Product Launch: New Borrowing Model + GLP as collateral
GLP whitelisted, Collateral Gating, Significantly lowered one-time fees, Interest rate schedule, and Rebates
The introduction of the new borrowing model marks an evolution to the Yeti Finance borrowing protocol in the path of sustainability. The new borrowing model consists of significantly lowered one-time fees, and variable interest rates for different assets.
During the broader crypto-market crash, there was a constraint on liquidity for many crypto assets including YUSD. This resulted in repeated redemptions for existing borrowers.
Redemptions are a mechanism when users holding YUSD go to the protocol and redeem it for $1 of underlying backing assets minus redemption fees. As a result, a Yeti borrower’s assets are swapped for YUSD.
This has helped maintain a hard floor for YUSD peg. However, while borrowers getting redeemed make a slight profit in terms of the amount of YUSD they received and were able to re-open their trove with borrow fees rebated, repeated redemptions create a volatile borrowing experience.
The community in aggregate had discussed various solutions to solve this problem and decided on the introduction of a small initial interest rate (starting at 0.5%) would be best to solve this problem. More information about the reasoning for this decision from the community can be read here.
Introducing interest will create incentive for YUSD to flow freely between existing borrowers and new borrowers, increasing new borrowing capacity while mitigating redemptions.
With this new borrowing model, GMX’s GLP will be enabled as collateral; deposits will be tentatively capped as $500,000 with further deposits gated by veYETI. More information on collateral gating will be coming soon, with details on how to burn veYETI and lock YETI to gain access to strategies. Here is a short write-up on how to collateralize your GLP: https://docs.yeti.finance/using-yeti-finance/borrowing/glp-trove-deposit
Upcoming assets to be released include BENQI’s qisAVAX, aBTC.b qiBTC.b, BTC.b, and Stargate USDC and USDT. Additionally, other more exotic collaterals like Colony’s CAI are currently under analysis for whitelisting.
Lowered Deposit Fees, Lowered Borrow fees, and Interest Rate Schedule:
- Borrow Fees: The one time YUSD borrow fee will be lowered from a 0.5% minimum to 0.1%
- Deposits fees will be lowered across the board for the following assets:
3. Interest rate schedule for assets. December numbers are tentative and are based on the initial interest rate numbers:
One-time fees: deposit and borrowing have been significantly lowered to counterbalance recurring interest rates. Recurring interest rates will reflect the borrowing demand of the underlying collateral.
This will lead to a much improved borrowing experience, and a more sustainable future for the protocol.
Interest Rate Rebate Plan
This rebate is capped to the amount equal to the outstanding loan amount the user has on November 1st when the upgrade occurs. There will be a one-time rebate form that existing borrowers will be able to fill out to receive their rebate. More information about the rebate form will be released soon.
Users for most yield bearing assets will still be able to earn positive rewards net fees with the current interest rate schedule.
The response of the community users who have been with protocol have been overwhelmingly positive, and the hope is users will continue to have that same great borrowing experience.
For instance, a popular deposited asset, aUSDT, had an average reward rate of 3–4% since the launch of the protocol. Over the course of a 6.5 month total interest-free borrowing period, someone who has had a trove open with deposited aUSDT for 6.5 months would have received ~1.9% in rewards.
This amount would be more than double any one-time deposit or borrow fee users may have initially paid to borrow against this asset.
The majority of loans opened during the course of the Yeti Finance protocol was against yield-bearing assets; currently the system is made up of approximately 91.4% yield bearing assets.
Thanks for reading, as always the community will be on Discord to support users through this change and answer any questions.