Introduction

Under the DeFi trend, products are continuously updated. On the one hand, many users need not only to find the best trading depth or the most optimal lending rate but also involve complex operations like savings, loans, contracts, and liquidity mining, making it difficult to grasp the distribution of their assets in different applications. On the other hand, Layer-2 solutions are gradually being implemented, with many users’ assets moving towards second-layer networks like Polygon and other exchange-based blockchains like BSC. The assets originally concentrated on Ethereum are now dispersed across different blockchain networks, making the asset management process more complicated. Therefore, aggregation layer projects integrating multiple protocols are emerging to provide users with a better DeFi experience.

In the specific tracks of DeFi, liquidation essentially is to eliminate bad debts. However, because liquidation causes the price of collateral to fall, it may trigger more liquidations and bad debts. A chain of liquidations is one of the greatest systemic risks in DeFi, and under extreme market conditions, it causes excessive liquidations and market liquidity shortages. Hence, aggregator projects focusing on asset management for lending protocols are gradually gaining market attention.

DeFi lending asset management aggregators focus on the lending market. By integrating DeFi lending protocols, users can manage their lending positions in a one-stop manner. Current market competitors in this segment include InstaDApp, DeFi Saver, and B.Protocol. Before using InstaDApp, users need to create an Externally Owned Account (EOA) through wallets like MetaMask and transfer their assets to this smart wallet to use the platform. All transactions and asset storage occur in the EOA, and the dashboard displays the assets in the contract wallet. This article will focus on InstaDApp’s product features, and provide a detailed analysis of its token model and current status.

What is InstaDApp?

InstaDApp is a DeFi lending asset management aggregator platform that has built an underlying structure known as DeFi Smart Layer (DSL) and DeFi Smart Accounts (DSA), allowing users to interact with DeFi protocols in a single-click manner. By integrating three lending protocols — MakerDAO, Compound, and Aave — the platform enables users to seamlessly switch and optimize their lending strategies. It can also serve as a debt adjuster under extreme market conditions, contributing to the stability of the DeFi lending protocols. Currently, the product supports six chains: Ethereum mainnet, Polygon, Avalanche, Arbitrum, Fantom, and Optimism, and provides features like token cross-chain transfers.

Source：https://instadapp.io/#apps

The founders of InstaDApp are two brothers from India, Sowmay Jain and Samyak Jain. They began developing InstaDApp in August 2018 with funding from Kyber Network’s CEO Loi Luu. The project has received support from well-known institutions such as Coinbase Ventures and Pantera Capital, as well as several angel investors. It went live on the Ethereum mainnet in April 2021 and announced the issuance of its governance token INST in June, with a total supply of 100 million tokens. At the same time, 11% of the total token supply was airdropped to users who had positions in Maker, Compound, or Aave on the mainnet. The locked-in value has been consistently rising, placing it among the top projects in the DeFi sector.

The project launched a smart contract wallet called Avocado in March 2023, which supports multi-network transactions.

DeFi Smart Layer

The core architecture of InstaDApp consists of the DeFi Smart Layer (DSL) and the DeFi Smart Accounts (DSA). The DeFi Smart Layer (DSL) was formally audited and went live in April 2022 and is the core product in InstaDApp’s development. The team aims to make the DSL a foundational layer in DeFi, allowing frontend developers to use DSL as middleware to fulfill all their DeFi needs, and enabling most users to interact with DSL through these applications. It also supports asset migration to Layer 2.

The DeFi Smart Layer (DSL) is made up of three components: the core DeFi Smart Accounts (DSA), Composable Connectors that link to basic DeFi protocols (Connectors), and an Authorization Framework that allows extreme modularity (Authority).

Source：https://blog.instadapp.io/introducing-defi-smart-layer/

DeFi Smart Account（DSA）

DSA is an upgradable contract account. Users can create a smart account by connecting wallets like MetaMask via the official website and need to transfer assets into the smart account for use. Each address can create multiple DSAs, and a single DSA can also be controlled by multiple addresses. InstaDApp manages users’ positions through these smart accounts (DSA).

The primary working mechanism of DSA involves tracking. Initially, users interact with the smart account DSA. After initiating a function request through DSA, the smart account contract employs the msg.sig function to initiate calls, fetching the corresponding address. This address, capable of executing the code, is then sent back to DSA, which retrieves the code and begins execution.

Source：https://docs.instadapp.io/

Connectors

Connectors are standardized proxy logic contracts that enable DeFi Smart Accounts (DSA) to interact with various DeFi protocols, granting DSAs access to core operations. Developers can employ pure JavaScript language to write complex DeFi transactions across protocols. Connectors are universal to all DSAs, and each connector aggregates all interactions and authorizations between DSA and that specific protocol.

Authority

Users can set guardians, administrators, or bots to manage their DeFi Smart Accounts (DSA). Authorizations can be modularized to the connectors. For instance, users can allow specific addresses to connect only to Maker and Aave connectors, thus only permitting those addresses to operate on Maker and Aave through DSA. Alternatively, users can opt not to allocate withdrawal permission from DSA to certain addresses, thereby disallowing those addresses from making withdrawals. Through such flexible permission structures, users can achieve more robust asset management in DSAs.

Create Account

Before experiencing the features provided by InstaDApp, users need to rely on wallets to create a DeFi Smart Account (DSA). The protocol currently supports wallets such as MetaMask, Wallet Connect, Portis, and Coinbase Wallet. Creating a smart wallet requires paying a setup fee. After creating the smart account, users can transfer assets into the account to start using it, and these assets are managed by the platform. Therefore, the data displayed on InstaDApp’s dashboard tracks the assets within the smart wallet and categorizes positions based on protocols like Maker, Aave v2, Aave v3, Compound, and Uniswap, allowing users to clearly and intuitively see the asset allocation in the smart account.

Source：https://defi.instadapp.io/#account

Users can import positions from lending protocols to DSA with a single click. However, positions cannot be exported, and users must manually close positions and withdraw collateral before exporting. This creates a certain amount of user stickiness.

In addition to supporting users to perform common deposit, withdrawal, loan and repayment operations, InstaDApp also supports the functions of leverage, debt reduction（Save）, collateral swap, and debt swap. Users can choose the corresponding tokens on the page to deposit and earn interest income. The page will display the APY that can be obtained by supplying the corresponding tokens; the interest rate for lending out tokens will also be displayed.

Automation Feature

InstaDApp announced in February 2023 that it had partnered with Gelato to launch the Vault Automation feature. For example, if a user’s ETH-A vault reaches the liquidation threshold, i.e., exceeds the debt-to-collateral ratio specified by the vault, the Vault Automation feature will migrate the assets and debt to other vaults with higher liquidation thresholds or lower collateral ratios, such as MakerDAO’s ETH-B, Aave, and Compound vaults. This feature requires a platform fee of 0.3% of the total debt.

Refinancing Feature

InstaDApp has a separate entry for the refinancing function. With the support of flash loans, this function allows users to freely switch positions between Aave, Compound, and MakerDAO. That is, users can transfer a portion of the collateral and debt from Maker to Aave v3 in a single transaction.

Tokenomics

INST is the governance token of the InstaDApp protocol, with a total supply of 100 million. The allocation and unlocking plan are as follows:

At the same time as the announcement of the issuance of the INST token, the team announced that users who have positions on Maker DAO, Compound, or Aave (including Polygon chain) mainnet can receive a total of 11 million INST airdrop rewards. The amount of airdrop is linked to the size of the position. The net value (i.e., collateral minus debt) is used to measure the number of INST received by the user. In addition, to reward users who use InstaDApp, users who manage positions with InstaDApp will be calculated using double the net value when calculating rewards. This strategy is mainly to attract users to transfer their positions on the three lending protocols to the InstaDApp platform. To ensure fair INST allocation, the increase in INST allocation will decrease with the increase in net value.

The governance features of INST are aimed at the entire DSL and specifically include the following aspects:

1）System Upgrades: Contract upgrades will be executed and represented by the governance token contract. INST token holders will vote on system upgrades, platform parameters, and other code changes.

2）Liquidity and Bridges: InstaDApp maintains multiple liquidity pools and bridges for refinancing and cross-chain asset management. INST token holders will manage these liquidity pools and bridges.

3）Ecosystem Funds: INST token holders will manage the allocation of ecosystem funds and the DAO’s finances, which will be used for establishing partnerships, liquidity, integration, and any other funds that the DAO community may require.

4）DSA Extensions: DSA supports managing the Maker, Compound, and Aave protocols. INST holders can govern which applications the project can support in the future.

Development Status

source：https://defillama.com/protocol/instadapp

The protocol announced the DSL upgrade plan and governance token plan when the product was launched. Users’ expectations for the token strategy prompted them to transfer part of their positions to the InstaDApp platform, resulting in a sharp increase in locked-in value.

Overall, InstaDApp, which integrates three lending protocols, has seen its TVL rise steadily from 2021 to 2022. With the official deployment of the DeFi smart layer (DSL) smart contract and the issuance of the governance token INST, the token airdrop incentive strategy attracted most users to transfer their positions to InstaDApp. As a result, InstaDApp’s locked-in value once again saw a sharp increase, reaching over $13 billion at its peak. The locked-in value ranked second on DeFi Pulse. Following the market’s bullish sentiment, the locked-in value continued to rise, and the growth rate accelerated. Because users could not export their positions with a single click, they could only manually close positions and withdraw collateral, which was costly to transfer. As a result, the locked-in value did not show a significant decline.

However, the market encountered “May 19th,” and InstaDAPP’s TVL saw a pullback. The cooling of airdrop enthusiasm and the impact of the macro environment of the bear market led to a steady decline in the total locked-in amount. The TVL has been relatively stable in recent years, and the current total locked-in value is around 20 billion USD.

Conclusion

InstaDApp has built the DeFi smart layer DSL underlying architecture to integrate various DeFi protocols. Users can manage their positions on the three lending protocols through a single-click DSA smart account, which can help users reduce the number of steps and gas fees, and play the role of a debt adjuster in extreme market conditions.

The protocol attracted a certain number of users through the governance token airdrop when the product was launched. In addition, users who transfer their positions to DSA to receive airdrop rewards cannot implement the one-click export function. They need to manually close positions and withdraw collateral, which has a certain transfer cost. Therefore, market data such as locked-in value performed well. Affected by the cyclical market bear market, TVL is currently maintained at around $20 billion.