Yield Dollar (cUSD) built for CKB and any token brought by Force Bridge

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:

  1. How to mint cUSD;
  2. How to use cUSD;
  3. 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.

6 Likes

Smell good!
yToken is actually a remarkable idea for DeFi bond.
Seems that Paradigm, the big bro of the crypto investment institute has been incubated the yToken team for a while.
And Nervos is also a good aim to implement yToken due to the damn interoperability 2.0 may only work on Nervos CKB.(Though there has been a DeFi project starting to boast about what they will do. Oops,is it called Compound ? Sorry I never said that.)
However,here I have a slight suggestion that it needn’t count the APY of NervosDao into the product design because I believe that it is hard to attract enough cute consumers to $BUY it.

  1. APY of NervosDao is too low to catch the dump users who find the APY more than 50 % every day.
  2. Unfortunately the price of CKB must be fluctuating.
  3. The lock date of NervosDao would limit the fund usage and add too much unnecessary limitation for a DeFi product.

Just make good use of interoperability 2.0 of Nervos may be charming enough.

1 Like

Yes, agree that interoperability of 2.0 can differentiate all DAPPs on Nervos from others, especially for those cross chain defi projects. As for NervosDAO counted there, it’s just 1 of the options to increase APY. Token holders can also deposit CKB to liquidity mining and use LP token to mint cUSD. It depends on which solution can give token holder higher APY.

1 Like

This is great Sarah - I’m a big fan of the idea. Ideally we’ll get to a stage where lending platforms (both on Nervos and other chains) can use “cUSD” to generate APY. Anchor by the Terra team for example are exploring this.