Cream Finance (CREAM), or C.R.E.A.M,. is one of many protocols banking on decentralized lending.
C.R.E.A.M. is a protocol that builds smart contract money markets on the Ethereum (ETH), Binance Smart Chain (BNB), and Fantom (FTM) blockchains. A smart contract is a digital robot that executes transactions on the blockchain. For example, Cream’s smart contracts lend money and create money market accounts.
A money market is an interest-bearing account that pays a higher interest rate than other accounts. Bank money market accounts often offer check-writing and debt card privileges. Hence, Cream is trying to build a blockchain banking protocol. Money market accounts are popular because of the higher interest rates they pay. Federal Deposit Insurance Corporation (FDIC) covers many bank money markets.
Is Cream Finance a bank?
Hence, CREAM (CREAM) is trying to create an online protocol that supports lending. CREAM claims its accounts bear interest on stablecoins, defi tokens, liquidity-protocol (LP) tokens, and cryptocurrencies.
Another protocol they call iceCREAM turns CREAM into a productive asset. They claim iceCREAM can lock CREAM tokens to receive iceCREAM tokens, iceCREAM is a non-transferable and non-tradeable token. They claim 50% of iceCREAM protocol reserves are distributed as ycrvIB tokens through Curve Finance.
iceCream serves as CREAM Finance’s governance token. Holders get one vote for every iceCREAM token held. Voting determines the allocation of CREAM token liquidity mining by blockchain and market. Users can change their votes every week. Staking iceCREAM can increase the amount of iceCREAM staked.
iceCREAM Lending Protocol
The iceCREAM Lending Protocol comprises a comptroller, cToken markets, and cTokenAdmin (administration). Ideally, each cToken market will generate reserves.
The cTokenAdmin is a smart contract that controls the cToken markets. A reserve manager is a hub that controls reserves extraction. The reserve manager takes snapshots of the cToken reserves and anybody can use the manager to trigger the extraction. The reserve manager takes a ratio of reserves and sends them to the burners.
Burners are token converters that burn iceCreamTokens into the US COIN (USDC) stablecoin. The USD Coin pays in US dollars. Hence, the burner allows users to convert tokens into US dollars. They claim burners can convert cryptocurrencies, such as Ethereum (ETH) into USD Coin to create onchain liquidity. Burners power lending by creating liquidity to back loans.
A distributor stores reserves in yvCurb-IB and distributes fee collected among all iceCream stakers. yvCURB-IB stores tokens in the Vaults at Yearn. Yearn Finance builds interest bearing vaults. Voting escrow allows stakers to use CREAM tokens and claim rewards.
How C.R.E.A.M. earns interest
crTokens are Ethereum request for contact (ERC-20) tokens that represent balances supplied to the CREAM Finance protocol. Minting crTokens allows users to earn interest through an exchange rate. Hence, the interest can increase as the asset grows.
The crTokens are users’ primary means of interacting with the C.R.E.A.M. Protocol. There are two kinds of crTokens; CErc20, and CEther. Both types use the EIP-20 interface. The EIP-20 is a standard interface for tokens.
The CErc20 wraps an ERC-20 token to create a synthetic asset. Each crToken pays an interest rate calculated by adding cash and borrows, then subtracting total reserves and total supply.
Get Cash is the underlying balance owned by the crToken contract. You can think of Get Cash as the amount of cash available in a money market account.
Total Borrow is the amount of money the contract loans out on the market and the amount which accumulates interest. The Borrow Balance is the amount of a user’s borrow plus interest. The Borrow Rate is the interest the Borrow Balance pays.
The Total Supply is the number of tokens in circulation in a crToken market. An EIP-20 interface controls the Total Supply. The Supply Rate is the interest rate the Total Supply pays. Total Reserves represent the historical interest set aside as cash users can withdraw or transfer. A small portion of user interest accrues to the protocol. The Reserve Factor defines the portion of borrower interest converted into reserves.
The CEther wraps Ethereum (ETH) tokens into a synthetic asset. A synthetic is an asset that contains another asset. For example, CEther contains Ethereum.
C.R.E.A.M.’s mint function transfers assets to the Cream Protocol. This allows users to earn interest at the current supply rate and create crTokens and CEther. Users who mint receive a quantity of crTokens equal to the amount of tokens they mint. For example, a user who mints 100 Tether (USDT)tokens will receive 100 crTokens.
How CREAM Finance users borrow money
A redeem function converts crTokens into a specified quantity of the underlying asset. For example, you can redeem 25 Binance USD crTokens into Binance USD (BUSD) tokens.
The amount of tokens redeemed is equal to the quantity of underlying tokens divided by the current exchange rate. The amount redeemed must less than the user’s Account Liquidity to keep the account from running out of money.
A Borrow Function allows users to transfer assets from the C.R.E.A.M. Protocol to users. This creates a Borrow Balance that accumulates interest at the Borrow Rate. The amount Borrowed has to be less than the user’s Account Liquidity.
Repay Borrow transfers assets to the protocol to repay loans. Repay Borrow Behalf reduces a user’s borrow balance by transferring assets to the protocol
Liquidate Borrow liquidate accounts negative (overdrawn accounts). Liquidators can repay some or all of an outstanding borrow on behalf of a borrower. In return they receive discounted collateral held by the borrower as a liquidation incentive.
When CREAM seizes collateral it transfers the collateral to crTokens users can redeem. Users have to approve cToken contracts before liquidation.
What Value Does the C.R.E.A.M. Finance Offer?
Mr. Market thinks C.R.E.A.M. Finance (CREAM) offers some value. For instance, CREAM was CoinMarketCap’s 10th most-trending cryptocurrency on 21 November 2022.
CoinMarketCap gave CREAM a $10.26 Coin Price, a $6.325 million Market Cap, a $30.014 million Fully Diluted Market Capitalization, a Total Locked Value of $34.870 million, and a 24-Hour Market Volume of $3.836 million on 23 November 2022. CREAM had a $3.790 million Centralized Exchange (CEX) Volume and a $51,440.48 million Decentralized Exchange (DEX) Volume on 23 November 2022.
They base those numbers on a Circulating Supply of 616,378 CREAM, a Maximum Supply of 2.925 million CREAM and a Total Supply of 2.925 million CREAM. CREAM was CoinMarketCap’s 817th ranked token on 23 November 2022.
In contrast Cream (CREAM) was CoinGecko’s 909th ranked cryptocurrency with a $10.33 Coin Price on 23 November 2022. CoinGecko gave CREAM an $7.917 million Market Cap, a $3.209 million 24-Hour Trading Volume, a $92.953 million Fully Diluted Market Valuation, and a Total Locked Value of $35.506 million on 23 November 2022. They base those numbers on a Circulating Supply of 766,534 CREAM, and a Total and Maximum Supply of nine million CREAM.
I think CREAM is an interesting but dangerous asset. CREAM meets a need providing liquidity to lenders. CREAM is dangerous because it could run out of money and collapse as FTX (FTT) did.
I think speculators need to minimize their CREAM holdings because the decentralized finance (DeFi) lending market is new and unproven. My prediction is many assets such as CREAM will collapse before this market proves itself.