enable USDT to borrow market, we have to sign transactions. As you can see, our transaction fees are estimated at 24.6, and a total of 2 energy and 313 bandwidth is consumed. Click on sign and move further.

^{Source: https://zethyr.finance/#/my-portfolio}

^{Source: https://zethyr.finance/#/my-portfolio}

---

Now again, click on USDT after enabling the market. Enter the amount of USDT you want to borrow. When you enter a certain amount it will show you the minimum and maximum amount of USDT you Borrow. After checking details click on borrow and move further.

^{Source: https://zethyr.finance/#/my-portfolio}

---

Now this time we have to sign the transaction to complete our borrow procedure. So click on the sign option and move further, this time you can see that the total estimated fees are 46.9 TRX and four energy are consumed with zero bandwidth.

^{Source: https://zethyr.finance/#/my-portfolio}

---

As you can see we borrow $1 and our borrow limit is $1.20. so, our 87.70% of borrow limit is already consumed.

^{Source: https://zethyr.finance/#/my-portfolio}

---

Let us verify our transaction on tronscan. Copy the Transaction ID and paste it on tronscan, once you do it you can find the total amount and token you borrow free the total bandwidth and energy consumed. We burn 0.345 TRX and receive 345 bandwidth and burn 46.5 TRX and receive 166297 energy. So if we have insufficient energy then our t-rex will get burned to increase bandwidth and energy.

^{Source: https://tronscan.org}

Hash:
https://tronscan.org/#/transaction/297113fb917af9d44fd14c527dcbb2a31b02ef188c54fa15e1d045d2701b1a28

Repay

Now to repay the borrowed amount we have to follow the same steps. We have already enabled the market so simply click on USDT again.

As you can see on top there are two options borrow and repay. Click on repay option and enter the amount you want to repay. Check all your details and then click on repay option given at the bottom.

^{Source: https://zethyr.finance/#/my-portfolio}

---

Now it will ask you to approve your transaction which will cost an estimated amount of 2.07 TRX with 345 bandwidth and 273 energy. If you want to proceed then click on the sign to approve.

Now you have to sign the trigger smart contract. This transaction will cost you 345 bandwidth with 273 energy and 96.73~ TRX. Sign to move further.

^{Source: https://zethyr.finance/#/my-portfolio}

^{Source: https://zethyr.finance/#/my-portfolio}

---

The failed results are as follows:

1. Hash: d4c279be775eb6fc105f229a354a86a8c32635b9b6bc4f02fd26389182a3800a

2. Hash: 3312c71843f4da368e7be136c4f1dabc87ae84d72ebb358f95d45a8327d02a68

^{Source: https://tronscan.org/#/transaction/3312c71843f4da368e7be136c4f1dabc87ae84d72ebb358f95d45a8327d02a68}

1. Hash: 064bdf11eb4f53fbca5d3fd5fc079267228f8bc43bc704244d4254aa6e3bf4e9

^{Source: https://tronscan.org/#/transaction/064bdf11eb4f53fbca5d3fd5fc079267228f8bc43bc704244d4254aa6e3bf4e9}

---

It was showing all the time => FAIL-OUT OF ENERGY>

From yesterday till today, I have tried to Repay 3 times, in which my total 160+ TRX got burnt buy still I was unable to achieve my goal.

Withdraw

Now the amount of TRX we supply to the chain, it's time to withdraw out those TRX coins. Let's follow basic steps to make a withdrawal.

Click on the TRX section in the supply market, we do not need to enable it once again as we have already done it.

^{Source: https://zethyr.finance/#/my-portfolio}

---

A new screen will pop up which will ask you which function we have to perform supply or withdraw. Click on the withdrawal option. Enter the amount of TRX you want to withdraw, check the details, and click on withdraw.

^{Source: https://zethyr.finance/#/my-portfolio}

---

As we discussed above that I was unable to repay the borrowed amount because of some unknown issue. Now I am also unable to withdraw my TRX amount from the supply market. When I click on the safe max option then also it shows the amount to be 0. I think(just an assumption) since I was unable to repay, it become difficult for me to take withdraw. I am unable to click on withdraw option. That's why I can't complete my withdrawal option.

---

However, The next steps are as follows:

• Once again the same alert will appear that we don't have enough energy for this transaction. As all the transactions in Tron Network are smart contract triggered transactions that consumed both Bandwidth and Energy. So we have to burn 20 TRX. Click ok and move further.

• Now it will take you to that Tronlink wallet prompt where you have to sign the transaction. Simply Sign the transaction and move further.

• This time transaction gets completed and the supply balance and the borrow balance both turn to 0, which means that all the withdrawal is now done.

It is excellent if I look at the cross-chain stable coin swap. In my opinion, the 10 USDT fee is still very reasonable.

See this ETH-gas fee chart.

^{Source-https://www.theblockcrypto.com/data/on-chain-metrics/ethereum}

Thank You

Cc:-
@fredquantum