Protocol-Level Liquidity for DeFi: Granada Upgrade Activated on Tezos

Protocol-Level Liquidity for DeFi: Granada Upgrade Activated on Tezos

TL;DR: transactions get faster, smart contract calls get cheaper, and DeFi gets more liquid.

This post covers the features and novelties of Granada like the new consensus algorithm and the integrated liquidity pool of tez/tzBTC as well as the cheapening of gas for smart contracts.

What’s up Granada

Consensus algorithm Emmy*

Emmy+ is now replaced by Emmy*. It halves the transaction time without compromising network security.

  • Block generation time is now 30 seconds compared to 60 seconds before.
  • The block now gets 256 baker confirmations instead of 32.
  • The maximum block reward is 20 tez compared to 40 tez before.
  • The security deposit is now 640 tez (it was 512 tez before). The baker blocks the deposit when creating a block and unlocks it again after 7 cycles.

As a result, Emmy* reduces transaction confirmation time from 5 minutes to one.

Liquidity baking

Nomadic Labs, Marigold, TQ Tezos, Tarides, and DaiLambda have launched an experimental DeFi, a liquidity pool sustained by the Tezos protocol itself. With the activation of Granada, it works with the tez/tzBTC pair. The Tezos protocol creates an additional 2.5 tez and deposits them in the pool when a new block is mined. Liquidity providers of the pool will earn 7,200 tez a day.

The smart contract calculates the exchange rate of tez/tzBTC as k = a × b. Since the amount of tez in the pool will be continuously growing, the tzBTC exchange rate will also increase. It will be advantageous to exchange tzBTC at this heightened rate and thus balance out the pool.

The experiment seeks to increase the liquidity of the tez/tzBTC pair and incentivise holders to invest crypto in DeFi. In 6 months, Tezos will automatically cease depositing tez in the pool. The following updates may continue the experiment if the community votes or even create new pools for new trade pairs.

Cheap smart contracts

There are three alterations that cheapen the use of smart contracts.

  • Optimising the decoder library has made the vault operations 10 times as cheap.
  • Improving the Michelson interpreter has made simple operations like stake usage 5 times as cheap.
  • Most instructions of smart contracts are now cheaper.

In Florence, exchange at the decentralised exchange Dexter cost nearly 50,000 of gas. In Granada, it’s only 10,000.

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