Neuron liquidity pools

Published in

Neuron

4 min readOct 2, 2022

Will the real capital efficiency please stand up, please stand up…

Hey fam, it’s radio Neuron again! Today we’ll talk about liquidity pools — the destinations one can deploy the collateral for additional yield.

Liquidity pools

A quick depiction of an AMM liquidity pool

Liquidity pools are the epitome of DeFi, a democratized way to provide the ability to exchange assets. One of their distinguishing features are transaction fees accrued by liquidity providers — actors locking their funds to facilitate asset exchange in a pair, say, USDT-USDC.

Why transaction fees?

We’re using them in Neuron. How? Earning ’em 😎

In the previous episode…

As we’ve mentioned, the collateral used to mint options in Neuron pools is sent to pools in Convex Finance. Why Convex? Imagine Curve, stablecoin liquidity aggregator, but with CRV boosts and automated compounding:

Liquidity pools by Neuron pool

Each Neuron pool provides a choice of liquidity pools to deposit collateral into, so let’s dive into them. With covered call pools, you deposit the asset itself. With put selling, it’s stablecoins . Let’s next look at how the collateral is managed in four pools: WBTC and ETH covered call and cash-secured put selling. We’ll mention the pools one can choose when making a deposit into the respective Neuron Pool.

WETH Covered call

ETH/stETH

stETH is the wrapped representation of staked ETH of Lido protocol. It allows for staking assets in several blockchains, essentially providing yield from assisting in transaction validation and, in the case of stETH, without needing to stake 32 ETH; which is, rather convenient!

It’s a huge protocol, with ~$6B in TVL ⇒ top 3 in DefiLlama’s rankings as of Sep’29! The Curve pool is $1.7B deep.

ETH/alETH

Alchemix ETH/alETH is an ETH-backed asset providing self-repaying loans as part of the Alchemix ecosystem. Defillama has a more elegant description: “Alchemix is a DeFi protocol that allows for the creation of synthetic tokens that represent the future yield of a deposit.”

WETH/WBTC Put selling

MIM/3Crv

MIM/3Crv is a pool on Convex (and Curve) swapping DAI, USDC, USDT, biggest stablecoins, and somewhat less known stablecoin, MIM.

MIM is a stablecoin operated by Abracadabra.money, a crypto-backed stablecoin protocol.

The MIM’s Curve pool is $150M+ strong at time of writing 🧙‍♀️

FRAX/USDC

FRAX/USDC is a two-asset pool with just FRAX and USDC, apparently. It doesn’t contain the rest from the most-popular Curve 3Crv pool part: DAI or USDT. However that shouldn’t stop one from considering it as a liquidity destination — as big and sturdy as are DAI and USDT, there’s always a risk of (anything) that’s independent, i.e.

So, having less assets helps. We’ve outlined that in one of our articles.

FRAX is the first fractional stablecoin. What does that mean? In contrast to overcollateralized “traditional” stablecoins, FRAX is collateralized only partly — the other part is algorithmic stabilization mechanisms: bonds, dynamic minting and redeeming mechanisms etc.

It’s a big pool, with $600M+ in reserves. The FRAX protocol itself was founded in 2020 👵.

WBTC Covered call

sBTC + renBTC + wBTC

Here comes (Johnny!) the Bitcoin pool, consisting of sBTC, renBTC and wBTC. Let’s do a short sanity check on every one of those.

Ren is the main (may we say so?) bridge from the bitcoin blockchain to Ethereum blockchain, smart contracts and mighty degens. So, renBTC is the wrapped Bitcoin on the Ethereum blockchain bridged by Ren service.

wBTC is the lingua franca (nomimative) wrapped Bitcoin, backed 1:1 by Bitcoin itself, the whole nine yards. It still has nearly $5B TVL as of Oct’22.

sBTC, or Synthetix BTC, is a synthetic asset pegged to Bitcoin’s price. It’s operated by Synthetix, protocol enabling the creation of synths. All of them are backed by SNX, Synthetix’s native token, which removes a lot of SNX from circulation, minimizing possible selling pressure.

Conclusions

As one can see, all the assets chosen are established and usually 2+ years old. They are the DeFi ecosystem’s backbone, resting upon the broad shoulders of Convex/Curve. Thus we can say with quite some degree of confidence: additional liquidity yield in Neuron is both safu and fun!