What do you call a crypto platform designed to help keep up with the rapidly evolving crypto market without constantly reassessing and adjusting your investment strategies?
Sommelier Finance.
What is a Sommelier?
Sommelier Finance is a non-custodial cross-chain platform designed with unique vaults to help execute actively managed DeFI investment solutions. The idea is to bring best-in-class yields while mitigating risks.
Pause, let’s track back!
The crypto market is evolving at sonic speed. Yet, most crypto platforms stick in the past. Many still leverage dormant and outdated strategies.
Due to their reluctance to evolve, many vaults remain deserted as investors seek newer opportunities. Sommelier Finance claims to have found a solution for this! But how?
Sommelier Finance is creating a system with intelligent self-adjusting vaults that evolve based on market conditions. The system will allow metric calculations to occur off-chain while leveraging live data simultaneously.
In essence, Sommelier Finance was created with autonomous vaults, which bring top-class yields when mitigating risks. These market adaptive vaults provide an optimization advantage to users while helping to bolster risk mitigation.
The platform is built at the heart of the Cosmos SDK to bolster its interoperability with different chains.
Who are Strategists in Sommelier Finance?
Strategists are part of the network’s community, working to determine optimal rebalance decisions off-chain. They then submit the decision on-chain to the Sommelier Finance validators. To be a strategist, you first must have expert knowledge of the blockchain realm. Finance and trading knowledge is vital to help in good decision-making. Finally, it would help if you had some technical know-how.
Sommelier community members can create cellars, and investment strategies executable through smart contracts.
Strategy Providers develop trading strategies and send their recommendations to validators. The validators could then execute the plan to gain yield.
Examples of Cellars include strategies like:
- A BTC-ETH portfolio rebalanced based on price trends.
- NFT trading strategy leveraging sentiment from X community
- A strategy designed to hedge liquidity provision on DEXes.
How Does Sommelier Finance Work?
In Sommelier, a validator set must reach a consensus on all rebalance messages sent by strategists before the messages are executed on-chain. As such, rebalance calculations happen off-chain. Strategists can use the widely available off-chain data modelling techniques used in Traditional Finance.
The working of Sommelier takes the following key steps:
- The strategists run their models off-chain, sending a rebalance message to the Sommelier blockchain.
- Next, Sommelier blockchain validators consider the rebalance message. Only through consensus can the message be adopted.
- After reaching a consensus, the validators will transmit the rebalance message to the vault contracts.
- At this point, what remains is the vault contract execution of the rebalance. This means the vault adjusts all asset balances to align with the strategist’s decision.
To make sure the message interacts with smart contracts, it’s passed through a bridge. Currently, two commonly used bridges are Sommelier’s proprietary bridge to Ethereum and the Axelar bridge to alt-EVMs.
Features of Sommelier Finance!
To foster efficiency and seamless interaction of users, Sommelier developers designed this platform with the following key features:
- Decentralization- No single entity can have complete control over the Sommelier protocol.
- Adaptability — Vaults, although 100% safe, are still flexible. They can adapt to any market changes thrown their way.
- Security – The network implants many security features to ensure every user, validator, and strategist feels safe.
But what are Sommelier’s top security protocols?
Audited Smart Contracts
The Sommelier smart contracts undergo thorough auditing to ensure there is no loophole for attack or manipulation. Moreover, the network has maintained an active bug bounty program to spot any possible loopholes.
Validator Oversight
Sommelier validators manage all vaults within this network. As such, only users can withdraw assets from the vaults.
Approved Through Governance
The DAO approval system also means that smart contracts must be first community-approved before addition to the protocol. This ensures top security and reliability of the added contracts.
Smart Contract Controls
The network validators are only allowed to move assets across the approved positions as approved in the vault smart contract.
Multi-Chain Without Bridged Assets
While the network functions in multiple assets leveraging bridges, the network ensures that only rebalance details pass through the bridge. At no point will the network bridge assets be part of the rebalance.
SOMM Token
Native in the Sommelier ecosystem is the SOMM token. SOMM has a maximum fixed supply of 500 million tokens.
So, what is the role of this token?
SOMM was created to bolster the security of Sommelier’s operations. It has three most vital functions:
- Staking in the PoS Consensus – SOMM holders can stake their tokens to help secure the network and earn rewards.
- Gas payments — SOMM token helps settle all gas payments within Sommelier Finance.
- Governance – Holders of SOMM can vote on various network proposals, including creating and approving new vaults.
In Conclusion
Sommelier emerges as a game changer in the crypto investment landscape. By leveraging cutting-edge technology, Sommelier enables investor agility in the rapidly evolving crypto market.
The platform has been making massive strides in its mission to succeed.
Just recently, Sommelier announced a new collaboration with Chainlink CCPI, enabling more secure cross-chain interoperability in chains like Arbitrum, Base, Ethereum, Optimism, and Polygon. These recent additions bring more efficiency to the market.