DeFi Dive 002: Surf.finance

In recent times a movement against billionaire hedge funds has been sparked. These developments were a long time coming, rooted in many years of economic pain & suffering created by an unjust system that is structurally installed to benefit large corporations and the most wealthy individuals. Now, what if there could be hedge funds that are democratically controlled in a decentralised manner? Such a concept has been made possible thanks to blockchain technology and DeFi. A project called Surf.finance is attempting to make this a reality.

Surf.finance is a decentralised hedge-fund that provides passive income to those that stake their SURF x Ethereum LP tokens in something called The Whirlpool. Let me break this down. In DeFi, Uniswap is the primary exchange that is most used. Uniswap offers the ability to provide liquidity for any ERC-20 (Ethereum-based) token. You provide liquidity by pooling the same value of SURF (or any other ERC-20 token) & ETH. In return you will receive Uniswap LP tokens based on how much liquidity you are providing. These LP tokens can then be staked in The Whirlpool. The whirlpool is the most important component of SURF, some called it the ‘heart of SURF’. By staking those LP tokens in the whirlpool, you give yourself exposure to all the different income streams that enter the whirlpool. There are new income streams that are constantly being developed, but as of right now, the main ones can be categorised in 2 sections:

1. Internal revenue streams:

  • SURF transfer fee

There is a 1% SURF transfer fee on every SURF transaction that is made. As the volume goes up in the SURF ecosystem, more passive income is created for those that are staking in the whirlpool.

  • SURF ecosystem dApps

As of writing this, there have been two dApps installed in the SURF ecosystem, namely SURFstacker and SURF3D. I won’t go too in depth into these dApps, but these dApps and many more to come stimulate the ecosystem and generate arbitrage opportunities with a nice layer of gamification. The arbitrage opportunities support the ecosystem and the whirlpool because of the 1% transfer fee. As those opportunities are utilised, volume in the ecosystem increases. Another element of the SURF ecosystem that could be considered a dApp is Atlantis core, which allows for fully decentralised automatisation of the SURF ecosystem. There are many transactions that need to be made to keep the cogwheels of the ecosystem spinning, these transactions cost gas fees. Atlantis core gives rewards for pushing through those transactions.

  • Whirlpool un-staking fee.

In order to truly support the ecosystem and prevent short term speculators of using the whirlpool as a quick way to earn profit without contributing to the ecosystem, there is a 25% whirlpool un-staking fee. 20% of this amount goes into the community locked liquidity, which can be used for anything the community votes on through governance. The idea behind it is to use those funds to benefit the ecosystem through investments. The other 5% of the un-staking fee goes directly to all the stakers in the whirlpool.

2. External revenue streams.

  • BetGalaxy Casino

BetGalaxy is a new cryptocurrency casino. The whirlpool collectively owns 6% of their total supply, which will provide continuous dividends based on fees generated by the casino.

  • Harpoon

The harpoon is a yield farming tool developed by AegisDAO’s Pep, which is able to target certain farms that generate a profitable yield and subsequently sell that yield directly for SURF.

The developers behind SURF are some of the most talented and smart developers in the space and are constantly thinking of innovative ways to further stimulate the ecosystem. It is safe to assume that the revenue streams we witness now are only a taste of what’s to come.

SURF ecosystem infographic (will be updated to include newly developed elements)

SURF Tokenomics

Now, let’s dive into the SURF’s tokenomics, which truly is one of the most innovative ones I’ve seen in DeFi. First, we have to understand that there were 2 separate phases. During the first phase (distribution) individuals could farm SURF using many different liquidity pairs such as UNI/ETH, ETH/USDT, AAVE/ETH, and more. These would provide a 2,000% APY (annual percentage yield), while the SURF/ETH pair would generate a 5,000% APY. During this period the SURF supply would start at 1 SURF and increase to 10 million SURF.

The overwhelming majority of crypto projects conduct pre-sales prior to listing of a project which offers certain people the opportunity to get tokens at a significantly lower price than others. SURF did the opposite. Even team members were required to farm to be able to get a hold of some SURF tokens, or buy it after the farming started, making this distribution method the most fair I have ever seen in crypto.

During the farming phase, an enormous amount of volume went through the ecosystem, which could be attributed to the very attractive yield that the SURF farms were generating. In order to participate, one had to pay a 10% fee, which was sent to the locked liquidity. These fees totalled a value of around 3000 ETH (2 million US dollars at the time) halfway into the distribution phase. After the 5 millionth SURF was farmed, all these funds were used to buy SURF and send it directly to the whirlpool, which would be activated after the distribution phase ended. The stakers in the whirlpool would then receive their share of that SURF over time. From the start of phase 2 until February 14th, a daily payout of 20,846 SURF would be made to all stakers in the whirlpool and they would get a percentage of that payout depending on the size of their share.

Art by 40till5

The tokenomics have been set-up in such a way to truly benefit the project over a longer period of time. It has created a situation where the biggest holders of SURF are those that truly believe in the project and vision of the developers of creating a decentralised hedge-fund that provides eternal passive income. I think it is also one of the reasons that the SURF community is one of the most dedicated I’ve come across in the crypto space. Everyone is incentivised to play their part and truly make the project a success, the developers included.

As the lead developer, Proof, once said ‘’I want this to be my last play.’’ This quote rings true because it is emblematic in all the different decisions that have been made. With the speed things go within the world of crypto, it is not easy to build something that lasts. This project really has been making all the decisions that will support long-term growth of the ecosystem.

How is SURF deflationary?

There are different mechanisms within the SURF ecosystem that burn SURF, making it a deflationary token. One of such mechanisms is the fact that 10% of the SURF dividends earned by the WhirlpoolManager contract from it’s SURF3D are burned. For more information on S3D please read this article.

There are many other SURF dApps that will continue to be developed and will burn more SURF, making the SURF token more scarce as time goes on.

Chart by Yostari, a SURF community member

What does the roadmap for SURF look like in the near future?

There are a lot of very interesting developments that are coming up for the ecosystem. Let’s go through them.

The Swell

First off, let me briefly outline something called The Swell, which will play a pivotal role in SURF’s long-term stability. The Swell will be a smart contract to which SURF tokens, SURF LP tokens, S3D, Surfboards (Surf NFTs) can be donated in exchange for SURFGOV. The Swell will create passive income similarly to any tokens staked in the whirlpool, but the passive income generated by The Swell will be used to benefit the ecosystem directly. This could be in various ways, such as rewarding certain community members for any work they do that helps Surf, feed certain dApps in the ecosystem, development funds, marketing funds, or anything else that the community would vote on.

The idea behind The Swell is to further consolidate SURF as a decentralised self-sustaining ecosystem.

The Boardwalk

The governance proposals will take place on The Boardwalk. This is where SURFGOV holders can vote on proposals such as the usage of The Swell funds, changing the un-staking fee, how to invest the community locked liquidity, etc. In order to be able to vote on these proposals one must donate to The Swell to receive these SURFGOV tokens.

The Beach & Towels

One of the main things that should get people, even those outside of the SURF ecosystem, very excited is something called The Beach. The Beach will be SURF’s attempt at a Universal Basic Income. On February 14th, The Beach will open and on The Beach, people will be able to stake their Towel token. 35% of The Swell will be directed towards The Beach initially to generate that passive income. The Towel token will be airdropped to everyone who met the eligibility requirements on February 1st, 10 AM EST. Those requirements can be found below:

Furthermore, SURF Whirlpool loans, SURF launchpad & SURFStacker lite are also being looked at / developed. In the most recent SURFCast it was mentioned that we will very soon hear about the first project to launch on the launchpad. (See below for link to SURFCasts)

How to SURF?

Please check out this neat infographic that will clearly outlines all the different steps to engage with the SURF ecosystem:

There are regularly held voice AMAs, called SurfCasts by the lead developer Proof, here are some of the recent ones held:

Additional helpful links:

As mentioned, the SURF community is very dedicated to making this project a success and thus are providing a plethora of great artwork, writing and other material that help raise awareness of the project. Please check out:

Cryptocurrency & DeFi enthusiast. Looking to raise awareness about the potential of Decentralised Finance and help newcomers gain a better understanding of it.