BunnyDucky — The magic of compounding, tokenized
BunnyDucky is a platform that tokenizes DeFi strategies as yield bearing tokens
- Yield bearing tokens — profits-accruing shares in a strategy that may be used as lego blocks in other DeFi protocols
- Smart automation — auto-compound and rebalancing strategies to maximize yield
- Friendly UI — compose multiple protocols into one UI, making investment into a strategy a breeze
Each DeFi strategy would have its own yield bearing token to represent the value deployed into the pool, as well as profits returned by the strategy. The profits returned increase the value of the yield bearing token, as well as the investable capital of the pool — earning the pool yet more profits in the future.
The first strategies that BunnyDucky offers are very simple. Stable swap LP tokens from Mercurial and Saber can be converted to yield tokens through BunnyDucky. The deposited LP tokens will be staked in their respective farms to generate profits. The yield tokens can then be deposited in Parrot.FI to borrow the stablecoin PAI. Since the yield tokens increase in value, this makes the PAI debt self-repaying.
The BunnyDucky vaults will aim to invest 100% of the deposited value, and allow users to withdraw at any time.
Yield Tokens vs LP Tokens
Why are yield tokens needed when there are already LP tokens?
To earn rewards, users are typically required to stake the LP tokens in a farm, thus making the LP tokens unavailable for use in other protocols. Even if a lending protocol accepts LP tokens as a collateral, users would have to give up the farm rewards to use it for borrowing. Instead, let yield pools stake your LP tokens for you, and offer yield tokens that can be used in other protocols.
Another advantage of using yield tokens is the fact that they increase in value automatically as the yield pool compounds profits back. This makes yield tokens an ideal form of lending collateral, because debt-load would decrease, making the loan self-repaying. Whereas if a user uses LP tokens as collateral, the loan position would have to be managed carefully to avoid liquidation as borrow interest accrues.
Yield Token as a Standard
Yield tokens are also simpler lego blocks for protocol builders. Yield strategies can have complex rules with respect to deposit and withdrawal. Through yield tokens, BunnyDucky can offer a unified interface for builders to plug into all kinds of investment strategies.
BunnyDucky will have a strategy that auto-rebalances between multiple lending protocols to optimize on the highest yield. Each lending protocol may have a different LP token, and some may not have LP tokens at all. BunnyDucky would abstract all these details behind yield tokens that accrue profits.
Another use case similar to auto-rebalancing is auto-rollover. Consider a lending protocol that offers 30 days fixed term lending for USDC. It would be very inconvenient for users to have to manually roll over the loans. For protocol builders, accepting LP tokens that are only useful for 30 days would also be impractical. Having a yield token can hide this detail, because the yield pool would accrue profits over multiple loan terms back to the same yield token.
Meta Strategies for Different Risk Profiles
Auto-balancing allows yield tokens to abstract over multiple protocols. Auto-rollover allows yield tokens to abstract over time for the same protocol. Going further, it would also be possible to create “meta strategies” that abstract over multiple strategies to create different risk profiles and better diversification for users.
At the lowest level, users can deposit assets to individual pools. For example, there can be yield tokens that map to
- Mercurial USDC-USDT
- Saber USDC-USDT
A “stable swap USDC” yield token may be set up to auto balance between the above two pools.
Similarly, there can be yield tokens for individual lending pools:
- Mango USDC deposits
- Tulip/Francium USDC deposits
- Solend/Port USDC deposits
And “USDC lending” yield token can be set up to auto balance between the above pools.
The BunnyDucky platform makes it possible to create higher level yield tokens out of yield tokens.
There will be higher level yield tokens created for “stable swap USDC” and “USDC lending” yield tokens to create investment strategies that diversify across stable swap pairs and lending pools.
These examples illustrate the power of yield tokens, and how strategy designers can pick and choose different yield tokens to create risk profiles and diversification to satisfy the needs of a wide range of customers.
Fair Token Launch
The utility token of BunnyDucky is $BUD. At token launch, 50k BUD and 250k PAI will be added to the token genesis LP pool to initialize its liquidity. A further 10k BUD is minted for the initial incentive boost at launch.
That’s it. There is no other pre-mined allocation.
(Details about the initial incentive boost will be announced in a follow-up article.)
Bonding & Staking
BUD’s supply and liquidity will grow through “bonding” and “staking”, using png.fi’s services.
With bonding, users are able to purchase BUD at a discount from the market price using BUD/PAI LP tokens, locking the liquidity in the protocol treasury. Overtime, the BUD supply grows in tandem with the token’s liquidity depth. Bonder would receive staked BUD tokens (sBUD) that immediately starts to accrue staking rewards.
Staked BUD (sBUD) will receive compounding BUD rewards. Unstaking will take 7 days. This means that although bonders will immediately receive staked BUD tokens, it will take 7 days for a bonder to unstake.
Protocol Revenue Bonding
Bonding is open to anyone who wants to buy BUD at a discount. At the protocol level, BunnyDucky will use its revenue to bond, adding more liquidity for the protocol as it earns more.
Protocol Revenue Bonding works like this:
- The protocol earns $100 USDC in fees
- Converts $100 USDC to PAI
- Uses $50 PAI to purchase BUD from the market
- Creates BUD/PAI LP with $50 BUD + $50 PAI
- Bonds BUD/PAI LP to purchase $120 worth of BUD (assuming 20% discount)
- Distribute staked BUD as rewards to protocol users
We see Protocol Revenue Bonding (PRB) as a way to build intrinsic value into the token over time.
In the initial growth stage, BunnyDucky will take a higher percentage of the harvested profits as revenue to engage in revenue bonding to bootstrap the initial supply. At launch, 90% of everything harvested will go into bonding, with 10% to the yield tokens.
Mainnet Launch
BunnyDucky is available on the mainnet. You can access it here:
There are currently two farms (with more added soon!):
- SBR USDT-USDC
- MER 4USD (USDC-USDCet-USDTet-DAI)
Here’s a tutorial of how to stake in BunnyDucky (you can stake LP tokens directly, or “zap” into a pool using any of the supported asset:
https://github.com/bunnyducky/docs
Token Launch
All protocol profits will accrue to yield tokens until revenue bonding is activated.
Protocol revenue bonding will activate on Friday 01/21/2021 HKT 9:00am, with 90% going into bonding, and 10% to the yield tokens. Initial incentive boost will start at the same time as protocol revenue bonding.
Stay in touch to get notified of more information regarding the initial incentive boost!
Follow us on Twitter https://twitter.com/BunnyDuckyHQ
Join our Discord: https://discord.gg/bunnyducky
