Hi community. I wanted to drop an idea here and i am curious what you all think.
Currently, we can only use ICX as collateral. As already mentioned by Scott, more assets will become available as collateral types soon.
However, a lot of assets on Balanced are locked in liquidity pools because they are generating a lot of yield. Wouldn’t is be valuable if we would be able to also use our provided liquidity as collateral.
There are of course risks here. For example, if someone provided liquidity to a stable coin pool, and one of the stablecoins loses its peg to the USD and starts to hyperinflate, the value of collateral will drop significantly.
Therefore, i would like to initiate an open discussion on the following:
Offer three types of liquidity providing instead of only 1.
Provide “collateral liquidity” (CLP).
With this type of liquidity, you can use the value of the provided liquidity as collateral. You have to give up a percentage of your LP APY that you would earn in current situation to the “protectors” (PLP).
Provide “protectors liquidity” (PLP)
The protectors basically protect the “collateral liquidity” providers (CLP) for events like the one i mentioned previously (hyperinflation of one of the provided assets). For covering this risk, they get rewarded extra APY that is being paid by the collateral liquidity providers (CLP).
Provide “normal liquidity” (LP). This is how we all provide liquidity now. So they can not use their provided liquidity as collateral.
More ideas, or something to add, or you think this is bullshit? Please jump in!