Proposal to Allow Whitelisting of Uncollateralized Borrowing for Qualified Protocols to Increase Borrow Utilization and Lender APRs
By: Slater Heil, creator and contributor at Blueberry Protocol DAO
8/23/22
Summary:
Blueberry protocol is a leveraged position protocol for Uniswap v3 LPs. In order to fulfill demand for leveraged LP position, the Blueberry Protocol requires stablecoin liquidity to be lent to position holders. Blueberry is launching in concert with a partner protocol who will fulfill $10 million of borrowing demand to create positions in the first 2 months, and the borrow demand will scale thereafter.
Abstract/Motivation:
This relationship would significantly increase utilization and interest rates for stablecoin lenders, driving more value to Compound.
Blueberry liquidates positions with a double backstop of a community stability fund and a partner liquidator fund that purchase liquidations and repay the potential lender (Compound) in full immediately. It is also an open liquidation market where other participants may do the same. These backstops eliminate the bad debt risk for Compound.
This is an activity that Iron Bank invented and has been effective in their partnerships with other protocols. Read more here: Introducing The Iron Bank. Part II: The Road to Cream v2 | by C.R.E.A.M. | Medium
In exchange for the liquidity depth, the Blueberry DAO is willing to offer a token incentive program that will further boost Compound yields for the tokens it needs to borrow.