Explainer; ib Stablecoin Tokens

Projects Fixed Forex
7

Apologies all, this piece could be a bit clearer as pointed out by Yan dgdp on twitter. So let’s expand on some of the peg scenarios, and the method that users got access to ibXXX stables;

Scenario 1 - Curve pool off-peg on ibXXX asset side of pool;
Example would be ibEUR+sEUR where balance is 35% ibEUR & 65% sEUR

  • In this case ibEUR can get a premium/bonus by swapping to the other pool asset or depositing into the LP solely on the ibEUR side
  • in short, this would mean that on curve ibXXX is the valued greater when comparing the two assets

What it means for a user borrowing ibXXX from Iron Bank;

  • if the user borrowed the ibXXX from Iron Bank their loan would be based on the fiat price of the stable (i.e. 1 x ibEUR = 1 x EURO)
  • Therefore if a user is borrowing ibEUR just to swap to sEUR then they need to check that the bonus for exchange would be greater than the cost of the loan rate
  • The user can also deposit into the LP, receiving a bonus for doing so and this will be supplemented by rewards available on the pool (i.e. CRV, rKP3R, etc.)
  • The user would need to re-acquire ibXXX asset at a later date in order to repay their outstanding loan

What it means for a user that acquired ibXXX from previously swapping to the ibXXX asset from another asset;

  • The user can make an immediate profit by swapping the ibXXX for the other stable in the pool
  • The user can earn a bonus for depositing into the curve LP on the ibXXX side only
  • This user does not need to worry about repaying any outstanding loans to Iron Bank

For the protocol, in cases where the user acquired ibXXX from the AMM (see guide here) this means that it would be MORE expensive for the protocol to swap treasury held assets in order to acquire ibXXX and repay outstanding loans taken by the protocol from Iron Bank

Scenario 2 - Curve pool off-peg on non-ibXXX asset side of pool;
Example would be ibEUR+sEUR where balance is 65% ibEUR & 35% sEUR

  • In this case ibEUR would lose value by swapping to the other pool asset or depositing into the LP solely on the ibEUR side
  • in short, this would mean that on curve ibXXX is the valued the lesser when comparing the two assets

What it means for a user borrowing ibXXX from Iron Bank;

  • if the user borrowed the ibXXX from Iron Bank their loan would be based on the fiat price of the stable (i.e. 1 x ibEUR = 1 x EURO)
  • Therefore if a user can acquire sEUR & swap to ibEUR then they would get more ibEUR in return
  • This means the user can cheaply repay their outstanding loans through this method because they are buying ibEUR, in this example, at less than fiat value
  • The user can also deposit into the LP, but would be penalized for doing so if on the ibEUR side only (i.e. they’d be better off depositing sEUR into the LP position). This will be supplemented by rewards available on the pool (i.e. CRV, rKP3R, etc.)

What it means for a user that acquired ibXXX from previously swapping to the ibXXX asset from another asset;

  • The user can would take a loss by swapping the ibXXX for the other stable in the pool
  • The user has no incentive to deposit into the curve LP on the ibXXX side only
  • This user still does not need to worry about repaying any outstanding loans to Iron Bank

For the protocol, in cases where the user acquired ibXXX from the AMM this means that it can pay back it’s loan at a discount, by the protocol to swapping treasury held assets in order to acquire the assets on the opposite side of the pool & swapping to ibXXX, then repaying outstanding loans taken by the protocol from Iron Bank.
This should be qualified by stating that the treasury MUST have liquid assets available to execute this method.

The last scenario to consider is users that are already in the LP position & want to exit in either un-pegged scenario. A careful reading of the above would explain the benefits & challenges LPers would face when considering these options.

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