Proposal to use Liquity’s Stability Pool staked in BProtocol as collateral for MIM

💡Idea Discussions
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TL; DR: Use the Stability Pool from Liquity that is staked in BProtocol as collateral to mint MIM in Abracadabra.money. This could be done safely for a Collateral Ratio of at least 60-90% (i.e. MIM / Collateral).

Expected Benefits

  • For Users: Gain additional yield on their StableCoin by leveraging the Stability Pool Deposit for MIM and investing MIM
  • For Abracadabra.money: add a new collateral for MIM to expand TVL in the system, earn interest
  • For Liquity/BProtocol: attract more TVL and keep it, especially important when LQTY incentives phase out in the future
  • For DeFI: prove again that composability introduces higher capital efficiencies and yield opportunities. The stability pool sits mostly idle and could be leveraged better this way.

Risks

Potential TVL available for Abracadabra / MIM

Currently there is a total of 511 Million in the overall Liquity Stability Pool, and 11 Million are in the Liquity Stability Pool supported by BProtocol (see picture). This opportunity and maybe some initial Staking or Migrating incentives could greatly increase the amount in the BProtocol Stability Pool and increase collateral available for MIM

What is Liquity (https://www.liquity.org )

Liquity is a protocol similar to Maker DAO that enables ETH to be staked in Troves (Vaults) to mint LUSD, which represents the debt against the ETH collateral staked. LUSD can be used as a stablecoin, similar to DAI. It is available in Curve (Curve.fi) for staking and exchanging for other StableCoins.

What is the Liquity Stability Pool in BProtocol (B.Protocol)

The Liquity Stability Pool is the main mechanism to support liquidations of Troves when the Collateral Ratio falls below the defined threshold. It holds staked LUSD that will be used to buy back ETH from liquidated troves in an automated manner.

This Stability Pool can now be staked through BProtocol (Backstop Protocol), which introduced a more efficient liquidation mechanism for Troves, to better ensure solvency of the Liquity Protocol.

The main expected changes in this Pool is that LUSD is used to purchase ETH, which is then sold by the Backstop back to LUSD. Therefore, the total amount in the Pool should be more or less constant, with a slight gain overall (because of buying discounted ETH).

There is a significant amount in the Stability Pool, and it mostly sits idle. While remaining part of the Stability Pool, it could be staked in Abracadabra.money to mint MIM. This would bring a new collateral which meets the main conditions (stable or increasing Collateral Value) and liberated liquidity making DeFi more efficient.

Liquity’s Stability Pool

Front End for BProtocol’s Liquity Stability Pool

https://app.bprotocol.org/liquity

About BProtocol

About Liquity

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Greetings from Pickle Finance! :cucumber: :wave:

We are pleased to see this being proposed as we think both Liquity and B.Protocol are great. Indeed, so much that we have integrated B.Protocol’s B.AMM for Liquity (the collateral being proposed) with Pickle Finance. In collaboration with B.Protocol, a pickled version of the same auto-managed backstop resells ETH from liquidations back to LUSD like the original, but deposits all LQTY rewards into the pLQTY Jar rather than directly on Liquity.

By using the pLQTY Jar, users never have to worry about their staked LQTY rewards, as these are automatically sold (both LUSD from borrowing fees and ETH from redemptions) for more LQTY regularly, saving users time and money in gas, while constantly growing their balance of fixed-supply LQTY. The pLQTY Jar is one of the jars we are most proud of because not only is it symbiotic (generating positive pressure on LQTY price, thus indirectly on utility for LUSD) but also evergreen as the Jar’s functioning is not relying on limited release rewards like those of a Liquidity Mining program but rather on protocol fees which will always be generated with usage.

Naturally, we wanted pLQTY integrated with B.Protocol’s B.AMM, hence the birth of our PBAMM. PBAMM itself has no fees, Pickle benefits by growing pLQTY. We would love for PBAMM to be considered as collateral in Abracadabra. Deposit LUSD in Pickle, start earning yield on your LUSD (currently 33%) from ETH liquidations plus LQTY rewards which are sent whole to pLQTY where they autocompound, receive PBAMM tokens, deposit PBAMM in Abracadabra, mint MIM, leverage to your heart’s content. PBAMM is wrapped yield-generating LUSD, so I would hope it gets a high LTV and low fees in Abracadabra given its risk profile.

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Updated Statistics on the Liquity Stability Pool in BProtocol:
image

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