As of September 6, 2021, Idle (IDLE) is ranked at position 784 on CoinMarketCap and at position 37 for lending protocols on DefiPulse. The International Token Standardization Association released a list with all 12 Idle tokens of which 11 are wrapped versions of prominent stable coins and one is the governance token which is used to make on-chain governance proposals. ITSA has assigned unique token identifiers to each of the tokens and classified them according to the International Token Classification (ITC). The project went live in August 2019 and a series of enhancements have been made in the months since. This subsequently led to the launch of Idle Finance V3, which aimed to deliver a streamlined interface and a better experience for users. As of today, Idle has reached a total value locked of 185M$.
Authors: Christian Viehof, Maximilan Bruckner
With the recent update to Idle v3, Idle now consists of a smart contract architecture that can be used to separately store funds, submit new allocations and manage different lending protocols. The update allows Idle Finance to keep their DeFi solution non-custodial and fully transparent. Idle Finance’s flagship strategy, the yield-optimizer, combines multiple money markets to provide interest rates that beat the traditional offerings across the interest-bearing tokens. However, in DeFi there are different risk profiles and Idle Finance also accounts for this. The biggest risk here is a single lending protocol losing its funds or suffering long-lasting illiquidity phases. To mitigate these risks, Idle Finance has introduced its new risk-adjusted portfolio strategy which automatically changes the asset allocation in order to find the optimal mix between risk scores and yield. The rebalance calculation involves assessing the total assets within a pool, incorporating underlying protocol rate functions and levels of supply and demand, skimming protocols with a bad score/rate mix, and finally determining an allocation that achieves the highest risk-return score possible after the rebalance happens. It has been developed in collaboration with DeFiScore, a framework for quantifying risk in permissionless lending pools. This will allow Idle users to choose the strategy that most suits their risk profile, having a complete solution to automatically manage asset allocation either in terms of returns or risks.
Figure 1: Total value locked in Idle Finance (Source: DefiPulse)
Idle Finance utilizes various usd-pegged payment tokens, also known as stable coins, for their decentralized lending services. Among them are the two most prominent stable coins, USD Coin (USDC) and Tether (USDT), which make up around 90% of the current stable coin market capitalization (we recently wrote two articles on the continuous expansion and interoperability of USDT and USDC and the relevance of token identifiers such as the ITIN). Next to USDC and USDT, Idle Finance also supports the algorithmic stable coin DAI which is minted by the MakerDAO through a borrowing process that involves the locking of collateral such as Bitcoin, Ethereum or the Basic Attention Token in smart contracts that act as vaults.
Apart from stable coins, users can also deposit Wrapped Bitcoin (WBTC), which is an ERC-20 version of Bitcoin created through a token bridge connecting the Bitcoin network with the Ethereum network. Wrapped tokens such as Wrapped Bitcoin have become popular during the massive DeFi expansion in the summer of 2020 as they allow for the efficient allocation of capital in DeFi services on the Ethereum blockchain. Idle Finance harmonizes all deposited tokens via their own smart contracts creating a wrapped version of the already wrapped Bitcoin called IdleWBTC. The ongoing innovation in the DeFi space and the continuous expansion of token bridges among popular networks such as Tron or Binance Smart Chain (BSC) highlight the need for identifiers such as the ITIN. The underlying assumption of the ITIN is that tokens need to be uniquely identified on a token layer. Wrapped tokens are in regard to value often indistinguishable from their original counterparts but they differ from technical perspective. Therefore it will be necessary to identify and classify each wrapped token individually in order to give more transparency to customers and to increase the acceptance of cryptographic tokens among the public.
Figure 2: Tokenbase list with all currently supported tokens including the Idle governance token (Source: https://api.itsa.global/view-list?list_id=18)
Figure 3: The Idle Tokenbase entry (Source: https://itin.itsa.global/KT2N1ZD81)
Economic Purpose (EEP): Idle is listed as a non-transactional Governance Token (EEP22TU03) due to its on-chain governance functionality.
Industry Type (EIN): The issuer of Idle is active in the field of Decentralized Lending, Saving and Asset Management (EIN06DF02).
Technological Setup (TTS): Idle is an Ethereum ERC-20 Standard Token (TTS41BC). The Class "Ethereum ERC-20 Standard Token" captures every Token that is implemented by means of the ERC-20 Standard on top of the Ethereum blockchain.
Legal Clam (LLC): Idle does not entitle its holder to any legal claim or rights against the issuing organization, therefore it is listed as a No-Claim Token (LLC31).
Issuer Type (LIT): The dimension “Issuer Type” provides information on the nature of the issuer of the token. Idle’s platform is built by a team of programmers and engineers that make up the core contributor community. It’s Issuer Type is a Private Sector Legal Entity (LIT61PV).
Regulatory Framework (EU) (REU): The dimension “Regulatory Status EU” provides information of the potential classification of a token according to the European Commission’s proposal for a Regulation on Markets in Crypto Assets (MiCA, Regulation Proposal COM/2020/593 final). Uniswap qualifies as an Utility Token (REU52) according to the definition provided in Article 3 (5) of Regulation Proposal COM/2020/593 final.
The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.
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Christian Viehof is an Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database including a classification framework and unique token identifiers and locators. He completed his Bachelor in Economics at the University of Bonn, the Hong Kong University and the London School of Economics and Political Science with a focus on Behavioral Economics and Finance. Currently pursuing his Master of Finance at the Frankfurt School of Finance and Management, you can contact him via firstname.lastname@example.org and connect with him on Linkedin, if you would like to further discuss ITSA e.V. or have any open questions.
Maximilian Bruckner is Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database including a classification framework and unique token identifiers and locators. He has a strong international background with significant time spent in Spain, South Africa, and Canada. Currently pursuing studies at the Frankfurt School of Finance and Management, you can contact him via email@example.com and connect on LinkedIn if you would like to further discuss ITSA e.V. or have any other open questions.