How Blindex will invest its funds to generate more yield to its community and BDX holders
One of the main drivers of the Blindex protocol will be investing its excess collateral in different Defi protocols to generate more yield for the community. These yields could come back to the community in the form of BDX buybacks or any other strategy to increase the value the BDX holders get.
With these yields, we could also:
- Keep Blindex’s assets/stables pegged across multiple DEXs protocols via arbitrage strategies.
- Supply liquidity to Blindex’s pools across selected protocols.
- Bring value to BDX holders
- Through listing on multiple DEXs (thus strengthening the Blindex’s brand).
- Participate in the Curve “games”.
- Buybacks of BDX on different DEXs.
Few situations could happen that will create excess collateral in the system:
- The CR (Collateral Ratio) changed and is now smaller than before. As we know, the CR is a moving target based on the price stability of the BD-Stable. As it goes down, it means we now have more collateral (BTC/ETH) reserves than needed in the system.
- The price of the collaterals went up. The collateral is required to back the circulating supply of the BD-Stables. If the collateral (BTC/ETH) price went up, that means we have more funds than we need.
- Fees - minting/redeeming fees go straight back to the collateral pools. That creates a situation we'll have more collateral than needed.
- BDStables locked up for a long time - Blindex is aware of all the LP tokens that were locked in its staking pools. Whenever there are BDStables that are locked, that means that at the moment, that wallet address can't go an redeem the stables (until the lockup period is over). Blindex can use this information to make wiser decisions about how much actual collateral is needed to back the "free" BDStables.
Blindex needs to invest its collateral wisely. As the treasury will increase in size, we could take riskier (and much more rewarding) strategies. Until then, we'll play it safe. Blindex will invest its funds only in well-established protocols with good enough yields to not risk it too much (mostly lending protocols at the moment).
Blindex could also withdraw its funds back to bring the eCR up again In case of market crashes.
However, we might not always need to do it. Blindex also has the incentivized swap (recollateralization) option. As described in our docs, in the case of the CR > eCR, the community can provide more collateral to the system in exchange for the same amount in BDX, plus a bonus for helping the protocol. So while a situation where the CR is bigger than eCR happened, the community might help in exchange for incentives even before Blindex will have to fill back the collateral pools with the excess collateral used for investments.
It's also important to remember that Blindex will slowly learn more and more about these investments, and until then, we'll not take out all the excess collateral from the system. It will be wiser to keep some excess collateral strictly for market crashes.
Long story short, we got it covered
Blindex stable collateral pools have an option to Buyback collateral by supplying BDX to the pool. As mentioned in our docs, this option is only available when the eCR (Effective Collateral Ratio) is bigger than the CR (Collateral Ratio).
Once we've done that, Blindex can invest the excess collateral and start generating yields to increase the protocol's treasury in service of our community.
Currently, this operation will be executed manually using the Blindex core contributors using the treasury multisig. We want to work on an automated and decentralized way of doing that in the future. We call it BSM (Blindex Strategies Manager).
Good things are yet to come.