Protocol-Owned Liquidity

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What are the benefits of protocol-owned liquidity?
We’ve all seen it before. A project launches with much fanfare, only to fizzle out soon after due to a lack of liquidity. It’s a problem that plagues many DeFi projects, but it’s one that can be avoided with protocol-owned liquidity.
It's no secret that many projects rely on liquidity providers to help them get off the ground. By offering rewards in the form of tokens or other incentives, these projects are effectively renting liquidity from users who are motivated by the potential rewards.
However, this model of misguided incentives can quickly become unsustainable. Liquidity providers more concerned with farming incentives than with the long-term success of a project, will sell their rewards and remove their liquidity as soon as the incentives are no longer attractive. This can leave a project worse off than it was before.
That’s why we’ve decided to forgo that path altogether. We’ve developed a more robust incentive structure that involves our protocols unique asset utilization algorithm and purpose-built HydraVaults. The end result will be a continual generation of liquidity that is protocol-owned - which means it can never be withdrawn on a whim.
So not only are we avoiding all the negative externalities associated with liquidity mining programs, but we've created a more sustainable approach that incentivises participation whilst also ensuring the ecosystem has the deep liquidity it needs to thrive.
This creates a self-perpetuating feedback loop that will boost confidence in the sustainability of the protocol with a growing level of exit liquidity. Put simply, as more users participate in the protocol, more protocol-owned liquidity will be created, increasing confidence for more people to participate. It's a virtuous cycle that we believe will have a lasting impact on the health and growth of our ecosystem.
👉 Learn about how our Liquidity Stability Model (LSM) provides stability and ensures exit liquidity remains high.
How does the protocol generate liquidity?
In addition to our protocols Quantum-Buy Back that feeds BUSD into our ecosystem every 8 hours from the rehypothecation of MetaVault assets, there will be accelerated growth of protocol-owned liquidity with every deposit made into either our HydraVaults or MetaVaults!
USDy BUSD (HydraVault) - 80% of BUSD deposits are used to create an equivalent of 160% of USDy-BUSD protocol-owned liquidity.
YSL-BUSD (HydraVault) - 80% of BUSD deposits are used to create an equivalent of 100% USDy-BUSD and 60% YSL-BUSD protocol-owned liquidity.
xYSL-BUSD (HydraVault) - 80% of BUSD deposits are used to create an equivalent of 100% USDy-BUSD and 60% xYSL-BUSD protocol-owned liquidity.
BSHARE-BUSD (HydraVault) - 80% of BUSD deposits are used to create an equivalent of 100% USDy-BUSD and 60% BSHARE-BUSD protocol-owned liquidity.
MetaVaults - depending on the multiplier level selected by a user, up to 42.5% of a deposit will be collected and redeployed to market buy YSL and xYSL, as well as create an equivalent of 42.5% USDy-BUSD and 25.5% BSHARE-BUSD protocol-owned liquidity.
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PROTOCOL DOCS - Previous
Game Theory of YSL.IO
Liquidity Stability Model (LSM)
Last modified 17d ago
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What are the benefits of protocol-owned liquidity?
How does the protocol generate liquidity?