Motivation
The proposal aims to increase the number of transactions and commissions by allowing the exchange between stablecoins and the main volatile tokens (BTC, AVAX).
Opening these exchanges will bring in volumes and fees. (Traderjoe traded 20M AVAX/USDC swaps at 0.2% commission over the past week for cashouts of more than $5,000 per day)
Specification
The proposal would be to create a pool composed of USDC (Routing Asset) and volatile tokens (BTC or AVAX) while still maintaining our unilateral liquidity supply (as is the case for alternative pools).
The peculiarity would be to use only a part of the USDC unilateral deposit to equalize the value of the BTC deposited, creating two assets of equal value that can be exchanged as is the case for alternative pools.
In practice, once the value of the two assets has been equalized, each swap will behave by evaluating the coverage ratio as is the case for each pool.
Next Steps
The next step would be to verify and create a contract with the developers that can manage the pool by balancing USDC in consideration of the value of BTC.
References
I attach some images with examples of the proposal
EXAMPLE VOLATILE POOL AND TOKEN EXCHANGE (BTC = 30.000$)
I studied this solution which tries to respect the current characteristics of the protocol as much as possible; with USDC which must have the same value as BTC deposits.
If 1 BTC stands at $30,000, $30,000 of deposited funds of USDC must be used, if 1 BTC reaches $60,000, the contract must understand that it must use $60,000 of USDC.
(of course it is necessary to insert an incentive or disincentive or a maximum ceiling of deposits of the volatile token that takes into consideration the USDC deposits considering that the price of the volatile token could rise; for example, BTC can be staked for a value equal to 40% of the USDC deposits or disincentivize deposits when it approaches USDC).
This would be like having a stable pool that can exchange the tokens present in the pool and always use the coverage ratio model respecting the current characteristics of the protocol.
It also mirrors the current model with USDC representing the Routing Asset and then allowing the exchange between the volatile token and all the stables of the main pool.
Finally, the APYs would be guaranteed by the swap commissions… in my example I saw that if the protocol collects 20% of what it collects every day Traderjoe on the BTC / USDC exchange would be able to guarantee an annual APY of 10% on 2,000,000 $ USDC deposit, 7% on $300,000 BTC (10btc) and over $200,000 PTP buyback that could be distributed to PTP Holders.
I ask you to contact the team to evaluate it and discuss possible improvements. A thousand thanks
Why shouldn’t this work if the assets have the same value?
In practice, if the volatile token falls, the deposit of USDC decreases; if the value of the volatile token rises, the deposit of USDC increases.
What needs to be developed is a contract that constantly updates USDC in consideration of the value of the volatile token before each exchange in order to equate them and be able to respect the coverage ratio.
Platypus’ main motto was Single Sided Liquidity and almost no Impermanent Loss. I believe this mechanism would require deeper analysis and understanding of these concepts. In a time when even stablecoins sometimes face challenges, it is crucial to better calculate the potential implications of more volatile assets in case of any issues.
Serious concerns arise when an investor may need to withdraw their asset with another asset after staking with a volatile asset. The idea is intriguing, but the initial comment made it clear that it may not be suitable for us. However, it could potentially be included in long-term plans with a different scenario.
Furthermore, the implementation of such a pool could generate additional fees through arbitrage transactions directed to the protocol, which would result in an extra source of revenue. I believe it could have advantages, but ofc, I dont possess sufficient technical expertise regarding its integration into the system.
The problem could consist in the collapse of the volatile currency (but I believe that if BTC collapses, the problem would not exist only for Platypus and the same is true even if the AVAX blockchain collapses).
For those who own volatile assets (such as BTC) nothing changes if they deposit unilaterally, as they will withdraw at the current value and the same situation applies for those who deposit USDC, the deposit of USDC decreases as the volatile asset decreases.
In my example it can be seen that if 10 BTC are deposited and the value of BTC drops from $30,000 to $15,0000, the one-sided BTC pool will have a total value that drops from $300,000 to $150,000 but at the same time the value of the one-sided pool also drops of USDC from $300,000 to $150,000 by moving $150,000 to the USDC fund and therefore those who deposit USDC risk nothing compared to the volatility of BTC.
Finally, the challenge of stablecoins is present on any Platypus pool (main and alternative) as USDC acts as a Routing Asset.
In my example a USDC fund of 2M (representing USDC deposits) is used in proportion to the pool value of the volatile asset.
In my example, when the BTC pool has a value of $300,000, only a part of the USDC fund equal to $300,000 is used and the remaining part equal to 1.7M will remain in the fund.
If the value of the BTC pool falls to $150,000 the contract moves $150,000 to the USDC fund which will increase to 1.85M.
Therefore those who deposit USDC continue to have the guarantee of the deposited USDC funds
Given the commissions that Traderjoe collects on the Avax/usdc and Btc/usdc exchanges, I think Platypus should try to insert alternative pools… I tried to make a proposal, hummus is also trying to become the fork of balancer and I think something must be done Paltupus… really too important!!
@Axel To support volatile assets, we can either (1) explore supporting volatile assets with our current asset-liability model, or (2) refer to existing proven models from other protocols. The former requires research on ensuring the pool can reach equilibrium upon price changes, and that LPs of both sides have enough incentives. for example, BTC pool will have a low coverage ratio when BTC price goes up, and the protocol needs to rebalance the coverage ratios of the tokens, since our asset-liability model’s equilibrium is defined by coverage ratio and not pool reserves or values.
But is the team planning to enter them in 2023? and possibly is it already under development to evaluate the possibility of inserting them with the platypus model?
So it is not possible to consider the coverage ratio considering the value of the assets and not the number of assets?
In fact, my idea was based precisely on keeping the value of the assets constant and the coverage ratio taking into consideration the value of the exchange … not what I move but how much value I move … given two pools of 100k, if I move 10k I will have a 90k pool and a 110k pool… without considering what I trade…
Of course, in order to keep the values ​​of the two pools equal… you need to have a pool with volatile assets (btc) and the other pool in USDC which follows the value of the deposits of the volatile pool… so I’m not saying to rebalance the two pools as it happens in the current dex defi but to add or decrease USDC in consideration of the volatility of the volatile asset and btc deposits … then the exchanges will take place on which you determine the coverage ratio … but basically what you need to have is a contract which through a oracle keeps track of the value of the volatile asset and before each swap and/or deposit of the volatile asset (there would be no need for USDC as it deposits in a “fund”) and updates the value of the USDC pool by withdrawing or depositing into the fund USDC
