Yield-Bearing Stablecoins - CAP Summary

Video

Watch presentation at StreamETH

Summary

This presentation covers the landscape of yield-bearing stablecoins and innovative approaches to generate sustainable yields while mitigating risks. The speaker outlines three main sources of yield: leveraged lending, emission optimizers that capture protocol rewards, and emerging reserve models.

Reserve protocols like Cap aim to decentralize yield generation by delegating to external agents (hedge funds, arbitrageurs, etc.) while using bonding and coverage to mitigate risks if agents lose funds. This agent-based model aims to tap into a wider range of yield sources beyond just lending, including arbitrage, real-world investments, and protocol emissions.

Key challenges discussed include the principal-agent problem when delegating funds, smart contract risks, and ensuring sustainability of yields as market conditions change. Legal agreements and economic incentives like bonding are proposed as ways to align incentives. The speaker emphasizes moving beyond simplistic strategies like lending to leverage more diverse and scalable yield opportunities.

Key Takeaways

• Stablecoins need to move beyond basic lending strategies to more diverse yield sources like arbitrage, real-world investments, and protocol rewards
• Reserve protocols aim to decentralize yield strategies by delegating to external agents while using bonding for risk coverage
• Principal-agent problems are mitigated through incentive alignment via bonding and legal agreements between protocols and agents
• Smart contract risks and sustainability of yields are key challenges that require robust risk modeling
• User discretion should be minimized; protocols aim to generate yields while protecting user funds from losses
• Capturing a wider range of global yield opportunities is key to scalability beyond basic lending models

Speakers

• Speaker A (Presenter)
• Role: Founder of Cap protocol
• Expertise: Stablecoins, DeFi, yield strategies
• Key contributions: Overview of yield-bearing stablecoin landscape, reserve protocol model, agent delegation with bonding
• Speaker B
• Role: Audience member
• Expertise: Lending markets, international yields
• Key contributions: Questions on fair market rates for international lending, addressable market
• Speaker C
• Role: Audience member
• Expertise: Risk modeling, bonding
• Key contributions: Questions on bonding requirements, delegation risks