Lybra Finance is a decentralized breakthrough protocol designed to bring stability to the volatile crypto world. Built on LSD (Liquid Staking Derivatives), the protocol initially leverages ETH proof-of-stake issued by Lido Finance and stETH as its main components, with plans to support LSD assets added in the future.
The protocol’s main goal is to provide the crypto industry with a safer, more decentralized stablecoin, the eUSD, that provides stable benefits to its token holders. As a DeFi protocol, Lybra facilitates its stablecoin minting by allowing users to borrow against their deposited ETH and stETH. eUSD, a stablecoin backed by ETH assets, provides users the security and stability needed to conduct their business confidently.
A special feature of Lybra Protocol is that users can earn a regular steady income by holding minted (borrowed) eUSD powered by LSD (Liquidity Deposit Derivatives) earnings generated from deposited ETH and stETH. Users who hold eUSD minted from stETH or ETH will enjoy staking earnings from these security assets (stETH) converted into this stablecoin to pay interest.
ETH and LSD holders (currently stETH) deposit their tokens into the Lybra Protocol to mint stablecoin eUSD with a maximum collateral rate of 150% without incurring any interest on borrowing.
Users can Redeem eUSD to redeem ETH and stETH at any time at the rate of 1 eUSD = $1 stETH. However, users will have to pay a small fee of 0.05% when Redeem. This fee will be used to maintain the Lybra DAO.
eUSD maintains a peg to the USD price through a combination of direct and indirect mechanisms. The ability to exchange eUSD for ETH at face value and a minimum collateral ratio of 150% creates price floors and ceilings, respectively, through arbitrage opportunities price. These are called “hard latch mechanisms”.
eUSD also benefits from indirect mechanisms for USD parity, known as “soft pegs”. One such mechanism is parity as a Schelling point. Since Lybra considers this stablecoin to be on par with USD, equality between the two is the protocol’s implied equilibrium.
Borrowers (minters) whose collateral rate falls below 150% of the minimum collateral rate must be liquidated to ensure that the eUSD stablecoin is fully backed by collateral assets.
During liquidation, the borrower’s (minter’s) debt is reduced, and liquidators receive the collateral asset in exchange for paying off the debt. After liquidation, the borrower’s (minter’s) reduced debt is paid off, and the value of the remaining collateral equals 110% of the reduced debt.
eUSD is a stablecoin pegged to the US Dollar, backed by excess ETH collateral, and issued decentralized and unbiasedly. Just holding this stablecoin will generate a stable income with 7.2% APY.
Thanks to its low volatility and stable interest income, eUSD can combat harmful inflation and bring economic freedom and opportunity to individuals worldwide. By depositing ETH into the Lybra Protocol, the ETH can be used as collateral to mint/borrow its stablecoin at a reasonable minting rate for use in DeFi at any time.
While it is true that eUSD yields may be lower than Lido’s stETH or other LSD protocols, there are several reasons why someone might choose to deposit their ETH into Lybra Finance:
The deposited ETH is automatically converted to stETH via the Lybra Protocol (stETH is an ERC20 token representing ETH staked with Lido). One stETH can always be exchanged for one ETH, and due to the LSD (Liquidity Deposit Derivatives) process, stETH will continue to increase over time.
The incremental earnings from stETH are converted to eUSD based on the USD value of ETH at the time. A certain percentage of the total earnings are prorated among LBR holders. Remaining earnings distributed to holders, with a base APY of around 7.2%.
The stability of the eUSD is maintained through a combination of over-collateralization, liquidation mechanisms, and arbitrage opportunities. These factors work together to ensure that the value of the eUSD remains close to its fixed $1.
Every 1 eUSD is backed by at least $1.5 of stETH as collateral. Excess collateral helps maintain stability by ensuring that the value of the underlying collateral is greater than the value of the issued this stablecoin. This cache reduces the risk of insolvency and provides security for holders.
The Lybra protocol incorporates liquidation mechanisms to protect the system from under-collateralized positions. Suppose a user’s mortgage rate falls below the Safe Mortgage Rate. In that case, any user can volunteer to become a Liquidator and purchase the liquidation portion of the collateralized stETH, paying in the corresponding eUSD (100% – Liquidation bonus rate). This mechanism ensures bullish pressure on the eUSD and helps maintain stability.
An arbitrage opportunity arises when the price of eUSD deviates from the fixed level of 1 USD. Users can take advantage of these price differences to make a profit and help restore the eUSD price to its expected value.
The Lybra DAO serves as the backbone of Lybra Finance’s decision-making process. The Lybra DAO will be managed by LBR token holders, who can influence the project’s direction, propose and vote on various decisions, and collectively manage the protocol. This community-driven approach helps to ensure that the Lybra project remains true to its decentralized nature and that its development aligns with the interests of its users.
The Lybra DAO is managed by the holders of its governance token, LBR. Through a governance system involving Executive Voting and Governance Voting, LBR holders can influence the direction of the protocol.
The Lybra Token (LBR) is the native token that powers the Lybra Protocol. Its utility covers all core network functions, such as staking rewards, administration, minting, and liquidation. LBR is an ERC-20 governance token with a maximum supply of 100,000,000.
LBR holders manage the Lybra Protocol and the financial risks of the eUSD to ensure its stability, transparency, and efficiency. The LBR voting weight is proportional to the amount of LBR a voter bets on the voting contract. In other words, the more LBR tokens locked in the agreement, the greater the voter’s decision-making power.
esLBR is escrowed LBR. It has the same value as LBR and is subject to the total supply of LBR. esLBR cannot be traded or transferred but has voting rights and can share in protocol earnings. Mining rewards are the primary source of esLBR.
esLBR holders can convert their esLBR to LBR through a vesting process. Once the process is started, esLBR will be linearly converted to LBR over 30 days. esLBR holders receive a varied percentage of yield boost depending on the lock-up length. Details TBD.
Lybra stands out from other stablecoin protocols by offering users 0 minting fees and 0 lending rates. This feature allows users to leverage their ETH holdings and mint eUSD stablecoins without incurring additional costs.
Lybra Finance can be seen as an over-collateralized stablecoin protocol. In addition to the usual collateralization, liquidation, and arbitrage, Lybra, unlike MakerDAO and Liquity, creates profitable eUSD stablecoins by collateralizing the yielding asset stETH. Lybra converts stETH interest generated by stETH into eUSD and distributes it to holders of this stablecoin and Lybra Token pawns.
Lybra uses the stablecoin eUSD to benefit from staking Ethereum. This stablecoin has a secure collateral rate of 160% and an APY of 7.2%. The return efficiency of this stablecoin is slightly lower than that of stETH. However, it is a liquid asset, and holders can profit more in DeFi protocol through eUSD, thus giving Lybra protocol stakingers a greater use of capital.
From another perspective, Lybra is helping Ethereum pledge participants realize future returns in advance.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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