Hi All, we had a small discussion in the telegram chat room that Carbon needs leverage. In both options presented below it would allow users to utilize leverage once they stake a certain amount of BNT, creating additional utility for BNT. Also it may help Carbon to become more attractive.
Use liquidity from Bancor v3 for Lending. We would need IL protection to be activated but only for this purpose. When liquidity is lended, it would mint BNT to cover the deficit, lend it to the users that want to leverage and once the position is closed it would return it to the pool and burn the minted BNT plus something on top of it.
Create lending pools separate from v3. Use these pools for lending and use part of the lending fees to burn BNT.
I believe option 1 may be more complicated to implement but we may have problems to attract liquidity for Option 1 as Bancor has suffered a loss of trust given what happened to v3. Let me know what you think, I’m not really an expert in token economics.
Just to add a few things, BNT is used here to enable a feature (levereging) and thus create utility for BNT. The amount of staked BNT would limit the amount the user can borrow. Borrowing will be only possible for Carbon, we’re not talking here about creating something like aave.
It would work similar to gearbox or alpha homora.
User wants to sell 10 eth at 2000$ and creates a one sided Carbon strategy. Based on the BNT that the user staked, the user can borrow 30 eth at 0.005% per hour (just an example interest rate - the real interest could be dynamic based on how much is available). So total 40 eth in the Carbon strategy. If the eth is 2000$ it would sell the 40 eth. It would then rebuy 30 eth (on v3 of course) and return them to the pool along with the borrowing fee. (duh! would this work like this?) If eth drops to the liquidation price, it could cancel the carbon strategy, return the 30 eth plus the borrowing fees and liquidate the rest (10eth minus the borrowing fees).
As I said liquidity could be used from v3 but we could also create new pools only for lending for example for tokens where trading was already stopped on v3. There could be also a limit so that we don’t lend the entire v3 liquidity.
Please share you’re opinions on this, even opinions why it wouldn’t work so that we can discuss them. Like I’ve said, I’m not a expert, there might be important points that I’ve missed. Thanks
Seems interesting, we need some thoughts from core contributors and other community members on this
Is this possible to do via an integration as opposed to with B3?
Yes, that’s also one possibility
I’ve been thinking about option 1. There is an issue I see here. Because BNT would have to be minted and burned it somebody may misuse it to manipulate the market and place short / long positions on BNT. The question would be if it’s worth it if that person has BNT staked. We could come up with a mechanism to make this not profitable. But I’m starting to think that this may not be the best option and it seems to be complex. And the more complexity, the more possibilities for mistakes / errors.
Option 2 - this will probably be the easier and safer method. I would like to know what the developers think about this.
How familiar are you with the tokenized options?
Familiar enough to post some info for us?
I’m definately not the right person for that