The Stabilize Protocol is a decentralized finance application designed to help keep stablecoins and BTC proxy tokens prices stable by rewarding depositors with STBZ tokens and by using active strategies to balance coin demand. Users have the option to swap pools manually to achieve a higher rate of reward or deposit into the active strategies that swap tokens on their behalf.
FRAX is a novel type of stablecoin that is partially backed by collateral, currently USDC. It combines both algorithmic stabilization factors, similar to what we’ve seen with seigniorage tokens, via its Frax Share token (FXS) with an additional collateral backing. This gives it more stability than most seigniorage tokens yet offers some protection from market effects caused by collateral collapse.
The team at Stabilize has developed a way to both help promote the peg of FRAX while earning via natural price variability around its peg. This strategy will be released soon. Follow us on Twitter to find out when.
The Stabilize strategy
In the upcoming pool, users wrap FRAX into an arbitrage strategy. The strategy looks at the difference in price between FRAX and USDC. It will continuously swap the higher valued asset for the lowered valued one. This will increase the overall amount of tokens earned by the strategy. Also, this will help normalize the price of FRAX to match that of USDC, a relatively stable stablecoin. In the long run, it will help decrease the volatility of the pair.
When redeeming, users will first get back FRAX then USDC if the strategy doesn’t have enough FRAX. This means if you deposit 1000 FRAX to get zs-FRAX, when you redeem your zs-FRAX, you will get back either at least 1000 FRAX, 1000 USDC or a combination of both.
The APY posted on the wrapper is an estimate based on historic performance of the strategy. The strategy doesn’t earn continuously. It only gains when there is trading activity. This means if you wrap into a strategy and unwrap before a trade takes place, the balance you redeem will be the same as what you put in, regardless of how long you were in the strategy.
Trade executors can earn 10% profit off each trade by timing the trade at the right time. The expectedProfit(bool inWETHForExecutor) function in the strategy will include a boolean that allows executors to see their WETH profit from the next prospective trade, instead of total profit (in tokens) for the trade.
Stay tuned to find out when our FRAX strategy launches!
Visit the website to get started using the Stabilize protocol, follow us on Twitter and join the community on Telegram