Thread by @powerpoolcvp

Interest in over-collaterised, decentralized stablecoins becoming massive. Not surprising.

But there is one stable backed exclusively by $ETH: $LUSD by @LiquityProtocol

It's unique since it can self-fund yield at its own secondary market with $ETH liquidation proceeds.

How:🧵

1/ Stablecoins need liquidity. But the market is showing that StableSwap AMMs cannot properly fund LPs with only swap fees.

APYs on lending markets like @AaveAave are greater than swap fees

2/ So, StableSwap DEXes like @CurveFinance also token incentives to juice LPs yields, motivating them to supply liquidity and maintain secondary market depth for stablecoins.

It's a genesis of Curve Wars: various tokens compete for rewards/liquidity

3/ But, what if there were an option to add yield into AMM pools not from token printing, but from a source of cashflow naturally related to stablecoins themselves?

$LUSD has such a unique option

4/ Whenever a CDP position in @Liquity $LUSD is liquidated, the Stability Pool (liquidator of all CDPs) receives $ETH with a discount, and shares profits with all $LUSD stakers

@bprotocoleth already provides a permissionless automatic $ETH -> $LUSD liquidation solution

5/ But when users stake $LUSD in Stability Pool, since yield there is good, and avoid liquidity pools with lower yield, this can limit $LUSD secondary market liquidity and therefore adoption potential

dune.com/dani/Liquity

6/ Is there any solution for that? YES

There is an option to take $LUSD out of an AMM pool, stake it in Stability Pool via @bprotocoleth and collect all liquidation income into AMM alongside with $LQTY rewards.

@BalancerLabs v2 architecture allows PowerPool to do that for you

7/ PowerPool is launching $LUCY, a StableSwap AMM pool consisting of a-bb-USD (analog of well-known 3CRV lending tokens on @AaveAave) and $LUSD

$LUSD is staked into @bprotocoleth generating $ETH liquidations income and $LQTY rewards, all automatically

8/ Here is in-depth piece describing how it works and some simulations on possible trading volumes and income:
powerpoolcvp.medium.com/enhancing-yiel…

9/ [a-bb-USD - $LUSD] Balancer v2 StableSwap pool yield by source vs $ETH price for recent months

10/ This next-gen automated stable yield option is named $LUCY (after the original ape) and will launch soon on top of @BalancerLabs, adding a Gauge via governance to get even more yield

11/ We welcome help for our launch with feedback or information distribution please DM @vasily_sumanov - PowerPool Head of Research

This is an opportune time to push $LUSD volumes and safe automated defensive retail stablecoin yield from $LUCY forward

12/ cc
@RyanSAdams
@StefanDGeorge
@DeFi_Dad @fcmartinelli @yaron_velner @TokenBrice @mediodelphi @RyanWatkins_