TriGLP: Earn 10% RealYield on Stables and 30% on ETH/BTC
The next evolution of RealYield on Arbitrum
One of the things that makes GMXs $GLP token so interesting, is of course its #RealYield. Consistently paying out around 20% APR in pure ETH and in a non-inflationary way is one of the main reasons why it attracted so much attention lately, and rightfully so.
But GLP is actually also really interesting from another perspective, namely that it’s basically an index token, consisting of roughly 50% stablecoins (with the vast majority in USDC) and the other 50% is crypto (mostly ETH and wBTC).
With the current yields for both stablecoins and bluechip cryptos being very low and unattractive, we at Unstoppable started wondering if there wasn’t an interesting opportunity here.
What if we could “split” the stable and the crypto part of GLP into its own synthetic tokens and divide the yield to make it attractive for both sides?
Enter stableGLP & cryptoGLP
The concept itself is rather simple, first we look at GLP as ~50% stable and ~50% crypto, then we tokenise these components and split the yield between the two in a way that is attractive for both and reflects the underlying risks.
Assuming GLP pays out around ~20% APR, we can create a delta neutral stablecoin-like position on one side with no crypto exposure earning ~10% APR and a crypto-like position on the other side earning a whopping ~30% while keeping full ETH/BTC exposure 🤯
Simple and should be built in a week, right?
Right?
The Devil is in the Details
Not quite so simple after all, we learned quickly while building and running the early test versions on a forked Arbitrum mainnet.
What if the demand for the stable and crypto side is not balanced?
Do we let the open market, supply & demand and adjusting yields decide the balance?
Sure, why not. But wait, that means demand for the stable side controls leverage for the crypto side, leading to high leverage in environments where there is a lot of demand for stables (such as a bear market, where crypto might be going down already?!) and lower leverage during times when crypto is likely to go up.
That sounds like a shitty deal for the crypto side.
How much volatility can an unbalanced system even handle before it would need to liquidate the crypto side completely in order to protect the stable side?
As it turns out not much.
Ok, someone else deciding my leverage (most likely being inverse to what I’d want it to be depending on the market) and the risk of losing it all during liquidation? Suddenly those 30% don’t seem so attractive anymore.
Since we only build products at Unstoppable that we ourselves are not just comfortable but actually really want to use, that’s a no-go.
Balanced pools it is then.
But how do you even get liquidity for that? Who is willing to give up his safe 20% on GLP only to sell the yield bearing tokens against USDC or ETH with 0%?
How do we ensure the peg on the secondary markets?
And given the attractiveness of the stableGLP and cryptoGLP premise, how can the system handle even large buy and sell orders without too much slippage?
Alright, looks like we got our work cut out for us here to come up with a creative solution.
The Solution
After finding a lot of designs that won’t work, we finally were able to put all the pieces together and came up with a really solid system design that has the following characteristics:
- Fully balanced pools (i.e. zero crypto exposure for stableGLP, exactly 1x crypto exposure for cryptoGLP)
- No liquidation events possible (unless crypto goes to actual zero)
- stableGLP trades directly against USDC for external users, no need to jump through hoops and get GLP first (or wait 15min after minting GLP 🙄)
- cryptoGLP trades directly against ETH and wBTC
- Yield for LPs from 2–4 different sources, and always greater than just holding GLP
- Protocol can make revenue through an AMO design that provides just-in-time liquidity for larger trades and stabilises the stableGLP/USDC and cryptoGLP/ETH “peg”
- Arbitrage opportunities for both protocol and external arbitrageurs against price movements in ETH and BTC
- … and a lot more
We’ll get into more details in the coming weeks about how exactly the system works and as soon as we have the testing system fully upgraded to the new design we’ll give our early community members a testnet environment to take it for a spin.
We’re really excited about the solution we came up with and are looking forward to sharing it and hearing your feedback over on our discord!
