Why Stablecoins?

Stablecoins provide stability with access to digital finance, often pegged to traditional currencies like the U.S. dollar. They offer a reliable base and unlock opportunities within DeFi protocols for yields that go beyond traditional financial products. Additionally, yield-bearing stablecoins, often backed by Real-World Assets (RWAs), such as treasury bills or private credit, present unique opportunities by bridging traditional and decentralised finance. With Fido, stablecoins are more than a store of value, they’re a gateway to various opportunities, from yield generation to collateralised lending to real-time streaming to insured investments and even on-chain card payments. Fido’s Smart Router takes this ecosystem and transforms stablecoins into a versatile tool for both money movement and a broader range of financial activities.

What is Fido’s Smart Router?

Fido’s Smart Router is an intelligent system that automates stablecoin movement across protocols based on user goals and underlying data. Leveraging a diverse ecosystem, the Router optimises funds for different objectives.

Examples of the Smart Router in Action

Example 1: Selecting the Optimal High-Yield Stablecoin Protocol

A user decides to allocate funds to Fido’s “Save” plan, aiming for treasury-backed or low-risk yields without additional composability or insurance. This plan offers a range of stablecoin and protocol options focused on maximising returns while maintaining stability. For this example, we’re using Angle Money’s USDA, which dynamically rebalances across a selection of Treasury Bill options and low risk DeFi, currently targeting 6.8%.

Steps Taken by Fido’s Smart Router:

1. Opportunity Analysis: The Smart Router scans all available options within the Save plan, assessing factors such as yield potential, liquidity depth, and protocol stability. It identifies Angle Money’s USDA as the best choice, offering a favourable balance between high yield and liquidity for flexible access.

2. Stablecoin Conversion: To optimise for yield, the Smart Router calculates the most efficient route to convert the user’s current stablecoin into USDA, prioritising the most liquid DEX to minimise slippage and transaction costs.

3. Dynamic Stake Execution: After acquiring USDA, the Router stakes it through Angle Money’s protocol. The Router then continuously monitors for fluctuations in yield, ensuring the user’s returns remain optimised.

Through these layered evaluations, Fido’s Smart Router ensures that funds in the “Save” plan are dynamically allocated for maximised, stable returns.

Example 2: Taking a Collateralised Loan via Morpho

A user decides to leverage their funds they currently have in Fido’s “Grow” plan by taking out a collateralised loan. In this scenario, Fido’s Smart Router determines using Anzen Finance’s USDz, a yield-bearing stablecoin backed by Private Credit as the optimal choice for taking a collateralised loan against.

Steps Taken by Fido’s Smart Router:

1. Assessing Liquidity and Loan Potential: The Smart Router conducts an assessment of available collateralised loan options, analysing liquidity, yield, and protocol stability. It determines that Anzen Finance’s USDz provides the most efficient collateral for users who want to leverage their investment with minimised risk.

2. Stablecoin Conversion: To prepare for the loan, the Router identifies the most efficient DEX for converting the user’s stablecoin to USDz, minimising slippage and optimising fees.

3. Yield-Bearing Staking: Once the conversion is complete, the Router stakes USDz on Anzen’s protocol, returning sUSDz (a derivative of USDz). This step ensures that the user’s assets are generating returns while preparing for collateralised borrowing.

4. Initiating Collateralised Borrowing: With sUSDz in hand, the Router accesses the sUSDz/USDC market on Morpho, enabling the user to supply sUSDz as collateral and borrow USDC at up to 86% of the collateral’s value. The Router actively monitors liquidation risk, stepping in if the sUSDz collateral value approaches 86% of the borrowed amount.

   • Example: If a user borrows $50 in USDC against $100 in sUSDz, they would face liquidation if the sUSDz value falls to $58.14 ($50 / 86%).

5. Optimising Loan Liquidity via Anzen’s Boosted USDC Vault: To ensure liquidity in the sUSDz/USDC market, the Router leverages Anzen’s “Boosted USDC Vault,” which supplies USDC. Users can borrow USDC by posting sUSDz as collateral, though yield is only earned on the initial USDz.

   • Example: If the user borrows $50 in USDC against $100 in sUSDz, they pay a 9.57% interest on the loan, while continuing to earn 18.5% on the original $100 in USDz, netting a 13.7% effective return (18.5% - (0.5 * 9.57%)).

Ultimately, the user secures a $50 USDC loan against their yield-bearing USDz portfolio, optimising returns while maintaining a potential yield of up to 13.7% on their initial investment.

Example 3: Insuring Stablecoin Yield with Nexus Mutual

A user prioritises yield with additional protection, so selects the “Save” plan and to have protocol insurance. In this example, the Smart Router identifies Aave’s USDC lending pool, yielding 10.09%, paired with insurance coverage from Nexus Mutual costing 2.34% as the optimal choice.

Steps Taken by Fido’s Smart Router:

1. Opportunity Analysis: The Smart Router scans the "Save" plan options, evaluating yield, protocol stability, liquidity, and available insurance coverage. It selects lending USDC through Aave as the optimal combination of yield and stability, with Nexus Mutual providing insurance at a rate of 2.34%.

2. Stablecoin Conversion: To access Aave’s yield, the Router converts the user’s stablecoin to USDC using the most liquid route to minimise slippage and fees.

3. Yield Generation through Aave: With USDC in hand, the Router allocates funds to Aave, securing the user a 10.09% yield within the stable, low-risk "Save" plan.

4. Insurance Activation via Nexus Mutual: To safeguard the investment, the Router purchases insurance coverage through Nexus Mutual, protecting the user’s USDC position at a cost of 2.34% annually. This added layer of protection enhances security, especially for risk-conscious investors.

   • Example: Lending $100 in USDC to Aave would yield 10.09%. After subtracting the 2.34% insurance premium, the net return is 7.75% (10.09% - 2.34%).

In this example, the user’s funds not only earn a strong yield of 7.75%, but they are also secured against potential risks in the lending protocol. This combination of yield and security reflects Fido’s commitment to accessible, risk-managed investing.

Why Fido’s Smart Router is Crucial

The stablecoin ecosystem, with hundreds of stablecoins backed by various assets and use cases, can be challenging to navigate. Fido’s Smart Router is designed to cut through this complexity, making stablecoin management accessible to all users:

• Seamless Access to Stablecoins: Instead of managing multiple wallets and manually selecting stablecoins, the Router automatically identifies the optimal stablecoin for each user goal.

• Dynamic and Optimised Returns: By tapping into a network of stablecoins, including those with yield-bearing options like RWA-backed assets, and DeFi, the Router selects opportunities that align with both stability and return targets.

• Secure, Simplified Movement Across Protocols: The Smart Router utilises different protocols, ensuring stability while preserving access to competitive rates and options like insurance. This selection process provides users with a stablecoin solution that is both robust and efficient.

The Future of Effortless Money Movement in Web3

Fido’s Smart Router goes beyond investments, simplifying every aspect of money movement within Web3. Whether seeking returns, loans, insured funds, payments, or exploring new stablecoin opportunities, Fido’s mission is to streamline the stablecoin landscape, offering users accessible, frictionless finance without the hassle of managing numerous assets. With the Smart Router, Fido sets a new standard for stablecoin utilisation and fluidity in the Web3 ecosystem. Learn more about us here.