To begin with, it’s necessary to give an explanation to “cUSD”,which is inspired by article “ The Yield Protocol: On-Chain Lending With Interest Rate Discovery” :
cUSD is similar with stable coins but have different features: (1) cUSD has fixed period and expiration date; (2) 1 cUSD=1 USDC only at the expire date, there will be a discount before the expiration date ( e.g. 1cUSD=0.95 USDC, it varies according to time), depending on the market consensus on the borrowing rate. (3) 1 cUSD can be redeemable for 1$ of the collateral asset (price oracle needed) at the maturity for cUSD holders and/or the original lender can buy back cUSD from the market, repay cUSD and unlock the collateral asset.(overcollateralized)
This article has 3 parts to elaborate on the idea:
- How to mint cUSD;
- How to use cUSD;
- Why cUSD
1.How to mint cUSD
1.1 CKB holders:
1.1.1Deposit CKB to “ Staking Contract on CKB (Contract 1)” and mint cUSD(on CKB) with a specific expiration date, for example CKBcUSD-31 Dec, at an over-collateralized rate;
1.1.2The CKB deposited in “Contract 1” can be automatically staked to “NervosDAO” to get a approximately 3% APY/APC during the lock-up period. ( Add leverage to CKB deposited in NervosDAO)
1.2 Any token brought by Force Bridge:
(Use ETH as an example)
1.2.1 Deposit ETH to “ Staking Contract on ETH (Contract 2)” and mint cETH on CKB(integrated with ForceBridge);
1.2.2The ETH deposited in “Contract 2” can be automatically staked to “ETH 2.0” or other yield aggregator on ETH to get an optimal return;
1.2.3 Can also mint eUSD(on ETH) or directly integrate with other protocol on ETH like UMA/Kira/Stafi to add the leverage if necessary
1.2.4 Deposit cETH to “ Contract 1” and mint cUSD with a specific expiration date, for example cETHcUSD-31 Dec, at an over-collateralized rate;
1.2.5 The cETH deposited in “Contract 1” can be automatically staked to other pools like “Gliaswap yield farming pool ” on CKB to get return.
2. How to use cUSD
2.1 Liquidity mining: Add cUSD/ USDC ( or other trading pair) to Gliaswap liquidity pool to get reward token;
2.2 Leverage: Swap cUSD to USDC at a discount (e.g. 1cUSD=0.95 USDC) on Gliaswap, use USDC to buy more CKB, deposit CKB to “Contract 1” to get more cUSD and buy more CKB, which will increase your exposure of CKB.( Long CKB)
Example: Bob has 100CKB, currently worth $100 and he deposited it into “Contract 1” with required collateral rate at 150% to get the NervosDAO return as well as get 50 CKBcUSD-31 Dec 2020 minted at 200%. collateralized rate. He believes the price of CKB will go up so he swaps 50 cUSD to get 47.5USDC. Then he uses 47.5USDC to buy 47.5CKB and deposited that into Contract 1 as well.
During the lockup period, if the value of 147.5CKB falls below $75, Bob’s collateral will get liquidated and the liquidator will get 147.5CKB( around $75) by just buying 50cUSD at a current discount in the market and paying it back.
If the price of CKB goes up to $150/100CKB as expected ,Bob can hold the position until the expiration date, and $50 worth of CKB(33.4CKB) will be paid to cUSD holder and Bob will receive 114.1CKB, currently worth $171.15. The cUSD holder will receive $50 worth of CKB by just paying $47.5 at the expiration date.
2.3 Deposit it to another yield aggregator.
2.4 Mint other synthetic assets like tesla stock.
3. Why cUSD
3.1. cUSD can be sent and received by different chain addresses and different wallets. For example cUSD on ETH address can be sent to TRON address;
3.2 Asset holders on other chain can easily get at least 4X leverage on multiple chains by just managing 1 wallet, more user friendly compared with other yield tokens;
3.3 Higher potential APY to attract more assets like ETH to be bridged to CKB;
3.3 cUSD can be an indicator of the interest rate for lending protocol;
3.4 There can be more experiments on top of it referring to traditional financial products.