Interest-bearing assets are assets that earn yield. Some examples are LP tokens, Yearn Vault Tokens, aTokens, cTokens, and more.
Currently, a lot of interest-bearing assets have locked in capital that can't be put to further use. Stabilize Protocol offers an opportunity to use it.
On Avalanche, there are already well-developed lending markets to borrow against base-level assets such as WETH or AVAX. But for many interest-bearing assets, there is no place to borrow against them and lever up in order to free up cash to improve returns or hedge your portfolio. Borrowers on Stabilize continue earning yields on their collateral while also now being able to lever up on these assets.
With decentralized borrowing, Stabilize will become a “liquidity black hole” as users drop in their entire portfolio of LP tokens, staked assets, and base level ERC-20 tokens.
To facilitate the elaboration of how it works, we will use the AVAX/USDT.e JLP collateral as an example.
AVAX/USDT.e JLP tokens are eligible for JOE farming rewards when they are staked on Trader Joe's Farms.
With Stabilize, you can continue earning these JOE rewards while also using your LP tokens as collateral to borrow U.token. We have a wrapper contract called WJLP which represents a staked JLP token. WJLP is used as collateral on Stabilize.
When you want to withdraw your WJLP collateral, you will receive the underlying JLP tokens as well as JOE rewards.
You can bring a number of different types of assets to Stabilize, and our smart contracts automatically allow you to acquire WJLP tokens and borrow against them.
- 1.User deposits JLP tokens into WJLP contract
- 2.WJLP contract stakes JLP tokens into Trader Joe Farms. Then the user is credited with WJLP and the WJLP contract starts keeping track of the user's accrued JOE rewards
- 3.Opens a new trove or adds to user's existing trove by depositing WJLP as collateral
- 4.User can now borrow U.token