Published in


Enhancing yield and capital efficiency of Balancer v2/Liquity LUSD pool model


In LUSD-a-bb-USD pool, each stablecoin will generate cashflows to an AMM using AAVE or Liquity protocols.

LUSD-a-bb-USD pool generated 19–24% APY during the observation period depending on market conditions.

Main updates to the LUSD pool model

Figure 0. An update for LUSD pool scheme.
  • staBAL LP token -> aUSD LP token
  • In-house liquidations -> B.Protocol liquidation services

Source data & model code

  • Start date: 01.01.2022 00:00:00
  • End date: 30.01.2022 00:00:00

General assumptions

  • Price(aUSD) = Price(LUSD) = 1$. We decided to apply this assumption since the observation period is quite small (1 month) and collected swap fees/AAVE yield cannot change aUSD value significantly.
  • aUSD yield in this model is generated solely by BAL rewards due to the lack of certain AAVE yield data — this may account for ~2% more APY from Aave boosted APY. We decided just to add 2% annual yield to the APY simplify this model:
  • All LQTY minted are distributed as rewards for Stability Pool liquidity providers:
  • SP add liquidity: 300,000
  • ETH withdrawal: 500,000
  • LQTY withdrawal: 350,000
  • BAL withdrawal: 100,000

Pool performance using B.Protocol

  • B.Protocol commission — 1%
  • ETH sale discount — 0–4%
  • Zero gas costs for ETH withdrawal, trade, and LUSD staking

A model adjustment due to high volatility

Figure 1: Curve LUSD pool and trading volumes during the main period. Curve LUSD pool was used as reference for calculating hypothetical trading volume in LUSD-aUSD pool.
Figure 2: LUSD-aUSD pool composition during the experiment and trading volumes

Results for case of PowerPool in-house liquidations

Figure 3: LUSD-aUSD APY for case of in-house PowerPool liquidations for main and adjusted periods.
Figure 4: Source of yield for LUSD-aUSD pool

Results for case of using B.Protocol for liquidations

Figure 5: Comparison of LUSD-aUSD pool APY for in-house and B.Protocol liquidations

PowerPool DAO fees & income for the Community treasury




Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store

A solution for accumulating governance power in Ethereum based protocols