Probe module: Automated Yield Maximiser

Community Initiatives
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Probe Module : Nexus Protocol Phase 1

What is Probe Module?

Probe module is a decentralized automated yield maximiser for Tefi, utilizing Anchor Borrow, Mirror Mint, Mirror’s mAsset-UST LP to maximize yield, with similar risk to staking or Anchor Earn, on your Terra assets (Luna, UST, ANC, MIR). This is the first phase of Nexus Protocol.

Why?

Utilizing Anchor borrow, Mirror Mint hedged mAsset LP, low-risk, high yielding is possible. However, there are several limitations for individual users to utilize such strategy as Anchor borrow and Mirror mint both requires constant monitoring and management to prevent liquidation. As such strategy is not a new thing, but with clear manual limitations, there is an evident demand for automation. By automation, we can offer significantly higher yield on Luna staking, UST Earn or manual replication of the same strategy, whilst maintaining similar level of risk. Such maximization of yield would not only attract customers within Terra ecosystem, but also other retail cryptocurrency investors seeking for higher yield on Defi world. Also, deposited assets and the customer pool will be the foundation of Nexus protocol to realize the next step of UST expansion, creating credit payment system with affiliated merchants. If you are interested in the larger picture, please refer to my post on Terra Agora.

Benefit & Impact Towards Anchor Protocol & Anchor Community

  1. Anchor borrow users can sleep well at night not worrying about liquidation, and benefit from even higher rewards (auto compounding & repositioning).
  2. Nexus protocol will utilize Anchor borrow as a part of Supply Chain Finance, which can be a long-term solution for Anchor borrow to be sustainable even after the 4-year Anchor borrow incentives are depleted.

How It Works

UI would super simple. The users will deposit the assets, in return for cAssets (deposit 1 Luna or 10 UST, receive 1 cLuna or 10 cUST). And withdraw the assets and rewards any time. 21 days delay may be applied for cLuna, as Luna’s yield strategy inevitable includes staking one way or the other.

Within the protocol, the optimization will be done as follows via series of smart contracts (for Luna):

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Why mint?
For first four years, MIR token allocated for mAsset LP staking would offer significant level of yield. However, to utilize such LP staking to UST earn operation, significant level of risk is involved. As one side of the pair, UST, is a stablecoin, the risk would heavily depend on the future price of mAsset in comparison to the price of LP pooling. Rise in the price of mAsset would resort in additional profit, however, decrease will resort in the loss of the principal asset. Such risk, however, can be hedged using Mirror’s Mint by sacrificing the efficiency of the yielding operation, but still providing significantly higher yield than Anchor Earn with similar level of risk.

At this point, I would love to hear your feedback on the concept. I am also searching for developers to realize this project together. If you are interested, please contact me via nexus.protocol21@gmail.com.

Thank you!

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Seems cool!

I like that this idea intends to utilize Anchor Borrow, because borrowing is important for Anchor’s long-term sustainability. It’s easy for other projects to utilize Anchor Earn, but those aren’t really contributing much value to Anchor.

Terra is also in need of automated Yield Farming.

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Very easy to understand and looks great. We need builders ASAP!

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Is this structurally similar to ApolloDAO?

Sounds very interesting though!

aUST will be added as a collateral type in Mirror v2, so the risks for minting will be significantly lessened (assets need to outperform 20% gains in the year for the minter to book losses)

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Thank you for your reply!

I do believe Nexus will be able to provide long term value in the market for Anchor Borrow, which is, as you said, the core engine for Anchor protocol.

Also Nexus will provide single-asset staking yield farming, in comparison to the other paired farmings, with no risk of principal asset being lost.

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The key difference with Apollo DAO on yield maximising section would be as follows:

  1. Single-asset staking rather than paired LP staking (e.g you will depoist Luna or UST, instead of mBABA-UST LP)
  2. point 1 leading to minimized risk on principal asset deterioration (no IL risk)

Thus, Nexus will be easy to use, safe vault for Tefi cryptocurrencies, with maximum efficiency.

And I think the most fundamental difference is that the yield maximiser in Nexus is a tool to create a UST payment system. Which may create a virtuous cycle of depositing Terra Assets (Luna, UST) → spending UST → more UST market dominance → more demand for UST → value appreciation of Terra Assets → more UST to spend

Yield maximiser will be the initial incentive for users to use Nexus protocol, where UST payment modules and affiliated merchants to Nexus will be the long term incentives for users.

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One problem is when collateral value decrease and liquidation control need to close mint contract when the stock market is closed which can’t be done.
So liquidation control can’t work properly.

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There are mAssets that can be minted or unminted anytime (like mETH, mBTC), and the logic of selecting mAsset to mint upon deposit and repositioning will include the comparison between the mAssets’ expected yield with consideration of the costs involved with Mirror Mint; which will include cost incurred from LTV and Mirror Minting closure.