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The Bob CDP (collateralized debt position) module allows borrowers to use various types of on-chain collateral to mint over-collateralized BOB tokens as debt.
It its first phase, Bob CDP protocol users are limited to Uniswap V3 positions on Polygon as collateral. More collateral options to be added in the future. LP providers of the following pairs can mint BOB to start (minimum $100 collateral).
CDPs offer a wide range of use cases, and can be used as a building block for external DeFi applications. Potential use cases include:
Many end users or entities prefer to keep part of their long-term portfolio in Uniswap V3 LPs. This includes DAOs providing on-chain liquidity for their own tokens.
At the same time, many of those actors also have different liabilities denominated in stablecoins: employee salaries, service fees, business and personal expenses.
BOB CDP allows to them to easily fulfill those liabilities without reducing LP positions, by taking an operational loan against them.
If they choose, acquired BOB can then be used conveniently for stable payments through the zkBob application.
The following examples are hypothetical since in first iteration of CDP there are a small number of pairs available, all of which contain BOB.
- 1.The active treasury of some DAO XYZ contains a large Uniswap V3 ETH/WBTC position valued at 1,000,000$.
- 2.DAO XYZ has a burn rate of 50,000$ a month, but does not want decrease their ETH/WBTC exposure yet, nor miss out on the accumulating LP fees.
- 3.DAO XYZ chooses to take a loan of 50,000 BOB each month to cover all expenses.
- 4.After 12 months of such repeated loans, the ETH/WBTC position eventually grows to 1,500,000$ and DAO XYZ decides to repay their loan using the obtained profits.
- 5.DAO XYZ repays 600,000 BOB principal + 3,000 BOB in accumulated fees and is left with a 897,000$ ETH/WBTC position.
- 6.DAO XYZ is 😁, since they now have a larger position compared to what they would have been left with (approx. 842,000$) if they chose to cover the burn rate by slowly liquidating their original position.
Uniswap V3 LPs with highly-liquid assets can easily provide a great ROI for DeFi players on their own. Users with a higher risk profile may also opt in for more concentrated positions, while expecting higher returns. However, over-concentrated positions can quickly become hard to manage.
BOB CDP offers an alternative way to opt in for higher returns on Uniswap V3 LPs, while avoiding the burdens of managing over-concentrated price ranges - capital leveraging.
Instead of achieving leverage on LPs via interval tightening, users can achieve the same impact by leveraging the amount of capital locked within LPs, with new capital collateralised by the very same LP position.
- 1.Alice wants to efficiently earn Uniswap V3 LP fees on her USDC/ETH position.
- 2.Alice does not want her position to move out-of-range, thus she prefers wider but capital-leveraged positions.
- 3.Alice mints her initial position for USDC/ETH pair on Uniswap V3 valued at 10,000$.
- 4.Alice uses her position as collateral on BOB CDP to mint extra 5,000 BOB.
- 5.Alice swaps 2,500 BOB into USDC and 2,500 BOB into ETH and leverages x1.5 her USDC/ETH original position.
- 6.Alice position now has 15,000$ collateral and 5,000$ debt.
Many users provide long-term liquidity in liquid pairs on Uniswap V3 in exchange for earning LP fees. At the same time, users monitor other short-term farming opportunities offering juicy returns.
Using BOB CDP, users can opt in for both strategies at the same time, increasing their total returns.
- 1.Charlie provides 20,000$ worth of liquidity in a USDC/USDT pair on Uniswap V3.
- 2.One day, Charlie finds an awesome farming opportunity for BOB/USDC LPs in another protocol.
- 3.Charlie uses his Uniswap V3 position as collateral to mint 15,000 BOB in debt, he confidently mints the maximum available amount without fear of being liquidated, as both of his collateral and debt are denominated in USD.
- 4.Charlie deposits 15,000 BOB into the farming opportunity he found.
- 5.After 1 month, the farming ends, and Charlie withdraws all liquidity, fees and rewards and converts them to BOB, ending up with 15,300 BOB.
- 6.Charlie repays his debt principal of 15,000 BOB + 15 BOB interest.
- 7.Charlie is 🤗, since he earned extra 285 BOB on top of his primary position in Uniswap V3.