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).
- 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.
- Smart Contract / Oracle problems
- Big fast crash on ETH that would put a lot of pressure on the stability pool to liquidate troves. However, the system was put to the test during the huge May 2021 crash and did not show any problems (How Liquity Handled its First Big Stress Test | by Kolten | Liquity | Medium)
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