A Guide To Furucombo
Furucombo is one of the more unique projects in the DeFi space and much needed for anyone looking to take advantage of the space without the complex technical knowledge often required to use more than one protocol at a time.
Created in 2020, the premise was a simple one. With all the new DeFi protocols popping up it was impossible to keep up, Furucombo helps users integrate multiple DeFi apps into one transaction without having any coding knowledge.
The simple drag and drop app lets you transfer your funds in multi-step transactions automatically and easily.
Each protocol in the DeFi space is solving a unique problem, the problem for users is that the platforms don’t integrate well. Transferring funds between a lending platform and an exchange can take multiple steps, if you want to buy various tokens you have to do so individually. The beauty of Furucombo is that it opens up endless possibilities of transaction combinations between protocols.
While DeFi is busy solving problems in the financial industry Furucombo is thinking about how to make the process easier for non-crypto experts. Reading whitepapers, understanding smart contracts and writing code to execute automated transactions is really hard for someone new to the space or someone who doesn’t have a professional background in software development.
The drag and drop aspect of the app lets you build transactions like you would lego, stacking one on top of the other until you end up with your money where you want it to be or the profit you wanted.
As with most things in the crypto world, there is a risk to using Furucombo, the app was developed less than 6 months ago and they make it very clear that the app is in beta. So far there have been no reported cases of transactions not behaving like they should but use at your own risk.
At the moment there are 11 protocols supported with at least one being added every fortnight. Currently, the app supports:
- Uniswap V2 and V1
The options for interactions between protocols are too many to list but there are 4 essential actions you can take across apps:
- deposit/ withdraw funds
- add/ remove liquidity
- borrow/ repay funds
- trade/ swap
Furucombo has a few of the top transactions listed on their homepage that you can try for yourself. For example, you can transfer your debt between protocols to get a lower interest rate by using a flash loan, swap ETH for a basket of tokens in the one transaction using Uniswap and Kyber, swap holdings between vaults to get the higher APY.
The main advantage of transactions like this is that all the steps are rolled up into one with only one action on your part, you don’t have to withdraw aTokens, exchange them for ETH on Uniswap, change the ETH for cTokens and then loan them out. This would take some time and mental effort to calculate each step.
The most interesting and most profitable transactions are those involving borrowing protocols to increase your leverage and trading apps to make a profit.
There are two types here, the first is increasing your long or short exposure in a specific currency such as ETH. This would work by getting an ETH flash loan from Aave, depositing it to Maker to get DAI in return, and then swapping it on Uniswap back to ETH.
However by far the most talked-about transaction has been the arbitrage trade automated my Furucombo, at this stage you still have to figure out when the trade will be profitable but the execution can be automated. The great thing is that you don’t need to understand how the individual transactions work just if your balance will increase after the whole transaction flow after you account for fees. You can take advantage of cross-exchange/ platform arbitrage and cross-currency arbitrage opportunities.
This is definitely one of the trickier aspects of not just Furucombo but the DeFi space as a whole. Only a few governments have posted crypto specific tax information and with DeFi being so new the best we can do is offer general interpretations as to how the laws could be perceived based on crypto rules and general tax guidelines. The good news is that using Furucombo specifically doesn’t have any extra tax rules, as the app connects directly to your wallet but the transactions themselves have tax implications.
Here are some general tax rules to keep in mind that can be applied to Furucombo combinations:
- Any crypto to crypto trade triggers a tax event, the sale of one crypto triggers a tax event for that coin while the purchase of a new coin forms the cost basis for future trades in that coin
- Transferring the same coin between platforms shouldn’t trigger a tax event as you are in control of the funds the whole time
- Coins that are airdropped to you or earned from staking is generally considered income and not capital gains
- Borrowing crypto is not a tax event as it isn’t income or capital gains
- Borrowing funds to make a trade could be considered income and not capital gains as you are technically making a margin trade. This includes transactions involving flash loans.
Furucombo is moving at a rapid pace and is posting news at least once a fortnight. They have been integrating new DeFi protocols weekly but the main news comes from an update posted on September 22nd. With the main goal to demystify the DeFi world for beginners they have launched an explore page where users can explore individual combos used in the past, they can see the APY generated and easily load the transactions so you can do it yourself.
The information provided on this website is general in nature and is not tax, accounting or legal advice. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider the appropriateness of the information having regard to your own objectives, financial situation and needs and seek professional advice. Cryptotaxcalculator disclaims all and any guarantees, undertakings and warranties, expressed or implied, and is not liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or incidental or Consequential Loss or damage) arising out of, or in connection with, any use or reliance on the information or advice in this website. The user must accept sole responsibility associated with the use of the material on this site, irrespective of the purpose for which such use or results are applied. The information in this website is no substitute for specialist advice.