This is the first month update of building the backd protocol with support through a curve.fi ecosystem grant. The main idea behind backd is to allow liquidity providers on backd to utilize their funds as “back up collateral” on other protocols, while earning backd APYs, thereby increasing collateral efficiency. Essentially, when funds are not used as back up collateral, they earn yield according to some yield generating strategy. This month, we’ve focused on completing the implementation for backd v1. This includes functionality for collateral top ups across other protocols, as well as backd deposit allocation for yield generation on Curve. For a more detailed overview of backd, please check out the Litepaper, which we wrote and published online during the past month.
Here is a brief overview of the main functionality which we’ve been working on for the past month:
Liquidity for Curve
Assets on backd are deposited into single asset liquidity pools, where each pool is allocating funds to some yield generating strategy. On backd v1, there will be three initial pools: DAI, USDC and ETH. Hence, any LP depositing into a pool, may register his pool holdings to be used as back up collateral on other protocols. In terms of yield generation, the three initial pools, employ similar strategies, which are all based on channelling liquidity into Curve pools. In terms of locking, these strategies are designed, such that they will lock an amount of CRV to achieve a max. boost of 2.5 for the pool which they deposit liquidity into. An additional amount of earned CRV will be locked to receive a higher share of the veCRV governance earnings. The majority of generated backd earnings will remain in Curve pools until withdrawn.
Collateral Top Ups
We’ve implemented the logic for handling collateral top ups on different protocols. In the current implementation of backd v1, LPs can utilize their funds on backd as back up collateral on AAVE and Compound. However, it is very straightforward to add support for additional protocols (e.g., Maker Vaults). This can be achieved via backd governance.
We’ve developed the first version of the backd webapp, which is designed to make it (hopefully) relatively easy for anyone to interact with the backd protocol. Note that the backd app is not publicly released yet. However, we also updated the backd website to share more information about backd (with more to come over the coming weeks).
In terms of future work, we are now shifting into an extensive testing period (including stress testing of collateral top ups and the backd keeper collateral top up mechanism). We are in talks with auditors and seek to have an audit scheduled for next month. What remains is of course a lot of documentation to be written, both technical and more general. Furthermore, we intend to open source an implementation for backd top up bots, which anyone can run to earn backd fees.
We would like to thank the curve.fi team and the entire Curve DAO community for the support. We are always looking for constructive feedback and are happy to answer any questions either here or on Twitter.