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aUSD Trading System
At present, the liquidity release path of LSD>USD is mainly the lending on AAVE and Compound. This year, the borrow apy of USD is increasing on AAVE and Compound, which makes the liquidity release of LSD too expensive. However, the liquidity release cost of LSD>aUSD is almost zero.
aUSD is an over-collateralization and native LSD stablecoin, minted with high-quality LSD assets and stablecoins as collateral.
Collateral Candidates: stETH, ETH, USDC, DAI
New Collateral Requirements:
- Deep Liquidity and High Quality
- Get the vote of esAGI and receive recognition from our community
aUSD will be paired with stablecoins, and esAGI will be used to incentivize liquidity for aUSD-stablecoins pair.
Since the face value of aUSD is 1, the arbitrage can be achieved when the price of aUSD fluctuates as follows:
- When the price of aUSD <1, aUSD debtors (Mint/Lending) can profit by buying aUSD on the market to repay their debts.
- When the price of aUSD >1, users can mint aUSD by collateralizing and selling aUSD for other stablecoins such as USDC.
The protocol may maintain price stability for aUSD and earn profits through open market operations.
The Stability Module acts as a defense mechanism to maintain the solvency of the protocol and the total backing of aUSD. It absorbs debt resulting from liquidations and rewards users who deposit aUSD into it with the liquidated collateral.
Due to the liquidation fees, aUSD suppliers can earn considerable profits most of the time.
At first, the entire liquidation quota of aUSD is handed over to the protocol, and later Qualified Partners and other members who can obtain liquidation quotas, may trigger an esAGI/AGI WAR.
The target price of aUSD is 1 US Dollar, enforced by a 1:1 US Dollar peg. aUSD Emergency Liquidity Mechanism (AELM) can be used to directly enforce the target price to holders of aUSD and vaults, and protect Agility against attacks on its infrastructure and periods of extreme and prolonged market instability and irrationality. This activates a system-wide redemption mechanism.
AELM settles all ongoing protocol mechanisms and ensures that all users, including aUSD holders and vault users, receive the net value of assets they are entitled to. In short, it allows aUSD holders to redeem aUSD for collateral after an Emergency Processing Period directly.
esAGI will be rewarded as compensation to Liquidators in necessary situations.
aUSD holders can choose to provide aUSD to a specific LSD Lending Pool and earn income.
Each low-liquidity LSD will have its own Lending Pool to support the corresponding LSD holders in releasing liquidity, with the cost being the aUSD Borrow Fee.
For capital efficiency, several low-liquidity LSDs can share the same aUSD lending pool.
Factors affecting borrow fees
- aUSD utilization rate: As the utilization rate of aUSD increases, the borrow fee of aUSD also increases.
- Liquidity measurement indicators of supported LSD: For LSD with low liquidity, its aUSD borrow fee will also be higher.
- Margin amount deposited by LSD issuers: to compensate aUSD suppliers in case of LSD large depeg. The LSD Lending Pool without margin means that its risk is higher, and therefore its aUSD borrow fee will also be higher.
Each Lending Pool is risk-isolated, with bad debt risk absorbed by the Lending Pool itself.
Reduce Borrow Costs
LSD issuers can reduce the liquidity release cost for their LSD holders through the following:
- Deposit Margin
- Provide rewards to incentivize aUSD suppliers or subsidize the aUSD borrow cost
- Bribe esAGI holders' votes to bring more emissions to their Lending Pool
- Participate in or incentivize their Lending Liquidation Pool
- Increase the liquidity of their LSD
esAGI War: LSD issuers can participate in the esAGI WAR to provide a liquidity release path for their LSD holders. They can also reduce liquidity release costs by bringing more rewards(bribe esAGI emission/provide more incentives) to their Lending Pool.
aUSD Lending Liquidation is usually profitable. aUSD holders can deposit aUSD into the selected Liquidation Pool to earn Liquidation profits.
Different Liquidation Pools support the liquidation of different assets. aUSD suppliers can choose based on risk and return.
We encourage LSD issuers to participate in lending liquidation or provide incentives for liquidation participants. A deeper liquidation pool means that the lending pools it supports have less risk, which will encourage more aUSD to be provided.
esAGI/AGI War: LSD issuers will participate in the esAGI WAR to get more esAGI emissions for their lending liquidation pools. Participants also can pay AGI for more liquidation quotas.
The protocol will either build a Trading Ecosystem for aUSD on its own or attract developers to do so, in order to increase the application scenarios for aUSD and meet the Trading/Hedging needs of aLSD or aETH holders.
aUSD perp will use two modes: P2Pool and PvP.
P2Pool is suitable for assets with good liquidity such as ETH, BTC. aLSD and aETH holders can hedge by shorting ETH and gain delta neutral yield.
PvP is suitable for long-tail assets such as $pendle, $gmx, $blur, $gns, $vela, $gear, etc.
Users can hedge exposure risk or leverage yield trading through Yield Exchange.
In addition to Perp and Yield Exchange, the future aUSD Trading Ecosystem will also build DEX, Option, Gambling, and more.
Outside of the aUSD Trading Ecosystem, we will also incentive aUSD Peg Liquidity and collaborate with other DeFi protocols to explore more use cases of aUSD beyond its ecosystem.
Agility protocol is full of imagination, and our vision is to unleash liquidity for LSD Holders and provide various trading markets.