Welcome to the Edge Podcast, a show that spotlights new and trending DeFi projects and teams. Today's episode focuses on the recently launched Gravitub protocol, a friendly fork of Liquidy designed to provide users with interest-free loans backed by ETH liquid staking tokens.
Gravitub Protocol
Gravitub is a friendly fork of Liquidy, but with a multi-collateral focus on liquid staking token ends. This unique approach makes it an attractive borrowing experience for both short-term and long-term borrowers. In Gravitub, the one-time loan origination fee is charged over six months, making it a more appealing option for riskier borrowers. Gravitub operates as a protocol-to-peer lending platform, where users mint a debt token (DRT) to borrow and then pay it back to get their collateral back.
History and Background
Rhett, the creator of Gravitub, has a background in data science and was introduced to Ethereum in 2016. He became interested in DeFi after hearing an interview with Ren Christensen about MakerDAO and has been following the space closely since then. Rhett worked as a data scientist and eventually shifted to work on AI-based applications. He then worked on the investment team at Wave Financial, a digital asset management firm with a venture capital arm that invests in DeFi projects.
LST and LST Phi
An LST (Liquid Staking Token) is a token that represents the underlying ETH assets plus the yield generated by a validator. LSTs have gotten significantly de-risked with the recent enabling of withdrawals, making it easier to safely support them in DeFi. LST Phi is a term used to describe the next evolution of LSTs, which is being showcased by Gravitub.
Gravitub Mechanics
Gravitub allows users to deposit liquid staking tokens as collateral and borrow up to a certain loan-to-value amount. The borrowed amount is minted as a debt token (DRT), which the user must pay back to get their collateral back. The interest-free loan is backed by the ETH liquid staking tokens deposited as collateral.
Additional Information
The episode also includes a quick word from sponsors, including:
- Mantle, a decentralized and token-governed ecosystem of technologies powered by its native token, MNT.
- KyberSwap, a decentralized exchange and aggregator on 13 chains that offers trading, farming, and limit orders.
- Gains Network, a decentralized leveraged trading platform that allows users to synthetically trade crypto, Forex, stocks, and commodities with up to 1000x leverage.
- Utopia, an all-in-one platform for creating, executing, and understanding Gnosis Safe transactions, payroll, and multi-sig transactions.
Gravitub is a decentralized lending platform that allows users to borrow and lend cryptocurrencies. Users can mint up to 85,000 worth of DAI (DAI) using Ethereum (ETH) as collateral. Liquidations are processed through a stability pool, which burns deposits to cover debt and distributes collateral amongst participants.
Supporting BLUSD as a Collateral Asset
Gravitub has implemented support for BLUSD, a stablecoin derived from liquidiated and censorship-resistant LUSD. BLUSD is considered extremely robust and is generating baked-in yield from the stability pool. Supporting BLUSD as a collateral asset helps to benefit the health of the Chicken Bond system and makes it more profitable to open Chicken Bonds.
Loan-to-Value (LTV) Ratio
Gravitub has a higher LTV ratio compared to other lending platforms like Liquidy and Maker. The higher LTV ratio is due to the stability pool's ability to liquidate over-leveraged borrowers quickly and the system's ability to burn all debt and capture all collateral during liquidation. However, this also means that borrowers may be more susceptible to liquidation if the system enters recovery mode.
Recovery Mode
Gravitub's system has a recovery mode that is triggered when the overall loan-to-value ratio for a particular collateral type exceeds a certain threshold (71% for ETH, 71% for wETH, and 80% for rETH). In recovery mode, the system limits borrower activity to activities that improve overall collateralization. If the system enters recovery mode, borrowers may be subject to partial liquidation to reduce the overall loan-to-value ratio.
Automation and Integration
Gravitub hopes to integrate with other protocols like Defi Saver and Insta DAP to provide automation and features like stop-loss mechanisms. Defi Saver already provides stop-loss mechanisms for Liquidy, but it is unclear if they have a specific mechanism for Gravita's recovery mode.
Advantages over Other Lending Protocols
Gravitub offers a lower borrowing experience with a one-time borrow fee and no ongoing interest. Gravitub allows for a more aggressive LTV ratio compared to other lending platforms, making it more suitable for users who want to borrow more against their collateral.