How does eUSD generate interest?
Deposited ETH is automatically converted to stETH through the Lybra Protocol. (stETH is an ERC20 token representing ETH staked with Lido) One stETH can always be exchanged for one ETH, and due to the LSD (Liquidity Staking Derivatives) process, stETH will continue to grow over time Increased income from stETH is converted to eUSD based on the USD value of ETH at that time A certain percentage of the increased income is shared proportionally among LBR holders The remaining income is distributed to eUSD holders, with a base APY of approximately 8% For Example,
Alice deposits $135,000,000 ETH and mints 80,000,000 eUSD
Bob deposits $15,000,000 ETH and mints 7,500,000 eUSD
Current eUSD circulation = 80,000,000 + 7,500,000 = 87,500,000
Current collateral = $135,000,000 + $15,000,000 = $150,000,000 stETH
1 year later,
LSD income = $150,000,000 * 5% = ~$7,500,000 stETH
Bob uses his holding 7,500,000 eUSD to buy the increased stETH
Service Fee during the past 1 year = eUSD circulation (i.e. 87,500,000) * 1.5% = 1,312,500 eUSD
Dividends 7,500,000 eUSD - 1,312,500 eUSD =6,187,500 eUSD is distributed among all eUSD holders (aka. Alice)
Current situation:
Alice's collateral = $135,000,000 ETH, debt = 80,000,000 eUSD, holding 80,000,000 + 6,187,500 = 86,187,500 eUSD
eUSD APY =6,187,500 / 80,000,000 = ~7.734%
Bob's collateral = $15,000,000 ETH, debt = 7,500,000 eUSD, holding 0 eUSD, and holding $7,500,000 ETH
Current eUSD circulation still = 87,500,000
Current collateral still = $135,000,000 + $15,000,000 = $150,000,000 ETH
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