Potential Opportunities in the Ethereum Ecosystem: An In-Depth Analysis of Liquidity Re-staking Derivation Protocol Agilely

Preface

After Ethereum transitioned to POS, the packaged ETH issued by staking underlying protocols such as Lido and Rocket Pool brought about a risk-free interest rate of approximately 4% to the ecosystem. EigenLayer will further decouple the security of Ethereum staking nodes from the network, providing restake to multiple POS networks. Although it has not officially launched yet, restake is expected to raise the benchmark interest rate of the Ethereum ecosystem to 6%-8%. On this basis, by leveraging, users could achieve about 10% long-term risk-free returns. Agilely is the first LSDFi protocol to embrace Restaking Token.

About Agilely

Agilely is a stablecoin USDA issuance protocol. USDA is a full-chain interest-bearing stablecoin based on the Liquity model, which guarantees users can earn interest just by holding it through multiple innovative mechanisms, while ensuring that USDA is always pegged to $1, achieving the coexistence of yield and liquidity.

After the rise of the LSD track this year, yield-stable coins with liquidity, stability, and profitability have quickly gained favor among DeFi players. Starting with Lybra in May, followed by Gravita, Raft, and Prisma, the total TVL reached $400m, becoming a force that cannot be ignored. Agilely draws on the strengths of various approaches, retaining the most innovative points in product design while ensuring that its token design can capture the real income of the protocol, which is an advantage not possessed by similar protocols.

The CDP-based stablecoin model was first proposed by MakerDAO, where users over-collateralize assets to borrow stablecoins issued by the protocol. However, the high collateralization rate of 250% leads to low capital efficiency.

Afterwards, Liquity proposed the classic CDP stablecoin model, achieving a low MCR of 110% through hard and soft dual anchoring and a three-tier liquidation model, significantly improving capital efficiency. The LUSD issued by Liquity has consistently been anchored to $1 during two years of bull and bear markets, fully proving the soundness of its mechanism design. Agilely adopts Liquity's price stability mechanism to ensure the stability of USDA's price.

Review of Liquity Stability Mechanism

The design of Liquity's CDP stablecoin LUSD mainly includes: Soft/Hard Peg to achieve price anchoring, Stability Pool - Debt Redistribution - Recovery Mode to ensure protocol security, and control of supply and demand through changes in minting and redemption rates. These modules work together to provide assurance for LUSD's stability, making it the best model for CDP-based stablecoins.

Liquity's price stabilization mechanism

LUSD, as a stablecoin pegged to the US dollar, has stability as its core attribute. Its price stabilization mechanism is divided into two parts: Hard Peg and Soft Peg. Hard Peg establishes a price ceiling of $1.1 through a minimum collateralization ratio of 110%, and constrains the price floor of $1 through a rigid redemption/repayment channel. Soft Peg includes long-term market psychology reinforcement led by the protocol, as well as a one-time issuance fee determined by an algorithm as an additional stabilization mechanism.

Liquity's liquidation mechanism

The liquidation mechanism of Liquity consists of a protocol security defense line formed by the stable pool - position redistribution - recovery mode. Usually, the stable pool serves as the liquidation counterparty. If the LUSD in the stable pool is insufficient, the position redistribution mechanism is activated. When the system's total collateral ratio falls below 150%, it switches to recovery mode.

The stable pool serves as the first line of defense and is also the most commonly used protective measure. Debt redistribution and recovery models are primarily used for protocol security protection in extreme circumstances.

Liquity's supply and demand control mechanism

Liquity controls the supply and demand of LUSD by adjusting the minting and redemption rates. The minting and redemption rates are adjusted based on the redemption time and cycle. When no one redeems, the system lowers the minting and redemption rates; when redemption behavior increases, the redemption rate rises accordingly. This mechanism is more defensive, focusing on preventing large-scale redemptions by increasing the redemption rate.

Agilely Mechanism Innovation Based on Liquity

collateral

Agilely allows users to use interest-bearing assets such as ETH, mainstream wrapped ETH, and GLP as collateral to mint USDA. In the future, it will also integrate Restaking Token to inherit its own interest rate to USDA, enhancing the USDA interest rate.

interest rate model

Agilely modified the BaseRate model of Liquity by adding a decay factor and determining different decay factors for each instance. Additionally, Agilely innovatively designed ADI( Agilely Dynamic Interest ) to regulate the total monetary supply.

stabilization mechanism

The stability mechanism of Agilely includes two parts: Hard Peg and Soft Peg. Hard Peg provides a 110% MCR to guarantee the price ceiling and offers a redemption channel to ensure the price floor. Soft Peg relies not only on the long-term market psychological game led by the protocol but also embeds ADI to regulate the USDA market for macro-level price control.

Clearing Mechanism

Agilely has optimized the three-tier liquidation mechanism of Liquity. The liquidation interface is placed on the front end to lower the threshold, allowing more people to participate. In addition, Agilely has optimized the conventional Stability Pool into a Smart Stability Pool, where the USDA invested by users will be placed in the Stability Pool of the collateral most likely to undergo liquidation and with the largest potential liquidation funding gap.

PSM

Agilely sets the PSM module to raise interest rates, achieving a siphon of DAI, and combining the collected DAI with MakerDAO, allowing the protocol to capture the national debt yield of MakerDAO.

Value Flow within the Protocol

The income within the Agilely protocol includes minting/redeeming and lending fees, PSM trading fees, additional fees from the stable pool, collateral earnings, and RWA earnings in PSM. These earnings flow out in the following three ways:

1. ABI flows to USDA holders, LPs, and stable pool USDA stakers
2. veAGL holders can capture the protocol's real earnings.
3. The remaining business income is allocated to the stable pool as stake income.

Token Design

Agilely's token AGL is designed to capture real yield. Users can lock Balancer AGL/ETH 80:20 Pool's LP to obtain veAGL voting rights. veAGL holders can capture protocol business income, including minting/redeeming, borrowing fees, PSM redemption fees, and additional fees from staking in stable pools.

Summary

Although current market funds are concentrated in BTC and the Solana ecosystem, the Ethereum ecosystem is relatively quiet. However, with the official launch of the eigenlayer, it is expected to enhance the benchmark interest rate of the Ethereum ecosystem, at which point funds may flow back to the DeFi ecosystem. Agilely, with its excellent product and token design, is expected to become the preferred choice for DeFi users' leveraged operations. In the current stage, laying out the future Restaking ecosystem through Agilely may be a high-return choice.