Locked LP Tokens for Loans/Credit
Poll Social Media asking which top pairings they would like to see on Liquid which will be a mix of Value pairings and non Value pairings. Small sized sample to Beta Test for launching of full release.
We will go off the assumption that Value incentives for providing liquidity will be very limited and could handicap massive incentives (APY) for launch. Take this with a grain of salt but Value has been said to be fully dispersed in less than 3 weeks. Also to premise this idea will go hand in hand with the tech and innovation behind Phase 2 Vaults as well as Value Liquid. The goals and ideas below will try to make the Value platform a full circle and a one stop shop to maximize your Defi gains and bring more revenue to the Governance Vault holders.
Liquidity added to Value Liquid in the form of both assets at the set ratio of the flexible pool or single asset being provided will always face IL. They will always earn swap fees for providing their liquidity. Flexible Farming in P4 of Value Liquid will allow users to swap between LP tokens for better farming opportunities without ever leaving the Value Liquid platform at the click of a single button.
Here is the next step in providing liquidity with my plan; Liquidity providers receive VLP on Value Liquid, UNIv2 for Uniswap, BPT from Balancer, and SLP from Sushi will all be accepted LP tokens for Value Vaults in the near future.
Introducing the Value LP Vault:
Liquidity provider tokens are locked into this Vault in exchange for a loan or line of credit in vUSD or vETH.
Need an Oracle Partnership preferably with LINK to get the price of vUSD stable around 1$. vUSD and vETH become crypto backed assets and now provide a use case instead of just another elastic coin similar to established AMPL.
These locked LP tokens will be utilized by the innovation and tech coming from P4 Value Liquid and P3 Value Vaults to automate the best utilization of the LP tokens across multiple platforms. The locked LP tokens stay within the Value ecosystem and LP providers are in return getting an accessible loan for their assets. To receive the LP tokens back users must return the loan simply put and I suggest when a user falls into the “liquidation zone” the assets remain locked in the ecosystem to maintain liquidity permanently. Selling the asset off and other parameters for mechanics will need to be thought out carefully and some will need a community vote to gauge how the platform should be maintained preferably through a singular or multiple DAO’s
So what other incentives besides having your LP tokens locked into this Vault will there be? Rewards earned through the innovation and tech behind Vault strategies should be used to help buffer and maintain the LTV ratio minimizing the chances of being liquidated and assets lost forever while also extending this credit line over time if the user shall want to take on more debt in the future. When the user wants to pull out from the LP Vault they will return vUSD with interest to unlock their initial LP tokens with the rewards gained.
How does this help Gov Vault holders? Well the 6.7% is a starting place we have for the Value Vaults and a reference point but I think we need to allocate some of the cut for a Value Debt Fund to keep a balancing check for downturns in the markets and keeping enough $ to cover failed debts. Also when Value becomes a limited supply and buying them back dwindles down vUSD and vETH can still be distributed as APY through rewards from the Value Ecosystem. Perhaps more thoughts into Gov Vault holders dumping vUSD and vETH can be added through a discussion from this topic.
A burning mechanism for returned vUSD will be in play to keep the stability and backing of the vUSD as close as possible to 1$. LP tokens with a Value pairing should be able to get 10-15% more on their loan then non Value pairings. Whales and all users will love to be able to get competitive loans for providing LP tokens and a safeguard of not being liquidated by stacking their rewards earned onto their starting liquidity.
This implementation of being able to lock LP into the Value ecosystem and receive a loan while earning rewards will make Value a top echelon protocol. No other competitor is offering this in the market and they do not have the tech with Vaults and swapping LP tokens seamlessly to optimize farming for the best APY possible. This is a light framework that needs more technical help and thoughts on how to maintain this lending service but this idea will keep liquidity within the platform for a long time bringing Value to the forefront of innovation in Defi. Liquidity is going to be key and the more we have on the platform the better the rates for all users wanting to make swaps/trades and being able to get a loan will attract an absurd amount of users. Other platforms will want to go through Value whether it be routing the best APY for LP tokens and seamless swaps or taking out loans for leverage with their own users liquidity they provide on other platforms.
-Written by Whose Forgotten