[Music] Hello, I'm Kell, co-founder of Bear Borrower and uh we're the largest CDP protocol on beer chain with over 400 million TVL creating new types of liquidity, leverage, and yield strategies. Why build on bar chain? Bearchain is an EVM identical L1 built with a novel proof liquidity incentive mechanism fostering application growth. This allows builders like us at Bearbar to use chain level incentives to help acquire users providing endless opportunities for growth in DeFi applications and beyond. What is bear borrow?
At a core, bear borrow allows users to free up liquidity on their assets. uh this means utilizing a and and to do this we utilize a CDP mechanism originally pioneered by make it with notable kind of iterations built by liquidity and now liquidity EV2 as well as many kind of other builders being inspired by that we've taken the liquidity v1 model where by which you have three core parts and really built on top of that as well as optimize it for bear chains proof of liquidity to to ensure sustainability. So high level there's three core parts to the protocol. We have our DEN. This is where collateral is deposited into.
This collateral could be an LP position. It could be a single-sided asset. Then we have our debt token which is NEC in our case. Nectar as our stable coin. Uh Nectar is a super simple ERC20 and that is by design and that's purely for composability purposes.
Lastly, we have our liquid stability pool. And this is probably the largest amount of changes from a traditional kind of liquidity V1 model. Our liquid stability pool allows users to deposit NEC, our debt token into the stability pool. And this is how we maintain protocol solveny. So instead of like a traditional money market liquidating uh onto an AMM or through an auction model, what we do is upon a liquidation, we burn the respective amount of debt token and replace that with overclapized position.
That's high level the three core parts of the protocol. Bear also owns the license to liquidity v2 on bear chain uh which we'll look to expand and explore upon uh in the coming months. Proof of liquidity started from the fundamental understanding that chain security has become a bit of a meme in DeFi. And there's a massive like value leakage from the chain's overall economy in uh validators pretty much getting paid to just stake and chill. Uh but the majority of the chain's inflation going towards stakers.
Um which is obviously extremely important, but it doesn't really allow for the growth of of the ecosystem. What proof of liquidity does is it kind of um takes a a curve governance or kind of bribe wars model and and puts that on top which allows the chains uh inflation uh and the kind of block rewards to be recycled back into the uh DeFi ecosystem or the chains ecosystem helping foster additional growth. So kind of what does that look like? Um essentially instead of validators earning just staking you know um or running a node and and folks staking with a validator and earning additional incentive tokens. Um what barer chain does is they have a kind of two token model which is bearer the gas token and then they have BGT which is the bear chain governance token and this token is non-ransferable and it's also um uh the kind of predominant incentive token within the ecosystem.
So when a user provides liquidity uh onto a a rewards vault um instead of receiving the incentives that come from that specific application what happens is they receive the chain level incentives which is BGT bechain governance token and then applications bid for those chain level incentives to go to their respective rewards. So it's kind of flips the model on the head where the validators have to kind of be longer ecosystem. So applications pay the validators in incentive tokens uh or their governance tokens or fees or revenue. In turn the validators then direct the chain level incentives towards the respective rewards vaults. So that helps the chains inflation and the chains kind of block rewards be recycled back into the DeFi or the ecosystem.
It doesn't have to be DeFi uh back into the ecosystem uh fostering further growth. Um, and we've seen this work tremendously well over the last couple of months, starting off with extremely efficient up to 7x rewards for, you know, applications being able to drive chain level incentives to their respective rewards vaults up until now where we saw recently in the last weeks. Um, applications have actually been bidding more uh in the value that they provide to validators uh than the actual value that they were receiving to their rewards. Um so it's a very refle reflexive model but ultimately what it does is try and recycle uh the economic flow and the the leakage which was uh you know um chain security back into the into the ecosystem. How does barrier borrow use proof of liquidity?
We use proof of liquidity in a few different aspects and our protocol is actually designed around proof of liquidity to start off with. So I touched on the three different parts of the protocol earlier and in each of those we kind of make use of proof liquidity in a different fashion. Um the first part is our collateral assets. So our DEN um are all ERC 4626 faults which allows for us to uh essentially enable any asset that is proof liquidity enabled to continue earning all the proof liquidity incentives whilst within our protocol. Um so that is on the DEN front.
It essentially means that we allow users to maintain access to all of their yield that they would have earned from participating in any pro proof liquidity rewards vault whilst using that asset as collateral uh within our protocol. Um we also then autoco compound those in incentives back into the underlying asset that the users provided. So that's the first part um kind of the on the DEN front. The second part is um our stable coin neck. So a interest rates are an important kind of mechanism to help provide uh stability for the stable coin's price peg.
Uh so essentially in a CDP model the sole purpose of the interest rate is really to ensure that you can create enough incentives for people to buy the stable coin as what there's um users selling the stable coin. So we use proof of liquidity as a means to optimize for the amount of incentives uh that we to optimize the the cost of the incentives we need to push through to users. Meaning that when we charge $10 in interest rates, our users are able to earn, you know, between $10 and $20 worth of incentives because of the fact that we can essentially buy um chain level incentives through proof liquidity. So our users when utilizing our stable coin participate and earn uh proof liquidity rewards instead of uh application specific awards rewards. Uh and that allows for uh efficiency not only on um on the application level in the sense that we have to charge less interest rates but it also allows for users to um earn more uh and borrow more uh as those costs are lower.
Um so that's the um the the stable coin side and then uh the last one which is the liquid stability pool. Um we also uh utilize proof liquidity within our liquid stability pool as our main our main kind of like uh um destination to drive demand for our stable coin as well as uh creating a a facility for folks to earn yield on top of our stable coin. And that is all proof liquidity enabled. Meaning when folks deposit our stable coin, they receive ESN in return and they can use that SNE in a proof liquidity enabled rewards vault allowing them to earn earn these yields. Bear borrow plays a key role uh as a primitive in the in the baritain ecosystem.
We offer number one a venue to rehypothecate assets. So what does that mean? We allow users to take an asset that previously was unusable and create and mint a fresh asset which is neck which is extremely composable and can be used in an unlimited amount of ways uh afterwards. So essentially creating a whole new set of opportunities for users within the beer chain defy ecosystem. So allowing them to take proof liquidity positions and then continue their journey within the ecosystem.
So that's the first part. Second part would be um helping uh meet demand for stable coins on other money markets uh and just creating a supply of stable coins that uh can help uh keep borrowing rates in check on other money markets and just enable healthy leverage throughout the ecosystem due to the fact that our interest rates um don't go up with utilization like a money market does because the stable coin is being minted rather than being borrowed from somebody bear borrow dens. So bear bar dens are essentially positions within the bear protocol um protocol. We have den managers that kind of sit on top of the dens and this is the interface that creates the den uh and then once a user has open den that den deposits the respective collateral asset into each assets cobalt. So there's one covt per collateral asset and this covault is how we are able to uh actually do the auto compounding and kind of accessing or proof liquidity uh yield because our covolt uh interfaces with all the different protocols to be able to harvest incentives sell those incentives and increase the user's position.
Um so when a user deposits it opens a den their asset is deposited into the covt and the den holds a covolt receipt token. the Den managers. Uh there are Den managers for each collateral asset as well as coals for each collateral asset. But then what we also do is we split the protocol into multiple protocol instances. Uh so that we're able to isolate risk and risk parameters within the protocol um to like assets.
So assets with similar volatility levels like volatile assets versus stable coin assets are able to go um together. that allows us to kind of group uh risk parameters um and just ultimately offer a better UX for users as well as um isolate risk for uh from a protocol perspective. The Bearbar liquid stability pool is the core the core offering that allows us to not only take on semi-liquid assets but also uh enables us to provide consistent and sustainable yield to neck stable coin holders. So at high level the stability pool is a EC4626 contract where users can deposit their neck and receive SNET in return. uh when a liquidation occurs um the asset uh from the DEN manager uh is moved into the liquid stability pool uh and the respective amount of net debt that that den that that den had uh is burnt.
So if the den had $50 worth of collateral and $25 worth of debt, $25 worth of net would be burnt. 25 net would be burnt out of the liquid stability pool and the $50 worth of collateral asset in the form of a cobalt receipt token would be deposited into liquid stability pool. that allows the protocol to perform instant slippage free liquidations whilst still uh enabling the underlying collateral to be earning proof of liquidity yield uh which essentially allows us to separate liquidations and stable coin solvency and the kind of unwrapping and liquidation process. So uh it it's basically a way for us to break the liquidation unwrapping and the complex process of liquidation uh and split that risk away from stable coin solvency enabling NEC to remain you know uh fully uh fully collateralized at all times. Um uh here's just an example of a liquidation um the from from the top.
So you have $150 worth of collateral. Originally you open a den with 100 with 100 neck as debt. Um the value of that collateral asset decreases to the point that it hits the minimum collateralization ratio for that set 10. Um the net amount of $100 would then get burnt out of liquid stability pool. The um respective amount of collateral would get moved into the liquid stability pool at that point.
Now the liquid stability pool's composition changes from being only necked to being the liquidated collateral. So the coval token and neck. Um this is where the liquid stability pool has an interesting function which allows for users to redeem only collateral assets out of liquid stability pool. Um so it's called choose withdraw preferred underlying and that allows us to once again remove a volatile asset out of liquid stability pool and liquidate that off for um for neck to ensure that the stability pool's composition consists mostly of stable coins in our case neck. How does the bar bear borrow protocol maintain?
Um at a core we are always over collateralized uh and users are able to redeem one neck for $1 worth of collateral. That means that when the price of net on on AMM were below $1, users were able to buy the net pushing the price up but also then being able to economically benefit from it redeeming it for $1 worth of collateral. So that creates a hard peg mechanism. Um but to prevent the pure u the poor UX that redemptions offer you know people with existing positions uh we have PSMs that allow for um other stable coins to be used to mint neck helping uh create a buffer of stable coins that uh can be used to maintain peg in the event of large sell pressure. So um when there is excess neck demand and the price of neck were to go above peg, our PSM's uh module um sells the neck uh uses the stable coins or mints next to flash loan sells neck uh on the AMM to drive the price back down to $1, takes the the stable coins it receives from that and mint neck via the PSM and repays the flash loan.
So now that neck that was used to drive the price back to $1 is backing the neck that was used to sell it. Um uh the stables that were captured from that are used are back in the the neck. Um, this means that in the event of a lot of cell pressure, uh, we now have stable coins that can be utilized to maintain PEG, uh, which allows for, uh, a bit of a buffer before we have to revert to using open dens as the means to maintain peg. The first track we would like to explore is building a module on top of the liquid stability pool. The liquid stability pool currently has over $150 million um and this is all set aside to perform liquidations for the bear borrow protocol.
However, um we believe that this could be optimized and by building a module that allows other protocols to plug into the liquid stability pool and utilize a portion of the neck to perform whatever they may please. uh this in turn creating additional yield for the stability pool and also helping uh other protocols benefit from the deep liquidity that the liquid stability pool has to offer. The second track is essentially utilizing all the different modules that we have within the bar bear protocol uh to develop a strategy that either helps users increase their yield or decrease their risk or both. Um the kind of core focus here is to build something similar to our managed leverage vaults. Um whilst a set collateralization ratio is maintained um and uh helps avoid liquidation risks but users are able to still maintain exposure to their collateral assets and earn yield from a stability pool.
So building something similar um the requirements are that the project must have a valid description GitHub repository with a descriptive readme. Uh it must be as ERC4626 compatible as possible. Uh this is for composability purposes. Uh the contracts must mint necked. So they must deposit into a den uh mint neck and then utilize the neck in any way shape or form.
Uh and the connect cannot be deployed into the liquid stability pool as we already have built that as a managed lever vault. Um it is allowed to be deployed into the liquid stability pool in a minority fashion but it can't be the core pro product uh the core kind of yield generation source for the strategy. Um, an example of this would be a delta neutral position where by which a collateral asset is deposited, neck is minted and that neck is utilized to hedge out any exposure or risk that that collateral asset may offer uh while still offering positive interest rates. Uh, another example is um depositing collateral minting neck and then using that neck uh in a uh in another protocol to offer additional yield. The requirements for this are the project must have a GitHub repository with the descriptor frene.
So how your module safely utilizes the liquidity in the liquid stability pool and why it benefits the liquid stability pool. So does it earn fees? Does it earn interest rates? Uh and then al also the protocol that is utilizing that liquidity. Um there has to be at least one practical example of a known protocol um utilizing the module that you've developed that plugs into the LSP.
Uh and the code must be open source and modular enough to plug into future protocols as well as be deployed on baritra. Uh an example of this would be a lending liquidation for an application like Ave or Doomite. utilizing NEC and liquidity pool and liquidating into that or a uh derivatives platform utilizing the NEC in the liquid stability pool as its amm. Yeah, that's it. [Music]
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