Novel pool construction on the Algofi Lending V2.
With the release of Algofi Lending V2, we are now able to fully take advantage of the composability in the Algofi AMM to allow for improved capital efficiency and increased yields.
In a traditional AMM pool Asset A and Asset B are pool against one another allowing users to swap one into the other and paying out a fee to the liquidity providers (LPers) in the pool. The advantage of this system is that there is always liquidity available, but the downside is it requires assets to sit unused most of the time. The Algofi Lending Pool addresses this issue for a curated set of assets which are also used on the Algofi Lending V2 protocol.
Novel Yield Mechanism
The lending protocol has the capacity to issue "b tokens" which are the equivalent of a depository receipt. They represent some amount of the underlying asset added to a market plus any earned interest and may be "Minted" or "Burned" at any time. A lending pool, rather than having Asset A and Asset B, has the "b tokens" for each of these assets. The first of these being launched is bUSDC / bSTBL2. What this means is the LPers will earn not only swapping fees but also lending interest as their assets are utilized in both the lending and AMM protocols.
Same User Experience
From a user perspective this is entirely abstracted away through a new Interface Contract. This is a contract which using the composability of the V2 Lending protocol and the AMM allows users to swap USDC/STBL2 directly on the lending pool without ever having to actually deal with the "b tokens".
This new design will allow for greater capital efficiency and ultimately deeper pools which will give users better execution prices and greatly improve the scalability of both STBL2 and the Algofi DeFi protocol overall.
LP tokens as Collateral
The Algofi V2 Lending Protocol supports LP tokens as collateral. As an LP token, the lending pool lp token can qualify as collateral. STBL2/USDC LP tokens have been added as a collateral asset to the V2 protocol. Users can supply them and borrow additional assets against, greatly increasing capital efficiency. Lending Pool tokens cannot be borrowed, but can be used to borrow against.