Lybra Finance V1, V2 and The Future

13 min readMay 23, 2023

The Story So Far

It’s been approximately four (4) weeks since the launch of Lybra Finance, and suffice to say we’re looking back on that (relatively) short space of time with gratitude, pride and an overwhelming sense of achievement. Ultimately, in the space of one month, we’ve hit some incredible milestones which we’ll dive into below, but what makes this reflection on the past month even sweeter is how the project and the team as a whole has been welcomed into the LSD space, by not only community members, but also fellow LSD projects and protocols alike.

Launching a new stablecoin isn’t easy, but the feedback received and enthusiasm that we’ve been met with, makes all the hard work worthwhile. But, this absolutely isn’t a time to rest on our laurels and revel too much in what has already been achieved to date. It’s time to share the next chapter of the Lybra Finance story, with the launch of V2 of the protocol.

For those of you that want the TL;DR version, look below:

V2 Testnet Launch June 2023
V2 Mainnet Launch July/August 2023
New LSD Collateral (LST’s) Types
LBR Tokenomics Upgrades
LBR Utility, Deflationary and Burn Mechanisms
Revised and Upgraded LBR Emission Schedules
Protocol Revenue/Fee Capture Upgrades
Lybra Finance DAO & Governance Launch
UI/UX Upgrades
DeFi Partnerships and Collaborations

That’s the summary of V2 in bullet points, we’ll jump into each of those points below!

But before we get into the details of V2 (I know, you’ve all been very patient!) It’s important to quickly remember and vocalise the unprecedented success and milestones which have been met in the very short space of time since launch, with V1 of the protocol.

Lybra V1 Successes

On 23/05/23, the protocol boasted a TVL of $67M, representing over 36,000+ stETH that had been deposited in Lybra Finance since its inception. This placed Lybra Finance #6 in the rankings across all CDP’s (Source: DefiLlama). Unofficially, Lybra Finance would also rank in the Top 9 of all LSD projects in operation today when measured by TVL.
Over $34M of eUSD has been minted, which ranks eUSD as the #30 ranking stablecoin (by total minted/circulating supply) out of a possible 108 (Source: DefiLlama).
Over $88,000 of real yield has been paid out to eUSD holders, representing an APY of between 8–9% (paid on eUSD holdings).
Over 1,000+ holders of the native Lybra Finance governance token, LBR (excluding those that are yet to migrate from the previous LBR token contract).
Over 150 cumulative depositors have deposited ETH or stETH in the Lybra Finance protocol.
Reached over 7,000+ followers on Twitter, along with an incredibly active community of 2,000+ Discord Members.
Launched our first Bug Bounty Program with Immunefi, giving white-hat hackers access to all Lybra Finance code, to help identify bugs, on the promise of generous payouts of up to $100,000 for any serious vulnerabilities found.
Since launch on April 24th, 2023, over 11K ETH has been converted to stETH. That equates to over $19M! (Source: Dune Analytics)

This list could go on, and you know we like to celebrate the little wins, but you get the idea.

For a completely new entrant to the space, launching a stablecoin built on LSD, I think we’re off to a great start. Don’t you?

But that is just what it is, a start. In conjunction with our advisors, investors and partners we’ve identified even more areas of opportunity and we can’t wait to show and tell you all about them.

Who’s ready for Lybra Finance V2?

Lybra Finance V2

The hurdles we encounter today will soon be viewed as merely another obstacle we triumphed over with the introduction of V2. The inauguration of the V2 protocol and launching Omnichain will secure the ongoing advancement and expansion of Lybra Finance, with a swift (yet maintainable) and assertive thrust toward evolving into a top-tier LSD project in the current landscape.

So, what will V2 actually consist of?

Omnichain launch in accordance with LayerZero
New LSD Collateral (LST’s) used to mint eUSD
LBR Tokenomics Upgrades
LBR Utility, Deflationary and Burn Mechanisms
Revised and Upgraded LBR Emission Schedules
Protocol Revenue/Fee Capture Upgrades
Lybra Finance DAO & Governance Launch
UI/UX Upgrades
DeFi Partnerships and Collaborations

So, let’s get stuck in!

Omnichain Launch, OFT & weUSD

One of the main objectives and reasons for launching V2 is to realize one of Lybra Finance’s core visions:

Become the most widely used and successful Omnichain interest-bearing stablecoin.

Upon integrating with LayerZero, the protocol will first bridge to Arbitrum. It’s as if it’s written in the Stars! Get it?

This means that users can simply deposit their supported LSD assets of choice on the Ethereum network, in order to mint eUSD which can then be bridged/sent cross-chain to Arbitrum.

We chose Arbitrum due to its outstanding Ethereum L2 performance and extremely low gas fees, making it highly conducive for the use of eUSD in other DeFi protocols. Arbitrum is the ‘home of DeFi’, and has continued growing TVL and there is a reason it is the most widely used L2. Introducing and launching weUSD will allow for greater DeFi-compatibility, with respect to yield strategies and protocol partnerships.

Just imagine the potential if weUSD could be used in leading perpetual trading platforms like Gains or GMX. We believe this would greatly stimulate the development and adoption of eUSD, giving a significant boost to our protocol. New utilities and use cases for eUSD will significantly boost TVL, it’s as simple as that. With a greater TVL, comes even more utility and demand for our governance token, LBR.

To achieve this goal, we need to transform LBR and eUSD from standard ERC20 tokens into LayerZero OFT (Omnichain Fungible Token). Omnichain Fungible Tokens enable a token to be sent across current (and even future) chains, with no requirement for liquidity, and there are no fees.

This is HUGE.

But, this does necessitate the launch of new LBR and eUSD contracts. While this might cause some temporary inconvenience, this transformation is crucial for the long-term development and sustainability of the protocol and ensures that Lybra Finance is prepared and ready for taking eUSD and LBR to all L2 networks that exist today, as well as chains that launch in the future. So, what do you need to do right now? Nothing. We’ll keep everyone updated with detailed road maps and timelines to ensure this process and upgrade is smooth, efficient and as painless as it can possibly be.

Looking past V2 (I know, I know), we are already plotting and planning how the protocol can also allow users to deposit LST’s on any L2 in order to mint eUSD! Mainnet is great, but how cool and cheap are the L2 gas fees!

The weUSD Magic Pool and Its Benefits

One of the huge advantages of going cross-chain is that users need only mint eUSD on the Ethereum mainnet first, meaning they can then cross-chain the minted eUSD to the Arbitrum network through LayerZero. This process naturally forms an eUSD pool, which goes a little something like this:

1. Users deposit collateral (LST’s) and mint eUSD on mainnet
2. Users bridge eUSD to L2 (Arbitrum).
3. Lybra converts eUSD into weUSD, and locks weUSD on mainnet, in the Magic Pool.
4. Users receive weUSD (OFT).

Users through Lybra Finance, swap mainnet eUSD to weUSD which is then locked in the mainnet weUSD pool.

Anyone using the protocol can utilize this pool for liquidation through the implementation of Flash Loans. When a user needs to be liquidated, the protocol can offer anyone enough weUSD for the liquidation to happen, ensuring protocol security while also earning liquidation rewards for the pool. These rewards (paid in stETH and other LST collateral) will be claimable for eUSD holders in the liquidation pool. Liquidators will first utilize weUSD in the pool and convert it to eUSD from the protocol (no costs), and then use it for liquidation. Here is a great overview by Mr.CrossChain himself:

Wider Range of Supported LST’s and LSD Assets

In Lybra V1, the protocol supported deposits of ETH and stETH. Whilst stETH is by far the biggest LSD asset by total supply today ($11bn), this may change in the future. By accepting more collateral types to mint eUSD, not only do we future-proof the protocol, but we can also tap into the growth of other LSD assets, including LSD assets that are yet to even launch.

Our V2 upgrade will expand support to other LST assets which ultimately creates a lot of exciting possibilities for the protocol such as:

1. Firstly, the protocol will have the ability to add or remove supported assets in line with the needs of the DAO in accordance with the governance procedures of voting on which assets Lybra Finance should support. This provides more flexibility to adapt to market changes and enhances the protocol’s resilience to uncertainty.

2. Each asset will have an individual pool, but all will mint uniform eUSD. To minimize any risk, we will only support tried, tested and audited LST’s. Each pool’s eUSD minting will have a cap depending on the asset type.

3. This increased flexibility in V2 will allow the protocol to set yield aggregator pools and support other crypto assets, including LP’s as decided by the DAO. This will not only improve deposit yields, but also isolate potential risk from main pools.

New LSD assets that we will support will include (but will not be limited to) the following: rETH, stETH2, wBETH, swETH, and tapETH. These are subject to change, and upon launch of the Lybra Finance DAO, these assets can be removed, and new LSD assets added, in accordance with the new governance process of creating, discussing and consequently voting on a proposal.

V2 Tokenomics Upgrade

In order to secure the long-term development of the protocol, we’ve decided to make some significant improvements to V1’s Tokenomics. Based on data received and analyzed since the launch of the protocol there is an opportunity to balance emissions with burning to make LBR deflationary and drive significant value (and further utility) of our native token, showcasing that the LBR token is an integral part of the ecosystem and always will be.

During the IDO raise, it was clear that the demand for LBR outweighed the total supply offered (5% of the total supply of 100M LBR). Since this raise, Lybra Finance has been approached by multiple institutions and funds that have expressed a huge interest in not only investing, but who are willing to help further develop the protocol at a market and ecosystem levels. It would be naive and ignorant to disregard such interest and support, and as a result we will be making some small changes to the Tokenomics, so as to ultimately give the protocol (not the team), the means to hold a small percentage of the total supply in reserves, should we feel the need to onboard any institutions in the future, that can provide long-term support, not only financial level but also with legal, legislative and networking support.

It is absolutely fundamental and important that we make clear, any VC/institution that is onboarded will be subject to an absolute minimum of 1 year of vesting, if not longer. Institutions will only be onboarded should we feel there is a significant gain to be made by Lybra Finance, in meeting our long-term goals, and driving further future success to the protocol, users and community. Note, by introducing the Institutional Reserve, it means we have the flexibility, but not the obligation to onboard any institutional investment.

So, with that being said, here are the changes to the Tokenomics from V1 to V2.

Lybra V2 Tokenomics

*Vesting is in accordance with the TGE, which for the avoidance of doubt commenced on April 24th, 2023 or where otherwise explained. The only changes to the vesting schedule apply to Institution Reserve, which will be fully unlocked upon the launch of Lybra V2. These minor adjustments will ultimately allow the team to enable value added contributions and commitments from long term investors/partners etc, with the long term success of the protocol in mind.

In accordance with the revised Tokenomics and the necessity to deploy new token contracts (so to upgrade the protocol tokens from ERC-20 to OFT), we will also take this opportunity to communicate a clear deadline on token migration for those who still hold V1 of the LBR token.

As most of the community will know, we needed to deploy a new LBR token contract in April, to mitigate a minor bug that was identified in the esLBR smart contract during the first week of launch. Holders of the genesis LBR token were asked to migrate to the current LBR token.

Whilst most have done this, there are still some issues with regards to those that haven’t migrated yet, and/or those that are still providing LP to the old token contract, where minimal trading of that token is still happening. To combat this, we will introduce and communicate with plenty of notice a verbal deadline, at which time V1 LBR tokens must have been migrated the old LBR token, to the current LBR token as per the contract address below: 0xf1182229b71e79e504b1d2bf076c15a277311e05

Introducing this migration deadline will ensure a smooth transition over to the new LBR token contract. For the avoidance of doubt, a snapshot (which we will communicate in further updates) will be taken of all eUSD and LBR holders/wallets to ensure that the newly deployed tokens are distributed correctly. Right now, you needn’t take any actions, other than migrating old LBR tokens to the latest version if you haven’t done so already.

The vesting period for esLBR will be increased from 30 days to 60 days.

This means that when converting esLBR to LBR, 1.66% will vest linearly on a daily basis. The decision to increase the vesting schedule of the escrowed token will ensure a greater control on the overall token emissions schedule, creating and ensuring a more sustainable model for Lybra Finance. Other than the new token deployments, and the revision to the allocations as highlighted above, all else shall remain consistent with the previous LBR token, i.e. Total Supply. The deployment of new token contracts for LBR and eUSD will result in new contract addresses for the new version of the tokens. Further details will be released in future with respect to wrapped assets of these tokens.

Mining Program and Emission Schedules Upgrades

Further to the above changes, we will also be upgrading the current mining program, tackling any concerns around emissions and adding a deflationary element to the LBR token. Whilst the emissions schedule during V1 remained sustainable (through esLBR locking mechanisms), we’ve taken on board feedback from the community to further improve and upgrade the long term sustainability and success of the protocol.

So, what is changing?

1. We’re introducing the dLP (Dynamic Liquidity Provisioning) mechanism in Lybra V2. To receive esLBR emission from the eUSD loan pool, users will be required to maintain a minimum 5% threshold in locked Dynamic Liquidity relative to the total value of their loan.

For example: If User A mints 1,000 eUSD but provides $0 of LBR/ETH dLP tokens, they would NOT be eligible for LBR emissions. On the other hand, if User B mints 1,000 eUSD and provides $50 worth of LBR/ETH dLP tokens, this user would be eligible for esLBR emissions (assuming the minimum 5% threshold continues to be met).

2. If the qualifier drops below the minimum 5% threshold, the user will become ineligible for subsequent esLBR emissions. Simultaneously, a bounty equal to the amount of emissions that the user has earned while ineligible will be placed. This bounty can be purchased by any user at a 50% discount in LBR.

3. The LBR received will then be distributed as follows: 10% will be burned, and the remaining 90% will be returned to the mining pool.

Let it burn baby! 🔥

4. Once the user’s dLP rises above the 5% threshold again, they will resume receiving their esLBR emissions.

5. We will introduce more options for esLBR locking lengths, for e.g. 1.5 years = 150% boost, 2 years 200% boost.

6. Other mining pool incentives, including LBR/ETH LP and eUSD/USDC will remain unchanged, but the yield may be adjusted.

DAO Launch & Strengthening Governance

Shortly after the release of V2, we plan to launch DAO governance. This move will not only enhance the utility of esLBR but also involve the community more actively in the protocol’s decision-making process. It’s an important step towards ensuring decentralization, transparency, and community ownership.

Enhanced UI/UX for an Improved User Experience

Along with the release of Lybra V2, we’re significantly upgrading our UI/UX design. Our objective is to provide an interface that is not only easy to navigate, but also encapsulates the innovative spirit of our protocol through a fresh, modern aesthetic. We are streamlining information presentation, optimizing the layout, and minimizing complexities, thus ensuring a seamless interaction environment for all users.

Other

In addition to what has already been communicated above, we will be taking the time between now and the launch of V2 to further research and improve on the eUSD peg (for e.g. pairing eUSD against 3CRV). In addition to this, we will also continue conversations with many protocols and projects and you can expect some pre-launch (V2) partnership announcements in the coming days and weeks! Prior to the launch of Lybra V2, the protocol and contracts will be tested and audited heavily, in accordance with Immunefi and Code4rena. Security is of utmost importance to Lybra Finance and we will not push any upgrade or deploy any contracts unless we are absolutely sure that the respective testing and security audits have been carried out to the highest extent.

Conclusion

In conclusion, we believe that these changes and enhancements, while requiring some adjustment, will bring about an even brighter future for the Lybra Protocol. By making these upgrades and continuously innovating, we’re shaping a long-term vision that goes beyond any immediate short term gains. We’re not just growing; we’re building a sustainable, resilient, and inclusive financial infrastructure that will revolutionize the DeFi landscape. We’re optimistic, ambitious (we know!), and ready to take on the future. Join us as we embark on this exciting journey with Lybra V2!

Lybra Finance ⚖️

Website: https://lybra.finance/
Docs: https://docs.lybra.finance/
Twitter: https://twitter.com/LybraFinanceLSD
Discord: https://discord.gg/mgyq3PhdJg