Ethereum DeFi coin explodes 400% in just two days – what’s behind it?

All eyes may be on Bitcoin right now, but in the decentralized finance (DeFi) space on Ethereum , investors were surprised by the rally of a coin called Saffron Finance (SFI), also known as Spice.

At first glance, it may be unclear why the coin sees a rally: Saffron Finance is run by an anonymous team, and what’s more, the protocol’s contracts are currently unchecked.

But the coin has risen by 400 percent in the last two days alone – and even more if you look at the starting price on Uniswap five days ago.

What is Saffron Finance?

The history of Saffron Finance is unique. Basically, it’s a clone or competitor of BarnBridge, a similar protocol run by doxxed developers and funded by leading space investors like Kain Warwick of Synthetix.

BarnBridge and Saffron Finance are both trying to introduce tranches into the cryptocurrency space.

Tranches are concepts from traditional finance that state that financial products can be split up to separate risk and return to meet the diverse needs of investors. To put it simply, junior tranches carry more risk but bring more return, while senior tranches bring little risk but little return.

A few weeks after BarnBridge unveiled its website, Saffron suddenly showed up and started a group on Discord and Telegram with a few dozen members.

At first it was quiet for a few days. Then it became clear that Saffron actually had a product unlike BarnBridge.

Saffron’s first product is the tranched liquidity provision for Compound in the DAI. Junior tranche providers receive a small interest payment (~ 0.5 percent APY), while senior tranche providers can make around 50 percent APY. Depositors receive SFI.

While the project is run by anonymous developers, it has received a lot of attention on Twitter. Investors from prominent DeFi funds such as Spartan Capital, Mechanism Capital and others have mentioned the Saffron Finance project in a positive light.

Tokenomics from SFI initiate a pump

According to CoinGecko, SFI has risen 400 percent in the past two days, increasing from $ 150-200 to $ 800 now. It went up even further considering it started at around $ 30 to $ 40 five days ago.

Spice now has a fully diluted valuation of $ 80 million.

Primarily, part of the rally is due to an increase in interest rates. As already mentioned, a number of investors have all tweeted about the coin in the past few days, raising the awareness of many for the project.

Second, SFI’s rally has risen sharply due to unique symbolic choices.

To pay into the junior tranches, Saffron Finance has an SFI and DAI pay in at a ratio of 1: 1000. This helps to roll back the protocol in the event of a hack and encourage the use of SFI.

The interesting thing is that users earn a lot more SFI by paying into the junior tranches, even though they need SFI to get in.