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Stablecoins in the cryptocurrency market can be categorized into three types: Fiat-Collateralized, Cryptocurrency-Collateralized, and Algorithmic stablecoins. The distinctions among them are based on underlying assets, collateral ratios, issuance methods, and price stability mechanisms. Fiat-collateralized stablecoins use fiat currencies as collateral while cryptocurrency-collateralized stablecoins use cryptocurrencies as collateral with a lower ratio. Algorithmic stablecoins maintain prices using algorithms and complex mechanisms such as elastic supply and incentives to adjust demand.
Stablecoins lack interest income, causing holders to bear the depreciation of USD. Current stablecoins cannot offer interest due to their issuance mechanisms and underlying assets. An interest-bearing stablecoin collateralized by ETH and stETH will be introduced as a solution, generating secure, price-stable, and interest-stable stablecoins such as eUSD. This innovation bridges the gap between traditional stablecoins and the need for interest generation.
The Lybra Finance’s mission is to create a decentralized stablecoin called eUSD that functions as a crypto bank account, provide solutions for Ethereum-based assets, and facilitate participation in the Ethereum staking ecosystem. They aim to offer easily integratable components with transparent yield reporting and inventive emission approaches to establish a sustainable token economy. The goal is to become the leading ETH staking yield protocol by amalgamating LSD yields and generating superior returns through DeFi mechanisms while promoting the accumulation of ETH and diversified LSD assets.
The Lybra Protocol is a decentralized protocol that aims to provide stability in the cryptocurrency industry by offering a safer and more stablecoin, EUSD. It uses Liquid Staking Derivatives (LSD) and allows users to borrow against their deposited ETH and stETH to mint EUSD. Users can earn regular stable income by holding minted EUSD, which is powered by LSD income generated from deposited ETH and stETH. The Lybra Foundation believes that a decentralized stablecoin is essential for both enterprises and individuals to fully harness the benefits of cryptocurrency.
eUSD is a stablecoin backed by ETH collateral, issued in a decentralized manner. It generates an APY of 8% and can counteract inflation while providing economic freedom. Depositing ETH into the Lybra Protocol allows for minting/borrowing eUSD at a healthy ratio for use in DeFi.
Deposited ETH is converted to stETH through the Lybra Protocol, which grows over time due to the Liquidity Staking Derivatives process. Increased income from stETH is converted to eUSD and shared proportionally among stLBR holders. The remaining income is distributed to eUSD holders with a base APY of approximately 8%. An example scenario shows how Alice and Bob deposit ETH, mint eUSD, and receive dividends based on their holdings after one year.
eUSD is a stablecoin that offers reliable revenue and 0% loan interest, making it an attractive option for those looking to optimize their DeFi portfolio's performance. It allows users to go leveraged long on ETH with zero loan cost while enjoying the stability of a traditional stablecoin.
eUSD functions similarly to money as it serves as a store of value, medium of exchange, unit of account, and standard of deferred payment. It is designed to maintain its value over time and can be used worldwide for transactions. It also serves as an interest-bearing asset where holders can receive regular stable interest income or stake eUSD to earn staking rewards.
eUSD stability is maintained through overcollateralization, liquidation mechanisms, and arbitrage opportunities. Each 1 eUSD is backed by at least $1.5 worth of stETH as collateral to reduce the risk of insolvency. The Lybra Protocol incorporates liquidation mechanisms to protect the system from undercollateralized positions and ensure appreciation pressure on eUSD. Arbitrage opportunities arise when the eUSD price deviates from its 1 USD peg, allowing users to make a profit and help restore the eUSD price to its intended value.
LBR is Lybra Protocol's native token, used for governance and revenue sharing. Revenue comes from a service fee on eUSD in circulation, with stETH income distributed to eUSD holders after deducting the fee. The service fee is allocated to the LBR Staking Pool, with LBR holders receiving Real-Yield based on their stake percentage.
Lybra Protocol offers negative-interest loans where users can borrow eUSD using their ETH as collateral, earn a steady income and repay the debt later. The user's collateral rate should be above 160%, and Lybra only supports ETH and stETH as collateral. There are no borrowing costs or interest charges in the Lybra Protocol, but users can make more by holding eUSD longer. There is no set payback period for loans issued by Lybra Protocol, and the minimum collateral rate is 150%. It's recommended to maintain a collateral rate higher than 200% to avoid getting liquidated.
eUSD is hard-pegged to the price of USD through direct and indirect mechanisms. Rigid redemption involves exchanging eUSD for ETH at face value, with a 0.5% fee charged on the redeemed amount. Redemption providers can offer rigid redemption services and receive incentives such as token airdrops and service fee compensations. During the redemption process, collateral is lost but debt is reduced accordingly, improving collateral rate and making it less risky. Being a redemption provider has advantages such as not experiencing total loss even if collateral is redeemed and increased yield of LBR reward by 50%.
Lybra Protocol requires borrowers to maintain a collateral rate above 150%. If the rate falls below this, liquidation occurs where the borrower's debt is reduced and liquidators receive collateral assets in exchange for paying off the debt. Liquidators are rewarded when liquidation proceeds. Keepers can monitor each liquidator and borrower on Lybra Protocol. Liquidators can earn a 10% reward by performing a liquidation or enable third-party Keeper access to their funds in exchange for a portion of the reward (9% to the liquidator and 1% to the Keeper). Overall Liquidation Mode is activated when overall collateral rate falls below 150%, allowing full liquidation of users with rates below 125%.
Lybra is an open-source DAO project managed by LBR token holders through Executive Voting and Governance Polling. LBR is the native token used for staking, governance, mint, and liquidators rewards with a maximum supply of 100,000,000. LBR holders manage Lybra Protocol's financial risks to ensure stability, transparency, and efficiency with voting weight proportional to the amount of tokens locked in the contract.
100 million LBR tokens will be allocated as follows: 55% for mining pool, 10% for partners and marketing (vested linearly over 2 years), 10% for team development (1-year cliff followed by a linear release over the subsequent 3 years), 15% for protocol treasury (linearly vesting over two years after TGE) and 10% fully unlocked at TGE for IDO.
esLBR token is used for governance and to receive voting power in the Lybra community. Holding esLBR also boosts yields as 100% of LSD Distribution Service Fee will be distributed to holders. Incentives are provided to ecosystem participants through rewards, grants, etc. Treasury holdings and protocol revenue are allocated towards investing in ecosystem projects.
Lybra DAO's roadmap includes open source contract review, community growth, social media establishment, and testnet on zkSync in Q1 2023. In Q2 2023, they plan to have a public sale and go live on Ethereum while collaborating with an audit firm. By Q3 2023, Lybra DAO aims to implement multi-sig safe, go live on Arbitrum, explore DeFi strategy and develop more functions according to the community's needs.
https://lybra-finance-1.gitbook.io/lybra-finance-docs/background/stablecoins-on-the-market