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Teddy Cash — a decentralized borrowing protocol with interest-free loans on Avalanche

Image by เกรียงไกร เหลืองชัยปรีดา from Pixabay

Teddy Cash is a decentralized borrowing protocol that allows you to draw interest-free loans against AVAX used as collateral. Loans are paid out in TSD (a USD pegged stablecoin) and need to maintain a minimum collateral ratio of 110%.

In addition to the collateral, the loans are secured by a Stability Pool and by fellow borrowers collectively acting as guarantors of last resort. Learn more about these mechanisms in our documentation.

Teddy Cash as a protocol is non-custodial, immutable, and governance-free.

Introduction to Teddy Cash

Teddy Cash is a fork of the Liquity protocol for the Avalanche C-Chain subnet. Teddy Cash follows Liquity’s vision of a completely decentralized borrowing protocol with interest-free loans, high capital efficiency, an a censorship-resistant stable coin (TSD or TEDDY Stable Dollar).

The mechanisms of the Liquity protocol have been proven to work effectively and to withstand black swan events, like the sudden market drop of May 19, when the stable coin was able to hold its peg with only a minor and short term peg deviation.

While Teddy Cash provides an easy to use UI, we incentivise other DeFi projects to integrate Teddy Cash directly into their frontends via a rewards mechanism. This will prevent censorship by governments and by the team itself, see Uniswap Token ban debacle.

Furthermore the protocol is completely autonomous and works without a DAO or governance. This is one lego block in Avalanche’s vision of a decentralized finance smart contract platform.

We strive to stay as close as possible to the original, and unlike other forks, do not change any of its mechanisms or reward economics.

The motivation behind Teddy Cash

Stable-value assets are an essential building block for Decentralized Finance applications and have grown to represent tens of billions of dollars in value.

However, the vast majority of this value is in the form of fiat-collateralized stablecoins like Tether and USDC. Decentralized stablecoins like DAI and sUSD make up only a small portion of the total stablecoin supply, meaning the vast majority of stablecoins are centralized.

Teddy Cash addresses this by creating a more capital efficient and user-friendly way to borrow stablecoins. Furthermore, Teddy Cash is governance-free, ensuring that the protocol remains decentralized.

Teddy Cash’s key benefits

  • 0% interest rate — as a borrower, there’s no need to worry about constantly accruing debt
  • Minimum collateral ratio of 110% — more efficient usage of deposited AVAX
  • Governance free — all operations are algorithmic and fully automated, and protocol parameters are set at time of contract deployment
  • Directly redeemable — TSD can be redeemed at face value for the underlying collateral at any time

Two ways to generate revenue using Teddy Cash

  • Deposit TSD to the Stability Pool and earn liquidation gains (in AVAX) and TEDDY rewards.
  • Stake TEDDY and earn TSD and AVAX revenue from borrowing and redemption fees.

TOKENOMICS

$TSD (Teddy Dollar)

The Teddy Dollar (TSD) is the first stablecoin on the Avalanche network that uses AVAX as collateral. In addition to the collateral, the loans are secured by a Stability Pool containing TSD and by fellow borrowers collectively acting as guarantors of last resort. Teddy Cash as a protocol is non-custodial, immutable, and governance-free.

TSD is the USD-pegged stablecoin used to pay out loans on the Teddy Cash protocol. At any time it can be redeemed against the underlying collateral at face value.

TSD is minted when users deposit AVAX as collateral and open troves. The mechanism for its price stability is described in detail in the excellent Liquity docs.

Users can deposit TSD to the Teddy stability pool to earn both AVAX through liquidations of risky troves and TEDDY rewards as an incentives for being early adopters.

$TEDDY

TEDDY is the secondary token issued by Teddy Cash. It captures the fee revenue that is generated by the system and incentivizes early adopters and frontends. The total TEDDY supply is capped at 100,000,000 tokens and has a max supply of 82,000,000 tokens.

TEDDY tokens are earned from staking TSD to the stability pool or from staking Pangolin LP tokens (AVAX/TSD, AVAX/TEDDY).

Users can stake TEDDY to earn a pro-rata share of the borrowing and redemption fees in TSD plus AVAX from redemption gains.

TEDDY’s distribution schedule

TEDDY’s community issuance (outside of LP incentives and the Community Reserve) follows a yearly halving schedule, described by the following function: 32,000,000 * (1–0.5^year). The purpose of this issuance curve is to favorably incentivize early adopters while also maintaining incentives for the long term.

As noted earlier, Teddy has a max supply of 82,000,000 tokens.

TEDDY Token Allocation

42.6% Community and early adopter rewards

> 39% for stability pool early adopter rewards. Distributed over 5 years.

  • Year 1: 16,000,000 TEDDY
  • Year 2: 8,000,000 TEDDY
  • Year 3: 4,000,000 TEDDY
  • Year 4 : 2,000,000 TEDDY
  • Year 5: 1,000,000 TEDDY
  • Year X: …

> 3.6% for AVAX/TSD Pangolin LP rewards

  • 3,000,000 TEDDY Distributed over the first 6 weeks

33% Treasury for partnerships, advisors, marketing and other rewards, e.g. additional LP rewards.

> 1M tokens was used for AVAX/TEDDY pool2 rewards.

24.4% Team. Locked for 1 year by smart contract. Then 25% is granted by a multi-sig every quarter.

TEDDY Circulating Supply

Circulating supply figures below and in the excel EXCLUDE the treasury (26M remaining). The treasury may be used to fund further liquidity pools. When funds are allocated the figures below will be updated.

Teddy Cash Circulating Supply

Unlike existing borrowing/lending protocols on avalanche, Teddy Cash offers no recurring interest rate for taking a loan but instead a one time fee. It’s unique and immutable architecture allows you to unleash your inner degen and go with close to 110% collateralization.

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CryptoBros Research consists of group of Computer Engineers and IT Professionals who believe in Cryptocurrencies and Blockchain Tech. We want to help drive informed decision making and investment by sharing our collected data and thoughts via the Cryptobros Research blog.

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