What Is Unbound Dollar (UND)?
Unbound Dollar is a decentralized cross-chain liquidity protocol that is building the derivative layer of Automated Market Makers (AMM). The intent of Unbound is to build products that are both native and compo-sable to the DeFi ecosystem. Unbound protocol is building a management layer over the existing AMMs by locking up LPT to mint synthetic assets that further reinforces liquidity in AMMs and Defi, unlocking liquidity from existing AMM Liquidity Pools.
The initial set of product Unbound has been built to include decentralized, cross-chain stable coin called UND. Unbound has created a robust architecture that does not require a Liquidation Engine. A combination of collateral ratio, risk management through selected stablecoin-ERC20 LPT pairs, and SAFU fund ensures a support system that is a lot more resilient than traditional crypto assets under similar circumstances. This is a huge shift from the existing lending landscape.
Unbound Dollar Storage Key Points
|Coin Name||Unbound Dollar|
|Source Code||Click Here To View Source Code|
|Explorers||Click Here To View Explorers|
|Twitter Page||Click Here To Visit Twitter Group|
|Whitepaper||Click Here To View|
|Official Project Website||Click Here To Visit Project Website|
What is DeFi?
Decentralized Finance (DeFi) is a financial system built on decentralized assets. The DeFi ecosystem comprises lending and borrowing, decentralized exchanges, and derivatives trading among other facilities. In October 2020, the total value locked in DeFi in USD is $10.71 Bn. Uniswap alone dominates 23% of the market share. This minting fee acts helps to provide stability for the ecosystem and will remain variable to help UND maintain its dollar peg.
Unbound Dollar provides three main services in the form of fully automated Smart Contracts that do not require any third party intervention. The Smart Contracts make sure that the LPT pool is valid before a transaction can be created. UND tokens and other synthetic assets are minted when users provide their LPT as collateral. The UND token represents a stable coin pegged to the value of USD.
Once users have their UND, they can use the funds immediately. Unbound will initially support LPTs from various AMMs such as Uniswap, Balancer, Mooni swap, Curve, Kyber, and Bancor, with others to follow. The Loan-to-Value (LTV) ratio is the percentage of funds that users can mint against their collateral. This ratio is variable.
Automated Market Makers (AMM)
AMM is an implementation of Decentralized Exchanges (DEXs). AMMs replace the existing exchange order-books with a permission less liquidity pool run by algorithms. In DeFi, the constant flow of liquidity is handled by AMMs. Smart contracts lock tokens in order to provide liquidity which enables token pair exchanges. In return, the users, also called Liquidity Providers, are issued an LPT (Liquidity Pool Token) that represents the value they put into the Liquidity Pool.
Unbound: A Derivative for AMMs
DeFi is evolving with various derivative layers and AMMs are building new smart contract based legos. Unbound Dollar is a DeFi platform that creates a treasury layer on top of existing AMM platforms by using LPT’s as a collateral, which is a decentralized receipt of the user’s funds in an AMM pool. Unbound provides the first-ever debt-free liquidity provision system!
The platform provides liquidity to AMM LPTs and issues a Stablecoin (UND) in the form of a minted token. The platform unlocks the LPTs once the UND is returned, irrespective of time. The user is never at risk given that Unbound does not have a Liquidation Engine!
Liquidation Free Liquidity
The most important part of using LPT tokens as a means of collateral is working out the impermanent or divergence loss that can erode the value of the collateral. To make it clearer, they would link the impairment loss in terms of the correction that the erc20 token will undergo in order to derive a break even price of the erc20 token with respect to the LTV.
Deducing the formula for Impermanent loss
Now, if he supplies his tokens to Uniswap, the constant product formula will work out how much ETH and UND he can claim from the liquidity pools, and u1. In Uniswap, the Unbound Dollar of the two pools is equal to the price of the two tokens. Then find the difference between VH(the value from the hodl strategy) with VU (the value from the Uniswap strategy) to work out the difference VD.