B.Protocol is LIVE
Get more from your MakerDAO Vault
Introduction
We are excited to announce that B.Protocol is live on the Ethereum mainnet, and available at https://bprotocol.org/app.
Users of B.Protocol are able now to make more with their MakerDAO Vaults, earn a share from liquidation proceeds, take part of B.Protocol future upgrading decisions, and help make MakerDAO more resilient to Black Thursday-like events.
We are sharing here the full details about the protocol’s launch, to enable everyone to learn the details and choose how and when to get involved.
What users get
Users who manage their MakerDAO Vaults with B.Protocol smart contract interface accumulate a user rating score. The earliest you start using B.Protocol, the more rating score you get. After a 6 month period, part of the liquidators’ proceeds are distributed to the users, proportional to the rating score they have accumulated.
The protocol was seeded with $10,000 in ETH to guarantee a minimum of the sum of distributed rewards. After 6 months the same time, users could start to vote on the future proceeds distribution model, and their voting power is proportional to their score.
During the first month, the user rating accumulation speed will be x2 higher.
- The score is given only to users, and no score was pre-allocated to VCs or the team.
- The score is non transferable and not even an ERC20 token. Hence it cannot be traded, and can never be traded.
- While we technically cannot prevent future governance from tokenizing it, we will not actively support any outcome that will violate the applicable regulatory framework.
Security model
B.Protocol was designed as a thin layer on top of MakerDAO CDP system, and to make user funds as secure as they are when using MakerDAO directly. The user pays the same interest rate, and the same liquidation penalty.
The code was audited by Solidified. Wil Barnes and Lucas Manuel, who are among the people that are most familiar with MakerDAO smart contract code, also reviewed it.
Both reports did not find any major issues, and confirmed our analysis regarding the security of user funds.
The problem we solve
Over $10B in DeFi assets crucially relies on an adequate liquidation process for their security. The Dai ecosystem, lending platforms like Compound and Aave, synthetic asset platforms, and margin trading platforms all rely on liquidations to remain solvent.
Whenever a user debt is about to exceed its collateral, a liquidation process is triggered, in which a liquidator pays the user’s debt in return for a part of their collateral. All major DeFi platforms currently outsource this service to the entire Ethereum community, by allowing every Ethereum account to participate in the liquidation process, and offer a discount of 3–8% on the liquidated collateral in order to incentivize liquidators to participate.
This is in general a fair approach, but as we have covered in a previous blog, it brings up two major issues — 1) Gas wars that lead to MEV growth that will eventually mark down liquidation incentives to zero, and 2) lack of committed liquidators as the uncertainty of potential profits is too high. Both of these issues are critical to the stability of the DeFi ecosystem on any given day, and in particular on severe market conditions as occurred on Black Thursday in March earlier this year.
B.Protocol is a new DeFi lego primitive aiming to make decentralized lending platforms more stable by introducing a backstop liquidity solution. We incentivize liquidity providers (keepers) to share their proceeds with the platform users in return for getting a priority in the liquidation process. By that, we bring more committed liquidators to the platform and help to shift back miners extracted profits (aka MEV) to the community.
How does it work?
We integrate B.Protocol with existing lending platforms, MakerDAO being the first. We let users interact with the lending platforms via a dedicated smart contract interface. B.Protocol liquidators get a priority in the liquidation process by providing a cushion to the user account when it is getting close to the liquidation price. You can read more about how B.Protocol achieves fairness in its liquidation process here.
Users are getting a Rating score according to their usage of the protocol (borrowing Dai for a certain time period). Any liquidation that is being processed by B.Protocol’s Liquidators over MakerDAO is being divided, and 50% of the liquidation discount is going into the Jar. After 6 months the Jar is being distributed among the Users of B.Protocol according to their Rating score.
Who Benefits from using B.Protocol
Everyone (but miners…)!
- MakerDAO users can get added value from their MakerDAO Vaults, sharing a part in the liquidation proceeds with no added risk*.
- MakerDAO as a lending platform gets new and committed professional liquidators that bring more stability to the platform. In the long run, a more stable platform could enable a lower collateral ratio.
- Liquidators get better risk management and prediction capabilities. This incentivise them to build better adjusted tools for DeFi lending platforms, and in return for the decline in uncertainty, to share their proceeds with the users of the platform.
- The Ethereum ecosystem get another way to mitigate MEV and to shift value from miners back to users.
The Details
Rating Score
- Rating Score calculation: A user’s Rating Score is determined by the amount of DAI s/he borrowed and the time that elapsed before returning the loan. Formally, for every debt of 1,000 DAI (*), a user will receive 1 point daily (* the actual debt is normalized by dividing by the MakerDAO cumulative rate, which is currently 1.2).
- For example, if a user has a (normalized) debt of 5000 DAI for a period of 7 days, then his/her score is added with 35 points.
- The user Rating Score is not transferable during the first 6 months.
- Fair Launch principles — No VCs & no pre-mine of Rating Scores to anyone. Including Dev.
- In order to incentivize the bootstrapping of the protocol, Rating Scores will be calculated with an x2 factor for the first month from launch.
Jar
- Liquidation proceeds sharing: 50% of the premium of every liquidation (In the time of writing, this is 6.5% of the liquidation size) goes into the JAR smart contract.
- JAR Rewards Distribution: After 6 months, the content of the JAR will be distributed among the users of B.Protocol in proportion to their Rating Score.
Important stuff
- 6 months after launch, 100% of the control of B.Protocol on top of MakerDAO will be handed to the community who will have the power to decide about its future path. A decision by 51% of the users, according to their Rating Score, will be able to set an adjusted incentive model.
- The Jar has been subsidized by B.Protocol and has been injected with a $10k worth of ETH, so participants will benefit from migrating to or using B.Protocol even if only few liquidations will take place during the 6 months period till the Jar will be distributed.
How to start with B.Protocol
B.Protocol (https://bprotocol.org/app) is an alternative Vault management system. Users are getting the exact same conditions as if they were using MakerDAO, plus the ability to share the liquidation proceeds with B.Protocol liquidators.
- Import your Vault to B.Protocol with a single click, using the import widget.
- If you do not have a Vault on MakerDAO — Open one through B.Protocol by deposit ETH and Borrow Dai.
- Your Rating score will keep on growing as long as you hold a debt.
- After 6 months from launching, the Jar balance, which is where liquidation proceeds are being kept, will be distributed among users according to their rating score.
*For a full tutorial on how to use B.Protocol head over to https://medium.com/b-protocol/how-to-use-b-protocol-4f13591e33dc.
About B.Protocol:
B.Protocol makes lending platforms more secure by incentivizing liquidity providers (keepers) to commit on liquidation of under collateralized loans and shift the miners extracted profits back to the users of the platform. B.Protocol was founded by Yaron Velner, who was previously Kyber Network’s CTO and a co-designer of the WBTC protocol.
For more, please visit our website, twitter, discord and github.
