Author: Slater Heil, Composable Corp (Development Company Engaged by Blueberry Protocol)
Create a Blueberry AMO to provide stablecoin liquidity directly to the Blueberry protocol.
Blueberry Protocol is a leveraged liquidity position provider for actively managed concentrated liquidity pools, focusing on Uniswap v3 pools on the Ethereum network. Concentrated liquidity has proved a superior option compared to Uni v2, but it creates unreasonable difficulty and management requirements for the everyday user. However, we believe community-owned liquidity is the strongest and healthiest liquidity, and protocols should strive to have their holders be their LPs (rather than relying on outside market maker deals). Blueberry empowers users to become liquidity providers once again by aggregating the best performing automatically managed uni v3 pools and enabling leverage. The protocol also unlocks capital efficiency by allowing holders to maintain their full single-sided token position while providing liquidity(for example, I have $100k FXS, and I can keep that deposited collateral–earning interest–while taking a 10-150% value LP position in a FXS pool). Lastly, the protocol boosts returns for LPs by offering $bBLB rewards. veBLB is used to vote to incentivize protocols’ pools, creating a sustainable flywheel for token demand and keeping yields high.
To start, Blueberry allows leverage for actively managed pools with a track record of profitability provided by Arrakis, Ichi, and Gamma.
Boosted BLB rewards usually would require the accumulation and locking of $BLB. However, Blueberry Protocol will offer 2x boosted BLB rewards for the duration of the liquidity partnership to any FRAX or FXS pools on the protocol.
Concentrated liquidity has established itself as the future of liquidity, and Blueberry will be the ideal destination for concentrated liquidity providers. By becoming the liquidity provider on the lend side to enable borrowing, FRAX accomplishes four goals:
- Additional utility for unused reserve stablecoins
- Competitive interest, with boosted $BLB rewards
- An incentivized and actively managed concentrated pool for both FRAX and FXS
- No cost ownership of $BLB token supply–an innovative, investor-backed liquidity protocol
The Blueberry Protocol is currently in process of an audit through the reputable firm Hacken. It will launch near the end of October, which will begin the Alpha Phase.
In its Alpha Phase, Blueberry will require $15M in stablecoin liquidity in the form of FRAX, USDC, or DAI. This is the amount required for this phase, as the protocol has secured commitments from various market participants to generate up to $10M in borrow demand in this phase. The protocol will request liquidity in 2 tranches. A new tranche will be requested when the borrow utilization reaches 66%. The expected interest rate paid at 66% utilization is an ~8% APR, NOT including $bBLB rewards.
In the Beta Phase, Blueberry may require an additional $25M in liquidity. Depending on need, Blueberry will request an additional tranche in this amount. See deal terms below.
Each time a tranche is granted, a locked BLB token allocation will be granted in exchange from Blueberry DAO to Frax. The BLB tokens will be on a vesting schedule of a 1 year cliff and 3 years vesting thereafter–the same vesting schedule as protocol contributors and investors.
Tranche 1 - $15M stablecoin liquidity - 2% Token Supply - 15,000,000 $BLB - 2% Token Supply Total
Tranche 2 - $25M stablecoin liquidity - 2% Token Supply - 15,000,000 $BLB - 4% Token Supply Total
If stablecoin liquidity is no longer needed by Blueberry as organic LPs have filled the need, the liquidity will be returned to Frax. Boosted BLB rewards will only be active for the duration of the stablecoin liquidity provision, which is defined as any time before Blueberry has returned 100% of either tranche 1 or 2. However, Frax will maintain its vested ownership of the token supply forever. Liquidity is one of the main difficulties new protocols face, and the team believes the liquidity contribution to help the protocol get off the ground warrants ownership in the protocol token.
Borrowers (leveraged liquidity position creators) are subject to conservative liquidation terms, as the top priority of the protocol is to ensure the safety and repayment of lender funds. When borrowing to create a volatile token liquidity position, the liquidation threshold is an 80% negative PnL relative to supplied collateral. When dealing in stablecoin positions, the threshold is a 90% negative PnL relative to supplied collateral. As an additional safety measure, a Stability Pool immediately purchases liquidated positions and instantly repays debt to the lender, while taking on the risk of collateral liquidation itself. Together, this creates a robust, low-risk system to assist repayment of any borrowed funds.
Note: If my understanding is correct–an AMO is when the strategy or partnership involves the utilization of treasury assets, while a Liquidity partnership involves using FRAX. For this proposal, either one is fine–whether the assets are contributed as FRAX or treasury stablecoins such as USDC or DAI. Please correct me if this understanding is incorrect, and I will move this proposal to another category.
Create a Blueberry AMO and authorize up to $15M of liquidity for use in the AMO, followed by an additional tranche of $25M if needed.