Alpha Report: Cat in a Box V1

Rather, a skillful blend of PvP, immutability, and LSDs.

CIAB is a lending service that allows you to use stETH as collateral to borrow boxETH.

boxETH is a synthetic of stETH.

An entire mechanism has been designed to encourage certain behaviors considered good and to discourage others that could endanger the system.

Yield in CIAB depends on:

The yield from all stETH positions in the system is accumulated in a smart contract.

Then, the accumulated yield is distributed to users proportionally to the over-collateralization of their debt.

In other words, only the over-collateralized portion of positions is eligible for the yield from the entire collateral of the system.

e.g., TVL = 1,000 $stETH; Average LTV = 50% → 500 stETH eligible for the yield from 1,000 $stETH

Maintaining an LTV lower than the average will be rewarded with higher yields.

Holding stETH in CIAB (without borrowing) is also more profitable than simple holding.

Taking the example above, as soon as your LTV is less than 50%, your yield is amplified.

To conclude with yield, it is auto-compounded, but you can activate the auto-repayment function.

Compared to some systems that only let you accumulate more collateral, here, it's your debt that decreases over time.

These two levels give the estimated resolve price, or the price at which resolution becomes attractive.

Fees in boxETH are charged to the resolver. These vary from 0 to 10%, with lower fees for higher LTV and vice versa.

In addition to reducing leverage excess, resolution creates a buying pressure for boxETH as well as a reduction in supply, thus aiding peg maintenance/regaining.

Yields generated by your collateral (stETH) are subject to a base fee of 1%.

An additional fee of up to 25% of your yield will be charged based on your LTV.

Here as well, the higher your LTV, the higher the additional fee and vice versa.

boxFEE is a fee-sharing token that, once staked, allows you to receive protocol fees in boxETH.

These fees consist of the base fee, the additional fee seen just before, and resolution fees.

The boxFEE tokens were initially issued during an LGE.

You can now acquire them on the secondary market or by minting 1:1 with boxETH.

They are backed by a certain amount of boxETH that varies according to mint/redeem.

When you redeem, you receive a proportional quantity of this reserve in boxETH.

In short, if you wish to acquire them currently, buy them on Uniswap!

CIAB is a protocol that does not have governance and has immutable contracts.

Only two parameters can be changed.

CIAB is a superb protocol, but it is not easy to understand!

Even though they have interesting documentation and an extraordinary explanatory video, it takes several attempts to grasp the different mechanisms.

I've tried my best to explain the crucial points, deliberately omitting other details to avoid being longer than the documentation, ahah.

Certainly, this difficulty in understanding makes the protocol somewhat "underground".. Plus, the lack of a token that could "moon" doesn't attract much interest.

However, such protocols should be highlighted more, as they are undoubtedly the most resilient.

I've introduced you to CIAB's V1, which seems more suitable for low LTVs (balancing between individual and average LTVs). However, for a user wishing to borrow with a high LTV, it's V1.1 that will be interesting.

I'm looking forward to discovering this version in an upcoming Alpha Report.

Article posted @August 23, 2023