Hey, my name is Vlad Kamyshov. I am CPO and tech architect of EVAA. And I am the team member who has launched two products on the Waves blockchain

Please introduce how many team members there are and provide a detailed explanation of the team member who participated in another lending protocol on the Waves blockchain.

There are currently 7 members on our team. 5 of them are Ton natives. My track record includes the following:

• Sway Lend as Tech Architect (December – January 2022)

• Puzzle Lend (Waves blockchain) as CPO (September 2022 – December 2022)

• Pluto reserve currency (Waves blockchain) as co-founder and CPO (April 2022 – December 2022)

• 4 years of work in a commercial bank as a risk officer and a product manager

All of the Waves products I've contributed are independent. I have never been an employee of Waves. All of these projects have never been involved in shady affairs and have had a good reputation among the Waves community. When the Waves Bridges liquidity crisis occurred, I lost most of the value of my allocation in these projects and some of my USDN savings. At that point, I stopped building there to stop creating value for a blockchain that was treating the trust of its warm and friendly community so badly

Has that team member been in contact with Sasha, the founder of the Waves blockchain?

I have talked to Sasha once. It was a year ago when we were launching Pluto. I was negotiating with him about marketing support for Pluto from his side.

The community's main concern about the EVAA project is that the lending protocol was at the core of the fraud on the Waves blockchain. The person who worked on that lending protocol is now involved in another project, which makes it difficult to trust. How do you plan to respond to this?

There are two lending protocols on the Waves blockchain: Vires and Puzzle Lend.

Vires is a notorious lending protocol that has been operating since 2021. At its peak, its TVL was about 1.3 billion, then several wallets, allegedly associated with Sasha, borrowed 0.5 billion, which led to a loss of trust in the protocol.

We found an opportunity in this and launched a new lending protocol protected from such whale manipulation. That's how Puzzle Lend was started. It still works well to this day.

How are lending parameters defined?

We are going to build a DAO for deciding on new isolated markets, assets, and parameters. During the MVP stage, I will set these parameters based on math, best market practices, and my experience. Our risk framework will be available in the Gitbook on our site after the mainnet launch.

How does the smart contract ensure that it will not be maliciously tampered with by developers?

In the first stage, we are going to implement a time lock in the code update: when we invoke an update function, the update itself takes effect in, say, a week. This way the community will have an opportunity to research the new code, decide if this code is malicious, inform others, and take action.

In the future, we plan to allow only the DAO to alter the code. In this way, the community will not only be able to check, but also to decide which code will be behind the EVAA.

If a developer needs to modify parameters, will there be a time lock to limit these actions?

Yes

Borrowing for spending

The simplest use case of borrowing is very straightforward: you just borrow stables using the token you are bullish on as a collateral. Imagine you are bullish on PUZZLE, and you want to buy a car but cannot afford it without selling your assets. In such a case, you needn’t wait for the next bull run to cash out - you can just supply PUZZLE as collateral to Puzzle Lend and borrow stablecoins. When your supply is up, you simply repay the loan using your yield from the increase in the price of the collateral. This will allow you to spend money on whatever and whenever you want while keeping a long position on your favorite token. 

However, this won’t make you a millionaire, so let’s move on to more tricky applications: 

Margin trading

The most common use of money markets comes as leverage for long or short positions in the spot market. Unlike futures, margin trading enables you to hold your positions for years paying about 1% per month, earning from medium- and long-term price movements.

Say, you want to long WAVES. For this, you need the following:

1. Buy WAVES at Puzzle Swap, Waves Exchange or Swopfi.

2. Supply it to the Main Pool of Puzzle Lend.

3. Borrow USDN or any other stablecoin. Now, your Account Health can go as low as 5%, you will be able to increase it further.

4. Buy more WAVES with the borrowed funds.

5. Repeat steps 2-4 till your Account Health matches your risk tolerance. In the case of WAVES, this allows for more than 2x leverage. Still, I recommend keeping Health no lower than 20%.

6. Wait until your supply skyrockets.

7. Withdraw your supply and sell for USDN to repay the loan in portions.

8. PROFIT!

Shorting is very similar, yet an inverted, process. As an example, let’s short the VIRES token:

1. Deposit some of your tokens into Puzzle Lend’s Waves DeFi Pool. It is preferred to use stablecoins as the volatility of the collateral may lead to liquidation.

2. Borrow VIRES.

3. Sell it for USDN.

4. Supply your gains into the pool...

5. And borrow VIRES again repeating the subsequent iterations. Mind your account health!

6. Wait until VIRES is low.

7. Invert the process.

8. PROFIT!

You should keep in mind, that using leverage increases your exposure to an asset and thus, amplifies your potential profit or loss. 

Risk management

Most investments follow the empirical law: the higher the APY, the higher the risk. So it is in DeFi – the best earning opportunities usually involve dealing with volatile assets. Lending protocols enable you to always be on the safe side - you don’t have to buy risky assets if you can borrow those. Say, you borrowed WAVES in order to provide it to the WX pool paired with USDN and earn up to 80% APY. In this case, you have as many WAVES as you’ve borrowed, and even if WAVES plummets, you don’t lose a thing. (In fact, in this example you may end up with fewer WAVES due to the impermanent loss effect, but this is compensated for by a higher amount of USDN).

Another good example of this trick is borrowing USDN with USDT as collateral. If you doubt Neutrino, this gives you peace of mind at any level of depeg. 

Your risks can be under your control.

Futures arbitrage

Since almost all tokens listed on Tsunami Exchange are also listed on Puzzle Lend, you can earn thousands of % in APY from arbitrage between the futures and spot markets. This is a rather complex matter to cover within this article, so if you are interested in the topic, you can learn more from the article in the Tsunami Blog.

***

The most inspiring thing in the DeFi world is that you needn’t be a part of selected centralized entities to build your own profitable strategies. These mechanics are just bricks that can be combined with the mechanics of other protocols by any user in order to build a unique money-making scheme or leverage an existing one. You can try these too 😉

The Pluto protocol is the first of its kind and the optimal parameters it should work with have yet to be figured out. The protocol was initially launched with crazy onboarding APYs to draw community attention to this mechanic and find out whether sell pressure it leads to is moderate enough. Now we are glad to see that anyone aware of Pluto is also aware of how to issue Pluto. But we realize that selling of onboarding rewards limits the growth of the market price and the protocol as a whole.

Why does this happen?

Onboarding makes backed price go up and improves sustainability of the protocol — this is why it is manyfold more beneficial compared to staking. But the flip side of Onboarding is that it is yielding only while lock-up. This makes a part of participants sell their rewards in order to reinvest the gains back into onboarding. Let’s name this kind of sell pressure the Onboarding price impact.

Anyone willing to invest in Pluto has to choose between buying PLUTO from the market to stake it and onboarding. Now we can tell that the share of buyers is not large enough to compensate for the Onboarding price impact.

And what’s next?

We are considering to make staking and onboarding APYs closer to each other:

1. Increase maximum staking emission from 60% to 80% per year to make staking more lucrative.

2. Increase lock-up period by 3 days keeping onboarding ROI. This means that participants get the same PLUTO amounts, but have to wait longer to unlock:

This should make the buy-and-stake option relatively more attractive to participants. In this case a participant gets the equally valued choice:

1. Buying PLUTO from the market to stake it in order to get, say, 350% APY keeping full control of their funds.

2. Investing in onboarding to get, say, 1010% APY, which implies a downside risk that they can’t address until the lock-up is over.

What should it lead to?

We expect the proposal implementation will lead to an increase in the market price of PLUTO. On the one hand, it will increase the share of participants who prefer the buy-and-stake option and thus increase buying pressure. On the other hand, it will reduce the Onboarding price impact and extend the cycle of selling rewards, which means less selling pressure. Therefore, the price equilibrium should be higher than before.

Finally, this proposal will affect the Treasury and backedPrice. Due to the reduced share of onboarders the treasury will have a lower degree of growth, still due to higher market price and plutoGrowthFactor each onboarded token will increase backed price more intensively.

Join the discussion on the proposal

The new parameters are just the beginning of searching for the optimum and these are not final. We look forward to getting your feedback on the proposal in our telegram community chat:

https://t.me/plutosoon

Stay tuned!

Pluto is an innovative reserve currency design. It is a financial instrument resistant to bear markets that provide long-term and planned growth in the market price of an asset.

TL;DR:

• PLUTO tokens are backed by treasury funds.

• The treasury maintains a market price no lower than the backed price.

• The onboarding mechanics build up the treasury and increase PLUTO's backed price.

• PLUTO onboarding and staking bring triple-digit %APY to the participants. Treasury-driven price model

The treasury is a core of the Pluto protocol.

Most of the treasury (at least 80%) consists of the low-risk lp tokes such as Vires_USDT, Vires_USDC, and Waves Exchange USDT/USDN pool, which are essentially stablecoins invested in protocols and generating interest. The treasury will also include LP tokens from the Pluto pool launched on Puzzle Swap in order to guarantee a sufficient level of liquidity.

The key objective of the Pluto protocol is to drive the growth of the treasury along with the backing of each PLUTO token.

There are several key parameters in Pluto's mathematical model that ensure the stability of the system:

Market price — PLUTO price in USDN on the market. Backed price — the value of the treasury assets for each PLUTO token issued, that is, the value of the treasury / amount of PLUTO. Maximum price — the backed price multiplied by K. Currently, K = 3, in the future the multiplier value will be controlled by voting. Growth factor — market price to backed price ratio.

If the market price of a PLUTO token falls below the backed price, the smart contract will start to buy back the tokens in the Puzzle Swap mega pool and burn them. Thus, the treasury maintains the market price of PLUTO at or above the backed price.

Conversely, if the market price of PLUTO surges above the maximum, the smart contract issues and sells PLUTO, increasing the treasury until the price returns to the established range.

In this way, the market price of PLUTO may decrease during short periods of time, but in the long run, it steadily grows.

Example.

The treasury holds 1 million USDN worth of assets, which are generating interest on Vires and Puzzle Swap. Meanwhile, 500,000 PLUTOs have been issued.

This means that the backed PLUTO price is 1000 / 500 = 2 USDN, and the maximum price is 2 × 3 = 6 USDN.

The market price of PLUTO can range from 2 to 6 USDN. At the point when the market price equals 4 USDN, the growth factor is 4 / 2 = 2, or 200%. This is the optimal value when the model generates a high yield and attracts new participants.

Basic mechanics

The Pluto protocol includes two main mechanics that create demand for the PLUTO token:

• Onboarding. This is a mechanism for attracting new assets to the treasury and issuing new PLUTO tokens. Onboarding is designed to simultaneously raise the backed PLUTO price, pay significant interest to onboarding participants, and (if the current growth factor is high enough) payout the incentive portion of the staking rewards.

• Staking. This is passive income generation for PLUTO holders.

Onboarding

To become a participant in onboarding, a user brings stablecoins or LP tokens into the treasury. In return, he gets PLUTO tokens at the market price. PLUTOs remain blocked for a few days. The protocol accrues Onboarding APY on issued Pluto until the end of lock-up period.

The blocking period and onboarding APY depend on the growth factor at the time of onboarding start:

Pluto growth factor Lock-up period Onboarding APY (with compounding interest)

Example

suppose: treasuryValue = 100000 usdn totalSupply = 50000 pluto backedPrice = treasuryValue/totalSupply = 2 usdn marketPrice = 4 usdn plutoGrowthFactor = marketPrice / backedPrice = 200% onboardingAPY = 2641% lockup = 8 days

Hence investing 1000 usdn through onboarding results in: onboardingBonus = investedAmountInPluto*(1+onboardingAPY)lockup/365 = 1000/2*(1+2641%)8/365=268.8 pluto worth of 1075.3 usdn if marketPrice stays the same. However, the price can fluctuate, but since backedPrice increases, marketPrice tends to increase.

Why are interest rates so high?

The onboarding yield comes from the "gap" between market price and backed price. The user receives the resulting amount of PLUTO at a price lower than the market price at the moment the onboarding starts, but higher than the backed price. It means each onboarding increases Treasury by more value than backed price.

The onboarding APY is designed to increase the collateral value per PLUTO token, so the backed token price increases due to onboarding.

Below you can see how onboarding in previous example affects backedPrice, totalSupply and treasuryValue:

totalSupply = 50000+268.8=50268.8 pluto treasuryValue = 100000 + 1000 = 101000 usnd backedPrice = 101000/50268.8≈2,01 usdn As you can see, the protocol is designed to increase the minimal price of pluto. Consequently, maxPrice and market price will also grow. To put it simply, the protocol is calibrated so that the amount of tokens grows at a slower rate than the value of the treasury.

Additionally, if the difference between the market price and the backed price is considerable, a portion of new value is allocated to back incentive rewards for staking. Staking rewards are capped by a governed level.

Staking

PLUTO holders can stake their tokens. PLUTO staking does not involve locking, tokens can be withdrawn at any time.

All PLUTOs are backed and staking rewards are no exception. This is why any staking requires growth of the treasury. There are two parts to the staking yield: unconditional and incentive.

The unconditional part of the yield is formed with the interest that the treasury's LP tokens generate. For example, if the treasury grew due to interest by 20% a year, then 20% of the new PLUTO tokens are issued and distributed among the stakers. The unconditional yield of staking is independent of PLUTO's market price.

The incentive part of the yield is backed by the onboarding-driven growth of the treasury. This part depends on growth factor: the higher it is, the higher incentive staking is distributed to stakers.

The maximal staking emission is capped by a figure governed by the community. Initially, this figure is expected to be 70% per year. The yield is calculated in proportion to the amount of PLUTOs in staking. So if there were only half of all existing PLUTOs in staking, the unconditional yield would be 140%.

Staking yield is compounded: the gained rewards are subject to the following interest accruals.

Why Pluto is sustainable

Pluto tokenomics are sustainable due to the design of incentives:

• Minting of any Pluto is backed by the growth of the treasury.

• The onboarding mechanics increase the backed price of each PLUTO token i.e. the price floor. Detailed calculations are given in the white paper of the project, and everyone is welcome to review them.

• The Treasury maintains the market price at a level no lower than the backed price, which gradually increases. The protocol can buy back all minted PLUTO at the backed price.

• The Protocol is designed to decrease the risk of investors: max price is bounded below 3*backedPrice, which means that downside under normal conditions on the market is no higher than 3.

You may wonder what if market price sets at backed price level, onboarding ceases and staking yield is reduced to the unconditional portion? The Pluto protocol has another buyback mechanism that will push the market price up to the midpoint between the minimum and maximum. Read more about the buyback in our next article.