Introducing StableCredit, a new protocol for decentralized lending, stablecoins, and AMMs.
First, a few primers;
Stable Coins (tokenized debt)
DAI is tokenized debt. You provide ETH into a Maker vault. This gives you a credit line of ETH in dollar value. You can draw up to 75% of this credit line in DAI (debt). Anything over, and you will be liquidated.
Lending is a further extension of debt. You provide ETH as collateral. This gives you a credit line of ETH in dollar value. You can borrow other collateral, provided by other users as debt.
To compare the two examples, user A provides 1000 DAI as collateral. User B provides 1 ETH as collateral and borrows 250 DAI. If user A used a Maker vault, they would not have borrowed the DAI, instead they would have created (minted) the DAI.
Automated Market Makers (AMM)
Automated Market Makers (AMM) such as Uniswap create a tension between two assets. If you provide ETH & DAI, it attempts to keep the ratio of ETH:DAI 50:50 in terms of dollar value. If ETH becomes more expensive, traders add DAI to the pool and take out ETH. Thus the pool has more DAI than ETH, this equates to ETH becoming more expensive. If you had 1 ETH : 1 DAI, and a trader adds 1 DAI and removes 0.5 ETH, then 0.5 ETH is now worth 2 DAI.
AMM’s can also be seen as decentralized utilization ratios. If we consider a lender has 100 DAI. And 0 DAI is borrowed. Then the utilization ratio is 0% (the cost to borrow 1 DAI is 1 DAI), this means there is no premium to borrow DAI. If 90 DAI is borrowed, then the utilization ratio is 90%, this then creates a borrow premium (the cost to borrow 1 DAI is > 1 DAI).
Single Sided AMM exposure
Based off of the concept a tokenized transfer token, we designed yswap.exchange (more information here). The concept was simple, in AMMs such as uniswap, you have TokenA:ETH, and ETH:TokenB. A trade of TokenA <> TokenB can be described as TokenA -> ETH <> ETH -> Token B. ETH, can be seen as a transfer token/mechanism. It itself does not need to have value, when it is created/destroyed it must simply abide by its creation/destruction rules. This allowed us to develop an AMM with single sided exposure (yswap.exchange is not live, it still has design flaws, do not use it).
StableCredit is a protocol that combines tokenized debt stable coins, lending, AMMs, and single sided AMM exposure to create a completely decentralized lending protocol.
You can provide any asset and create tokenized credit called StableCredit USD (can also support EUR, JPY, etc).
The process as follows;
- Provide amount (x) USDC
- USDC price oracle is used to determine the USD value of 1 USDC
- The protocol mints x * USD value StableCredit USD
- The USDC and StableCredit USD is provided into the 50:50 AMM
- The protocol calculates the system utilization ratio, up to a maximum of 75%.
- The utilization ratio (or 75% max) value of the supplied USDC is minted as StableCredit USD
At this point, your StableCredit USD is your “lending credit”. You can use it to borrow (buy via the AMM) other assets, so if another user provides LINK as collateral, you can borrow LINK by “selling” your lending credit. When you want repay your debt, you can “sell” the LINK back for StableCredit USD, pay off your debt, and receive your USDC.
The AMM’s create the utilization ratio’s between assets.
The total system utilization ratio defines the amount of credit line you are extended to borrow against.
The AMM defines the premiums at which you borrow/repay assets.
We are currently finalizing the UI and will make it available in the coming weeks.