Lien AMA(April 11th, 2020)
To fellow crypto enthusiasts,
In this post, you will discover a brand-new protocol that allows for issuing a stable coin and a leveraged token in a brilliant way.
This article is a summary of Lien AMA at DeFi Japan. we would like to say big thanks to Mayato for organizing this AMA!
How is the value K computed in a most appropriated way? and who is involved with this process?
K itself is free to set up, but acceptable SBT to the iDOL contract is limited.The risk of SBT is determined by the maturity and K. So the ladder can be determined based on the price movement in a stressed environment.
It is written in Lien Protocol WP that when a Stable Coin (SBT) is issued, a Leverage Token (LBT) is also granted, but is it possible for users to decide the ratio of SBT / LBT in 10 ETH, for example? Percentages are SBT 50% / LBT 50% or SBT 70% / LBT 30%? Maybe this is also dependent on K value? as SBT value is determined by that and LBT is the leftover?
The user can decide the percentage of SBTs issued, but certain conditions must be met in order for the iDOL to take over the SBTs. For example, in the case of 70% SBT, the strike price is very high, so the stability of the SBT price is low, i.e., the delta is large, and in some cases it may not be accepted.
In this case, if there is no one to pick it up, you will continue to carry the risk yourself, so it is practically impossible to make such a distinction. There’s also the ability to freely carve out LBTs, so you’ll still have the option of selling them individually in the auction.
You say that anyone can customize the LBT. How do you provide the market for selling the remaining part of the LBT? It is not standardized by its definition.
We understand that the liquidity when you tranche the LBT is definitely a concern. It’s true that some things are hard to price depending on how you tranche. There is not always enough liquidity if how you tranche is not attractive enough.
But anyway, you can always ask the market to determine the price by doing the auction. We are going to provide the marketplace for customized LBT(Immortal Option).
Oracle data source needs to be updated when the data source exchange is obsolete. What kind of governance mechanism do you implement?
As for Oracle, we plan to use external decentralized ones. We are thinking of automatically deciding which Oracle(s) to use. The details will be announced in another White paper.
When you deploy our protocol?
We are planning to deploy in Q2!
What can possibly go wrong with Lien?
We are not 100% sure if people are willing to have a truly decentralized stable coin.
But the interesting point is as long as there are people who would like to take a risk and hold LBT, SBT is also provided in the market. One of the beautiful points of Lien Protocol :)
K should be low enough to stabilize the system. The lower K becomes, the lower leverage becomes. What makes potential user use Lien instead of dYdX?
The price of K is another concern for everybody, we guess.
We are working on the ratio of K to ETH price that iDOL can tolerate, but we think K should be fine if you imagine half of the current ETH price, and when you issue DAIs, you can only issue DAIs about half of the actual deposit, so it’s not a disadvantage in that sense. Also, if you sell the LBT for iDOL, the iDOL will be the same value as the ETH you put in.
For the comparison between dYdX, There is no liquidation in our protocol. Also, there is no margin call even if there is no liquidity. The risk will be minimized as there is always a maturity date.
What does iDOL stand for?
It stands for “Independent DOLlar”. It is expected to play a role as “the independent dollar”, which is designed to maintain a relatively stable value against the fiat dollar while being independent of its economic and political influence.
What made you start working on your project? is there any reason behind?
It is because there is no true “stable” coin in the world.
We have been thinking that how we can improve current DeFi, and we have reached to this idea luckily in the end. We hope you’d like our idea!