How to earn passive income on a stablecoin: BUCK Protocol Guide to $BUCK
BUCK is a money market protocol that connects multiple independent agents to produce a blockchain credit facility, an insurance pooling mechanism and an interest-bearing commodity-backed stable cryptocurrency. Built on the EOS blockchain, the protocol is permissionless, transparent and free to use.
Out of 3 main use cases, BUCK Protocol produces an interest-bearing collateralized stablecoin $BUCK pegged 1:1 to USD. It allows individual agents (further on: savers) to receive a yield on a stable asset, which is expected to be 3–4 greater than bank savings accounts or US treasuries.
In this article, we will explore how stablecoin $BUCK works and how to become a saver via Scatter.
How it works?
$BUCK is an EOS-collateralized cryptocurrency. Debtors bring $BUCK into existence by locking EOS of dollar value equal at least CR (e.g. if CR = 150%, then every $BUCK is backed by at least 1.5$ worth of EOS). In case of price going down, insurers perform automatic margin calls to bail out bad debt. There are strong economic incentives in place, such as arbitrage opportunity and a passive income, for people to use the protocol as insurers.
Stability
It is recommended to check the white paper to understand how stability works. At a high level, there’s an Interest Rate on the loans, which affects both demands for $BUCK and its supply. Increased Interest Rate increases the yield on stablecoin, making it more attractive to hold and less attractive for debtors to borrow and vice versa.
The Interest Rate will be set every 3 months starting from July until we introduce a decentralized mechanism of setting interest rates. In the first month of the launch (June), we retain the right to change interest rates at a 3-day notice.
So what if $BUCK > 1$?
Interest Rate will be reduced.
So what if $BUCK < 1$?
Interest Rate will be increased. However, there’s an immediate automatic feedback mechanism called Redemption. It allows to redeem $BUCK for EOS at a rate 1$BUCK = 0.99$. The mechanism is simple: CDPs with highest CCR get (partially closed) with a rebate of 1% of the current market price.
Yield
Debtors who bring $BUCK into existence pay an interest rate on their debt. Part of the interest rate proceeds goes to savers. How much savers receive depends on the following factors:
- What is the Interest Rate?
- How much $BUCK is staked in savings contract relative to the overall supply
- What is the savings ratio?
With the current Interest Rate of 9.5%, we expected the yield on a stablecoin to be around 7%.
Scatter How-to-Use Guide
The process of receiving a yield on $BUCK is very is actually very easy. First, one should obviously own $BUCK. $BUCK can be purchased from other exchanges that listed it or directly from the contract:
Go to https://scruge.world/buck
- First, you would need to login:
2. Then one would need to exchange EOS for $BUCK
Please note that the order will be executed after the update of the Oracle (happens every 10 minutes) at the price of the Oracle. Also, for the order to be executed, there should be somebody else on the other side to buy EOS.
3. After you have some $BUCK, you would need to put them into savings.
Done. $BUCK will be automatically compounding. If you need to withdraw $BUCK, you can do it at any time and use the contract exchange to buy EOS or transfer $BUCK somewhere else.
FAQ
How safe is it to use the contract?
The contract has been independently implemented in different programming languages and checked against the formal specification via random tests. Possible attack scenarios have been explored and corrected for. With that being said, the interface is the major possible security threat, so it is strongly advised to view Scatter transactions before signing them.
Who determines EOS/USD price?
The price is determined by the Oracle. The price gets updated at least every 10 minutes. The Oracle is controlled by the founding team. The founding team doesn’t benefit from liquidations, therefore there are no incentives for us to disturb the price. The Oracle takes the price of BTC/USD, EOS/USD and BTC/EOS from the major exchanges and takes the median price of EOS/USD. Please note that we don’t include any Tether pairings.
Who determines the Interest Rate?
The Interest Rate is determined by the Founding Team based on the market conditions. In the first month of launch (until July) Interest Rate can be increased or decreased within 3-day notice. Starting from July, Interest Rate will be set for a period of month with the only possibility of reducing the Interest Rate (meaning that Interest Rate can’t be increased until October ).
