A win-win staking design for $BPRO

a win-win staking design for $BPRO

solution requirements
the staking model should:

  1. add value to the protocol
  2. incentivize long term holders
  3. give the token a valuable utility
  4. be as simple as possible for newcomers
  5. consider the volatility of $BPRO

the main idea is to feedback the $BPRO into the backstops to create larger backstops,
that in turn would generate bigger liquidation gains.

To accomplish this there are several approaches,
here is my solution

creating a stable coin (a Liquity clone) that can be collateralized only using $BPRO
this stable would be backed by our very own backstop (much like Liquitiy’s stability pool)
so user deposits BPRO borrows “BUSD”
and then stakes the BUSD.

this backstop would be a general-purpose backstop to be used by all of Bprotocl’s backstops
This reduces friction for newcomers

the general-purpose backstop would convert some of the “BUSD” into Uniswap LP tokens to create liquidity without impermanent loss and when a liquidation happens it would be easy to swap and liquidate any debt.
This would give $BPRO holders great liquidity as well if they want to cash out they can borrow at a 100% of their BPRO and get liquidated

only BPRO holders can generate BUSD,
only BUSD stakers get profits (kind of like Liquity’s LQTY reward),
This gives the token a utility, the only way to become a liquidator is by staking BPRO

to conclude
this design gives great value to BPRO holders and the protocol
and creates a self-reinforcing loop for $BPRO generating profits and pushing the BPRO price higher
while still accounting for all of the solution requirements

  1. add value to the protocol
    (adding funds to the backstops)
  2. incentivize long term holders
    (stakers get profits and BPRO value increase as they hold)
  3. give the token a valuable utility
    (the only way to liquidate without building bots and allocating capital is by staking BPRO a very valuable utility)
  4. be as simple as possible for newcomers
    (staking once on one backstop to provide for all backstops)
  5. consider the volatility of $BPRO
    (using a stable coin users gets to decide how much $BPRO they want to risk as collateral)

lastly, I would like to add that besides giving $BPRO holders short term value,
the main long term goal of the project creating a huge backstop for all of Defi liquidations
still has a big promise so holding & staking makes snese not just for short term profit.

BPRO holders would get antifragile returns meaning whenever something goes wrong on Defi liquidations happen and BPRO holders profit it could become a hedging tool for Defi investors driving the value even higher.

any questions or feed back would be highly appreciated



I have a few questions,

  • how backstop mechanism can work with itself? Maybe, with huge DAO treasury (i.e. Gnosis) this can be possible but in that case, isn’t better just take $ from treasury and perform backstop?
  • who will provide $ (BUSD) for BPRO in stake?
  • who wants to stake BPRO with that conditions?
  • how avoid IL? Some AMM protocols provide “protection” but actually they cover LP losses with protocol native token (Bancor, Elk)

Your concept is not bad but at this moment it is impossible to use BPRO for that purpose. I think we need to find a way how to raise funds (stablecoins) on DAO level (DAO treasury). Valuable treasury/reserves is a very important factor for DAO, because it would gain stability in market valuation and the potential to generate future cash flows, which would then be reflected in the market price of BPRO token.
Feel free to correct me if I’m wrong, but the backstop protocol is meant to generate revenue from performed liquidations and we as a DAO should have a “backstop fund”.

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first of all
thanks for the feedback

  1. BPRO - BUSD would be the same as Liquitiy’s ETH - LUSD market it is trustless and autonomous and easy to build (no DAO needed)
  2. the Stable would be deposited into a Liquiity like SP (stability pool or backstop),
    this SP is used to liquidate bad leaders and like in fractional reserve banking you don’t need the full capital to back users
    you don’t really need a trillion USD to backstop and liquidate a trillion USD worth of debt assuming they will not all run to the bank at the same time
    and not all liquidations will happen on the same block
  3. " Who wants to stake BPRO with that conditions?" most of the LUSD in circulation is deposited to Liquity’s SP, users do it to be rewarded with free LQTY, BPRO users would do it to profit from liquidations (or to hedge for antifragile returns when the market goes south :slight_smile: )
  4. IL is avoided because the backstop uses BUSD (a stable) LP tokens like LUSD - DAI have no IL

one of Liquitiy’s protocol features is that there is no DAO and no treasury
each user manages his own risk no hidden miss-aligned incentives or bad risk management by the DAO

while this could go into a philosophical discussion
a DAO is great to build something
but then the DAO needs to give up its power because the DAO’s ability to change things is a liability that would require newcomers to trust the DAO.

and your best question
was that using BPRO as a backstop is not enough funds
you are right

we want the backstops to be big
but using the BPRO as a backstop gives it utility and profits so it will rise in worth
and that will cause our backstop to grow as well

its circular
like a self-reinforcing loop
bigger gains for BPRO → price goes up → BPRO feeds back the backstops → bigger backstops → -> more integrations → more liquidations → more gains and so on

I hope I managed to answer

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This is an interesting idea, but I don’t know if adding a stablecoin to the mix. Mainly because using BPRO to mint BUSD is going to be a hard sell due to the lack of liquidity in BPRO.

I have an idea that is simpler and will solve 2 problems at once.

create a staking pool that will receive a portion of all liquidation profits. But instead of simply using staked BPRO for this, we would use staked BPRO-WETH uni v3 LP tokens. So in order to get a piece of the fees, you need to provide liquidity. The BPRO-WETH price range would be updated once or twice a month based on some formula where the liquidity is redeployed to center around the market price. This would improve capital efficiency over a uni V2 pool, and reduce the friction of managing the pool LP position because it’s all moved at once. And the trading fees of the pool add yield in addition to the liquidation fees.

Another thing to consider is to incentivize the backstop pools with a modest amount of BPRO which would be matched or exceeded by incentives from the backstopped protocol with their token. This would make it more desirable for protocols to integrate the BAMM as their protocol backstop and would accelerate project integrations. This second part would be a separate proposal of course.

More backstop integrations → more liquidation fees → higher incentive to stake BPRO-WETH → more liquidity for BPRO → more investment flows into BPRO.

One last angle to explore is have a portion of the lending platform token incentives funneled to the staked BPRO-WETH pool as a fee for deploying our superior backstop on their protocol.

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thanks for the feedback

in regards to liquidity, you said that

I don’t fully understand how lack of liquidity would cause it to be a hard sell
we are trying to create a staking design that would incentivize holders to never sell
so staking is for holders
liquidity is for pumper-dumpers

but minting a stable with BPRO and then using that stable to generate LP tokens with other stables
would give BPRO excellent liquidity

to liquidate all your BPRO “cashout”
you mint BUSD on a 100% collateral debt ratio
go to UNI swap it for DAI USDC or some other stable
and you’re good to go
if BPRO price drops the backstop would liquidate the BPRO if the price goes up you win you got to liquidate your position “cashout” and got to keep the BPRO

the hard sell for this type of staking would be
BPRO’s price volatility,
so people would not want to risk losing BPRO so they would have to use low collateral to debt ratio

but the thing is that a token with this type of utility
would have a lot more reasons for holding on to it:

  • fees,
  • gov,
  • price appreciation,
  • easy cashout,

so no one would want to sell
and people would be able to leverage their position to buy more of it

so the price would 10X

in regards to BPRO-WETH LP on UNI-v3
I’ll have to think about it
but why do you think its better

I am also not sure it can work

liquidation flow would require pulling funds (usually in stables) paying debt usually in stable
selling the collateral back for a profit
BPRO-ETH sounds too volatile to use in backstops for liquidations sounds like too much volatility to account for (besides the collateral volatility which is usually having a price drop during the liquidation)
this is a question for @yaron


The reason that the stablecoin won’t work is because

  1. high liquidation risk due to low liquidity for the token. e.g. I could easily push the price around to cause liquidations.
  2. Volatility (related to #1)
  3. the total BPRO in circulation and BPRO’s mcap is insufficient to mint enough BUSD to be an effective backstop.

There is a reason stablecoins are minted primarily with ETH and other large stablecoins like USDC and DAI.

And I want to clarify that BPRO-WETH would not be used as backstop liquidity. It would be used to stake and get a portion of the liquidation fees (we have not turned on profit sharing if liq fees yet, but this is my plan for turning them on)

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I see
low liquidity you mean
easy for whales to game the price

Exactly. I think you’re idea of a BPRO backed stablecoin may be possible in the long run if the price and liquidity of BPRO becomes robust enough, but not at the current moment.


so to summarize
the general idea is OK and has nice benefits
BPRO price volatility makes it not a good fit as collateral
BPRO holders would just get liquidated.

but maybe there is a solution
so this is just a sketchy thought

but what if…
bprotocol is backstopping 20 lending markets on various protocols chains & layers
would it be able to support one more lending market for BPRO

I think the answer is yes

but what about the BPRO volatility?
the lenders would just get liquidated on every price hiccup

what if our internal lending market for BPRO would offer a buffer

so say BPRO is stable around $5
and user is putting it in as collateral for 50% of that price
if the BPRO price drops below $2.5 user has a 3 months cushion to pay back the debt to reclaim his BPRO
if he dosent only then he will be liquidated.

like a mortgage, the bank does not automatically sell your house if the price of the asset drops
if you are good on your payments you can keep it

if you fail to pay only then will the bank sell your house

the 3 months “buffer”
is meant to

  • prevent liquidations in the short term
  • alow BPRO holders to participate in the backstop’s using some of the capital value of their BPRO (aka capital efficiency)

I believe this idea would be better suited after fees are turned on
so that BPRO price starts to lean on the dividend it pays.

that way a failure to pay the loan would confiscate the fee profits to repay some of the debt.

also from another angle
if user deposit 1000 BPRO as collateral at a price of $5 to borrow(mint) 2500 BUSD
and then he uses that BUSD in the backstop

say price drops to $1 for more than 3 months and there is a negative incentive to pay the loan
the backstop could collect that user BUSD from his share of the backstop and close his loan automatically so he could keep his original BPRO collateral
and assuming the backstop made some money from liquidations his share is now larger than the original deposit,
he deposited 2500 BUSD and they were used to close his loan but the backstop gained profits in that 3 months,
so his 2500 gained 10% he is left with $250 worth of backstop shares after all

so basically
users have nothing to lose
they can only gain more by unlocking the capital in BPRO to be used in the backstop
the lending market is safe the backstop funds are safe the BPRO is safe

and with this safety mechanism in place, BPRO price would go up only :slight_smile:

please tell me why this can’t work