The growth of LSDfi is becoming exponential.
@LybraFinanceLSD V2 is bringing LST-backed stablecoins to new heights, increasing the potential of reaching $1 billion in TVL.
Here are the key features of V2 (ELI5 version) + my strategies for capitalizing on this upgrade.
🧵
In this thread, I'll cover:
0/ Core Concept of Lybra
1/ Past: Performance in V1
2/ Present: New Features in V2
3/ Future: My Thoughts + Strategies
I've simplified everything for you.
With V2 just around the corner (Aug 31st), now is the perfect time to get rewarded. 🔥
0/ Core Concept of Lybra
eUSD is an interest-bearing, over-collateralized stablecoin.
In V1, users can use [stETH] as collateral to mint [eUSD] and then [hold] to [receive passive yield].
I put words in [ ] so you'll see the difference between V1 vs V2.
1/ Past: Performance in V1
It has been performing very well. There is $370m worth of staked ETH used for minting eUSD and earning a passive yield of ~8% APY.
The use case is perfectly suited for a savings account, holding for real yield.
But there is a limitation of $eUSD being "rebasing" tokens.
Holders of rebasing tokens experience a change in balance as the token supply changes in accordance with staking rewards.
This is why we always see dApps use wstETH, the wrapped v. of stETH (a rebasing token).
Lybra has a clear goal: to increase the use case of $eUSD and expand the ecosystem surrounding it.
To achieve this, they aim to enhance compatibility with other DeFi protocols, making it easier to integrate and utilize $eUSD while ensuring it remains pegged at $1 USD.
2/ Present: New Features in V2
In this upgrade, Lybra introduces the following new feature:
Users now have the ability to use [stETH and other LSTs] as collateral to mint [eUSD/peUSD]. They can then [lend/borrow/swap/hold] across protocols on different chains.
2.1 peUSD: Introducing a New Omnichain Version of eUSD
Originally born and residing in ETH L1, eUSD is taking a step further with the introduction of peUSD (pegged eUSD) on V2.
This new omnichain version allows users to access peUSD across chains, starting with Arbitrum.
The TLDR on eUSD and peUSD are:
• In V1: eUSD, backed by rebasing LST (stETH), remains still interest bearing
• In V2: peUSD, backed by interest bearing LSTs (rETH and all others) unlocks omnichain functionality
• eUSD <> peUSD in 1:1 ratio and earn interest bearing
This is huge, given the new compatibility for all DeFi protocols and the increasing use cases of $peUSD.
Because everything will eventually become omni-chain, and it's very important to have native bridge across chains to do txn, e.g., swap, trade, lend, borrow.
2.2 Expanding Collateral Options
It's acknowledged that stETH has been dominant in LST area, creating a sense of centralization.
In V2, Lybra introduced additional LSTs as collateral options for minting peUSD, such as Rocket Pool’s $rETH, Binance’s $WBETH, Swell’s $swETH
2.3 Lybra Wars
The presence of more LST providers brings increased competition and incentives for esLBR voters.
The bribing system is an infrastructure that introduces a new range of possibilities for users.
As an example, Swell aims to enhance the utility of $swETH and encourage users to utilize its LST for minting peUSD.
To achieve this, the Swell team can offer incentives to esLBR holders, encouraging them to vote and direct esLBR emission towards the swETH pool.
2.4 Enhancing $LBR Tokenomics
New mechanisms will support the value of LBR tokens by decreasing sell pressure and increasing demand:
• 90-day vesting period for esLBR
• dLP (Dynamic Liquidity Provisioning) - Radiant model
• Penalty for those who exit vesting early.
2.5 Peg Stability Mechanism
To ensure that $peUSD is pegged at $1, there will be a new eUSD/3CRV pool, the introduction of a Premium Suppression Mechanism, and a dedicated Stability Fund.
dLP will also play an important role in enabling the peg mechanism.
3/ Future: My Thoughts + Strategies
I believe that in the first month of V2 launch, the team will provide large incentives to bootstrap liquidity and push growth for $peUSD.
The home base will be @arbitrum. I'll provide liquidity to enjoy rewards with low txn fees.
Being the first mover in launching multiple LST-backed stablecoins has a lot of advantages.
Because when users use LSTs to mint the stablecoin and enjoy yield,
that's stickiness and a barrier to entry for other competitors.
$LBR price:
Despite the unfavorable market conditions, LBR has been trading sideways and holding its ground.
Personally, I wouldn't fade LBR. I would set my stop loss slightly below the yellow box, I believe R:R is worth it.
Remember, NFA. Always DYOR.
If you've been following me, you should know that I always research CDP stablecoins.
And I believe the first to launch will have a nice head start. Thanks to the Lybra team for helping me put up this content.