LSDfi is currently facing great opportunities for growth in the near future. Besides famous ETH staking protocols like Lido Finance, Lybra Finance can also be a smart choice for investors to explore. Lybra is committed to solving problems encountered while developing its own protocol (TVL and Tokenomics) and the lack of application scenarios for eUSD. So let’s find out what Lybra Finance is with the article. Is eUSD a fully decentralized stablecoin that offers stable interest to investors?
What is Libra Finance?
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.
What is Lybra’s Mechanism of Action?
Mining and redeeming eUSD
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.
Peg holding mechanism eUSD
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.
Liquidation mechanism
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.
What is eUSD?
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.
Advantages of eUSD
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:
- Interest stable coin: By depositing ETH into Lybra, users can mint eUSD, an interest rate stablecoin, allowing them to earn a steady income from their holdings. This can be especially appealing to those looking to reduce their exposure to the volatile cryptocurrency market while still earning passive income.
- Long-term leverage on ETH: Lybra allows users to deposit ETH as collateral and mint eUSD without paying fees or interest. Users can use minted this stablecoin to buy more ETH, effectively using long-term leverage on ETH without cost. This strategy can benefit a bull market, as it allows users to increase their profits while maintaining exposure to ETH potentially.
- Decentralization and stability: Lybra only accepts ETH and stETH as collateral, making it more decentralized and stable than other stablecoin platforms that accept a variety of world assets challenge. This could be an important factor for users who prioritize decentralization and the long-term stability of the platform.
- Token incentives: Lybra offers additional incentives in LBR tokens for users who deposit ETH and mint eUSD. These tokens can be earned as rewards, giving users an extra layer of income generation beyond the steady interest offered by this stablecoin. The LBR token also grants the holder administrative rights, allowing them to participate in the decision-making process in the Lybra DAO. This could be attractive to users who want to be actively involved in the development and growth of the platform while also benefiting from the token’s potential appreciation.
How profitable is eUSD?
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%.
How to ensure the stability of eUSD?
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.
Excessive collateral
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.
Liquidation mechanism
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.
Arbitrage trading opportunity
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.
Lybra DAO
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.
Libra token
Token LBR
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.
LBR Token Allocation
Token Utilities
- Hold esLBR to Govern: esLBR is used to receive voting power and govern the protocol. Control the direction of the Lybra community, treasure, and protocol, and change protocol parameters.
- Hold esLBR to Boost Yields: 100% of the LSD Distribution Service Fee will be distributed to esLBR holders.
- Fees and Rewards: Minters, partners, developers, and other participants’ ecosystems should always remain adequately incentivized to continue contributing and maintaining a robust ecosystem. Incentives could come in the form of batch solution rewards, trader incentives, ecosystem grants, and more.
- Treasury holdings and Protocol revenue: Allocation of treasury holdings, distribution of Protocol revenue, and investing in ecosystem projects.
esLBR Token
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.
Fee
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.
Roadmap
- Open source contracts for review
- Community Growth
- Social Media Establishment and looking for Whale adoption
- Testnet on zkSync the bring the Hype
- Audit
- LBR Public Sale
- Live on Ethereum
- Community Call
- Collaborate with a reputable audit firm
- Multi-sig Safe
- LayerZero
- Live on Arbitrum
- Lending Protocols
- Omnichain
- Explore DeFi Strategy
- Develop more functions according to Lybra DAO community
Conclusion
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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