Freeze your steak, borrow Steak Dollars
Steaks Dollar is an over-collateralised, LST-backed stablecoin, that allows borrowing a USD-pegged token (”Steaks Dollar or SD”) by collateralising staked assets in the form of Tenderize’s LSTs. It is the first of a kind decentralised stablecoin backed by a basket of various liquid staked assets.
USD is generated by locking in collateral to create a Collateralised Debt Position (CDP), the value of the collateral in a CDP must always exceed the value of the debt to prevent liquidation. The benefit is that there is no dependence on external liquidity providers to act as lenders. Rather, creating new debt positions increases the USD supply, whereas repayment of debt contracts the USD supply.
The yield generated by the LSTs provided as collateral is isolated to their debt position where it automatically accrues. The owner of the debt then has the option to program the yield.
Users can deposit tTokens into BeefBank as collateral to mint SD. Once minted, the user created a Collateralised Debt Position which is owned by the user. The SD has to be paid back at some point in the future to unlock the collateral. The debt needs to be repaid either by the user that opened the debt position, or a liquidator once a position drops below its minimum collateral ratio.
SD is over-collateralised, meaning for each 1$ of SD borrowed a user must put up more than $1 worth of tTokens. The SD value of the collateral divided by the amount of borrowed SD is known as the collateral ratio.
Each collateral asset will have a different minimum collateral ratio (MCR) greater than 100%, e.g. 125%. Once the collateral ratio of a CDP position falls below this minimum it can be liquidated, as otherwise it has the risk of becoming bad debt within the system.
The minimum collateral ratio for each asset is adjustable by governance. This ratio can vary depending on the asset because of various reasons such as market depth, price volatility and oracle health of the underlying asset.
While collateralised, the deposited LST tokens still generate yield. The generated yield is automatically added to the collateral and will increase the collateral ratio of the position. This effectively deleverages the position as yield is earned. This allows the user to create various automated strategies such as:
- Auto-Yield stablecoin (fund yield via tToken - paid as tToken)
- Auto-Yield stablecoin (funded yield by minting SD as collateral value rises- paid in SD)
- Auto-Repaying loan (Yield is sold for SD, paying back the loan)
- Leveraged long (post collateral, mint SD, buy more collateral)
By maintaining a specified collateral ratio according to the risk appetite, a user can use the excess collateral above it to mint more USD. This resembles the workings of an yield-bearing stablecoin where the yield and risk is isolated on the underlying debt position.
Alternatively, users can use the yield to partially repay the loan in installments. This can be done very efficiently using “flash repay” described below. This lets the user mint an amount of USD upfront to unlock some of the collateral, which can then be sold in the same transaction to repay the minted USD within the same transaction.
Our system does not charge an annual percentage rate interest on the outstanding capital. Rather a one-time borrow- and redemption fee is used.
Liquidations are performed by liquidators who are incentivised to acquire collateral at a discount by repaying the borrowed USD of the position. The profit obtainable by a liquidator depends on collateral ratio the loan is liquidated at. Given a sufficient minimum collateral ratio liquidations should always be profitable even under severe market conditions.
To facilitate liquidations we use a technique called “flash repay” instead of the traditional stability pool found in common lending protocols such as Liquity. Using flash repay, a user is able to borrow an amount of USD equal to at most the debt of a position. The borrowed amount has to be paid back within the same atomic transaction, after which it is burnt again.
Liquidators can use flash repay to access the necessary USD tokens to repay a borrower's debt without requiring large amounts of upfront capital. Subsequently, they can utilize the received collateral to swap back into USD and repay the flashed tokens, all within a single transaction. This process allows liquidators to arbitrage the market for risk-free profits
Flash Repay can also be used to (de)leverage positions.
- 1.Flash USD equal to amount to reduce debt with
- 2.Repay debt to unlock collateral
- 3.Swap collateral for USD
- 4.Repay flashed USD
- 1.Flash USD up to the initial debt
- 2.Swap flashed USD to the preferred tToken
- 3.Borrow additional collateral against the acquired tToken
- 4.Repay flashed USD