Open 0xExplorer opened 2 years ago
rachftw
commented
2 years ago Thanks for taking the time to prepare for this proposal, we appreciate yor effort and contribution！We are currently in the process of revewing your proposal, will come back to you ASAP.
0xExplorer
commented
1 year ago Thanks for taking the time to prepare for this proposal, we appreciate yor effort and contribution！We are currently in the process of revewing your proposal, will come back to you ASAP.
Hi Rach,
Any update on this? Seems like a prime opportunity as other protocols are building similar products (Nazare & Solend).
Summary:
This proposal looks to add new, high yielding, low risk vaults to Parrot Protocol and BunnyDucky that involve USH – the stablecoin built from Hedge Protocol. Currently there are a variety of LPs as well as a Stability Pool which offer 10%+ returns, making them highly attractive for borrowing against.
Background:
Hedge is a Solana based leveraging platform that has its own stablecoin (USH). USH is an overcollateralized stablecoin that can only be minted by making a collateral deposit into Hedge’s protocol. USH’s design provides automated and attractive peg defense by allowing ANYONE to redeem it for $1 of the underlying collateral.
This differs from PAI which can only be redeemed by debt holders which makes it more susceptible to depegging. What this means is that any depeg below $1 is quickly arbitraged away by buying 1 USH for $0.99 (or less) and swapping it for $1 of collateral.
The USH model isn’t new – it copies the Liquity model from Ethereum which has been show to hold up extremely well in the market down turns and actually trades at a premium to its peg due to demand for depositing in the Stability/Liquidation pool.
Proposal:
2 new Farms should be added to BunnyDucky and then turned into vaults at Parrot Protocol.
Both pools should be added at 110% minimum collateral ratios – while lower than the existing stablecoin LPs, USH is not susceptible to a bridge hack like the others and has automated peg protection. Further, the current pools are seeing little demand at the existing 120% collateral ratios.
The Stability Pool vault will be particularly attractive as even after the incentives run out, automating the conversion of liquidated collateral back into USH to deposit into the Stability Pool will be very attractive for yield farmers looking for simple, consistent returns.
The Orca pool is not included due to it being a Uniswap-V3 design which adds too much complexity nor is the Atrix pool due to having only $750k of liquidity without a materially higher yield.
Conclusion:
Solana DeFi is generally limited by lower returns and thus more effort is needed to seize opportunities when they arrive and constantly look for the next opportunity. Hedge is an underappreciated contender in the efforts to create truly decentralized stablecoins and has created a prime product for Parrot Protocol to leverage via its vaults system.
The addition of these vaults should drive a material increase in TVL and can revitalize what on the outside appears to be stalled development.
Next Steps:
FAQs:
Q: I’ve never heard of USH. Is it the next UST? A: No, USH has a built in redemption model that allows anyone to redeem it for unaffiliated collateral – SOL, mSOL, etc. This prevents the feedback loop seen in the Terra collapse.
Q: What if it trades below peg? A: See above, anyone can redeem 1 USH for $1 of collateral so arbitrage prevents material deviations below peg.
Q: What happens when the incentives run out? Will the yield be bad? A: No, the Stability pool will general ongoing, real yield from liquidations while the LP will see active trading when liquidations are done or when users want to open and close leverage positions. Because Hedge offers high leverage, these leverage positions see high volumes of USH traded.
For anyone interested in using Hedge to borrow against your mSOL, SOL, or cUSDC, you can use my referral link for a 5% discount on loan initiation fees. I'd suggest creating your own link so you can get paid yourself but it requires 500 HDG (~$500) so up to you. https://www.hedge.so/?referral=7289020582817587342