Omm’s Role in the ICON Ecosystem

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Omm’s Role in the ICON Ecosystem
By Omm • Issue #1 • View online
Welcome to the first newsletter for the Omm community!
Since the announcement, early contributors of the Omm protocol have been heads down building the defi lego stack for the ICON ecosystem. We are excited to announce that we have a prototype ready for our community members to give a try.
In this newsletter, we would like to explain the significance of Omm’s role within the ICON ecosystem. Omm will act as a money market protocol for the ICON ecosystem. The Ethereum ecosystem is always a good proxy for ICON given that it is a few years ahead in terms of development. Currently, two of the top 5 defi protocols in terms of total value locked (TVL) are money market protocols in the Ethereum ecosystem: Compound and Aave. 

Total Value Locked (TVL)
DeFi Pulse Statistics
DeFi Pulse Statistics
Why is there so much value locked in money market protocols?
Undoubtedly, speculation is currently the largest driver in the blockchain space. To this end, money market protocols enable individuals to take leveraged positions in the market. These individuals mostly collateralize their crypto assets because they don’t want to lose their existing principal position and take out a stable coin loan to purchase additional crypto assets. They can also use the stable coin loan to cover unforeseen expenses if necessary.
Maker DAO, the first defi protocol on Ethereum, saw its initial success with DAI as Ethereum community members wanted to take a leveraged position in Ethereum without selling their Ethereum. Balanced will serve a similar purpose in the ICON ecosystem. Shortly afterwards, money market protocols such as Compound and Aave emerged and started to offer more collateral options (ETH, LINK, WBTC, etc.) and more stable coin options (USDT, USDC, DAI, etc.) as a loan.
The crypto market was very volatile and various farming opportunities arose in 2020. As a result, savvy traders actively utilized money market protocols to profit since gains in the market outweighed the borrowing rate from the money market protocols. With an active lending market, 2020 saw a significant uptick in the usage of defi protocols and the TVL of the Ethereum defi ecosystem spiked from under $1B to $14B+ as you can see from the below chart.
However, the borrowing option does not come risk free. Potential of liquidation is the downside of borrowing from money market protocols. In a drastic situation when the market is unstable, collateral values can collapse or loan values can spike due to price volatility, which can lead to a liquidation. Thus, it is always recommended to use a money market protocol with caution and the understanding of potential liquidation risk.
Despite the risk, money market protocols provide immense value to savvy users who understand the potential risk & reward, contributing to the explosive growth of the defi ecosystem. Given that ICON ecosystem does not have the necessary protocols to utilize ICX to take an additional position in the market, we believe a money market protocol such as Omm is a necessary defi stack for the ICON ecosystem and are very excited about it. 
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Updates about the Omm decentralised finance project on the ICON Network.

Omm is the money market made for everyone. Supply assets to earn interest, borrow assets for short-term loans, and earn OMM for doing so.

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