This is the third article in the "DeFi Notes for Girlfriend" series. This series is dedicated to providing some common sense about DeFi in the most easy-to-understand language, including not limited to conventional concepts such as impermanent loss/AMM, or Regarding the analysis of the principle and design of the new project, we strive to make it possible for girlfriends (imaginary and possible) who do not understand DeFi at all to understand. I hope I can write at least 30 articles.
The last article "I rely on time for insurance" was recommended by Dao Niang, Brother Xiao Mao, and Super Jun. I was flattered, thank you Dai Jia.
This article talks about BarnBridge, which has been very popular recently. It has been online for 12 hours and has no liquidity (pool2 will be launched in 5 or 6 days). TVL has exceeded 190 million US dollars. , I haven’t looked at the project carefully, but I read a few articles mainly about the translation of the white paper. To be honest, I didn’t understand it, so I carefully read the white paper and related AMAs, and I probably understood it.
This project has received $1 million seeds from Fourth Revolution Capital, ParaFi Capital, Synthetix founder Kain Warwick, Aave founder Stani Kulechov, DARMA Capital managing partner Andrew Keys, Centrality, Blockchain Companies, Dahret Group and other institutions and well-known practitioners round of investment, and will participate in the governance of DAO. In addition, it is said that it also rejected the investment of Framework, Accomplice, Morgan Creek, and Pantera.
After reading it, I realized that this is actually the realization of another idea of another project ARCx.Game in early September, and it is another attempt to bring the traditional financial matryoshka game to the DeFi world.
Table of contents
Disclaimer
I don't have a girlfriend right now
I love women
The author is extremely opposed to gender discrimination that has no scientific basis, such as "boys are born to study science, and girls are better off with natural arts"
The author is not a professional financial person. This is a non-serious series. People who read it can read it casually, and those who write it can write whatever they want.
Retro
DeFi Notes to Girlfriend: Impermanent Loss
DeFi notes to girlfriend: I rely on time for insurance
bank without a teller
The full name of MBS is: Mortgage-Backed Security, which is "mortgage-backed bond" in Chinese. The future extensions include ABS and CDO.
What does this thing mean? To put it simply, banks can sell their own "loans" and quickly recover their positions.
For example, China's banks are funded by residents' savings. It's all very short-term. Current deposit, one-year fixed deposit, two-year fixed deposit, three-year fixed deposit, and five-year fixed deposit.
On the other hand, bank loans to enterprises are very long-term. For example, loans to the Ministry of Railways, loans to the Three Gorges Dam, and loans to residents to buy houses. These are things that cannot be recovered in twenty or thirty years.
Thus, this creates a spatio-temporal mismatch.
Consider a limiting example. After the five-year fixed deposit in a certain bank expired, depositors asked to change careers one after another, and none of them continued to exist with you.
The 5% 30-year mortgage released by the bank, for example, 10 million yuan, can only be recovered about 50,000 yuan per month.
If somehow a bank is run on, at this rate of recovery, even if the bank is well-managed, it will not be able to withstand such a blow at all. Because his assets are all 20 to 30 years old, and he is eager to get them back. He could only watch as the depositors couldn't withdraw their money and the bank went bankrupt.
But with MBS, the problem has been solved very well. Banks can "sell" part of the loan when they need it. Cover the cash position.
For example, the bank can transfer the 10 million loan and 9 million to a local tycoon, and the monthly repayment of 50,000 will be given to the local tyrant.
As long as the quality of the loan is good, the bank will recover the position, and the local tyrants will be happy - the interest rate is higher than that of fixed deposit, and there will be good cash flow into the account every month like rent collection.
In actual situations, banks can also "buy" a part of MBS when there is a lot of money to increase returns.
It can be seen that MBS greatly reduces the bank's operating risk.
Let me add one more thing here, because with MBS, the financial industry in Europe and the United States is completely different from that in China.
Banks, as we know, are intermediaries.
For the bank, he collects 2.x% deposits in his left hand, and releases 5.x% loans in his right hand.
The bank is just a passing agency, an intermediary between the upper house and the lower house. Earn the difference for a living.
However, "intermediary" is a broad term. The combination of "deposit-loan" is not necessary.
In Europe and the United States, some banks have no counter business at all, or very little counter business. Where does their money come from? "Borrowing" mainly relies on the inter-bank lending market.
Because for some small banks, they have calculated that it is not very cost-effective to lay out a lot of retail outlets and build their own debit card/ATM machine system.
They would rather borrow money overnight from big banks like Industrial and Commercial Bank of China and China Construction Bank. Paying a little more interest than savings can save a huge amount of counter labor, capital investment, and organizational structure.
The most important of these is the simplification of the organizational structure. In this way, these banks can focus more on their own fields and do a good job in detail.
MBS is also based on the same principle. In the U.S. market, consumers may apply for a mortgage, but the bank that grants you the loan does not have its own counter outlets at all, nor does it have the ability to absorb savings.
A typical example is GE Capital, the leader in the aircraft leasing industry. GE Capital has no retail outlets at all. But he released hundreds of billions of dollars in loans.
At this time, how does the "intermediary" function of the financial industry work? It relies on "interbank lending-MBS" rather than "deposit-loan".
Asset securitization and risk classification
Asset Securitization
With MBS, you can talk about ABS and CDO.
The ABS here is not the anti-lock braking system on your car, but Asset-Backed Securitization, which is the difference between Mortgage-Backed and MBS.
Yes, it is to promote MBS. For example, since housing loans can be securitized and sold, can the securitization of car loans be sold, and can the credit card installment loans securitized be sold.
Sure, it's ABS.
It doesn’t even need to be a fixed cash flow. For example, you have probably heard of REITs, and it doesn’t matter if you haven’t. Simply put, it’s to sell your house to leeks (without derogatory meaning, referring to the next family) , the rental income received is distributed to Leek in proportion, holding, for example, more than 51% or 66% of Leek owns the right to dispose of assets (of course, in reality, only 49% of your property’s equity is used to issue coins).
It seems to be very powerful, but obviously I can go to the bank to get a mortgage and sell the house directly, so why do I need to issue a coin, don’t I find something to do by myself?
I said your pattern.
Do you know how high the transaction cost of real estate is in most countries in the world? Do you know how much time and energy it takes to sell a suite to find the next home?
Another example, is this not the suite in your house, but 100 or 1000 suites?
The transaction cycle is based on a year. This kind of currency issuance quickly provides liquidity and can recover positions. What's wrong?
So, do you know who the largest "landlord" in the United States is.
Who are the owners behind those long-term rental apartments and those co-ops.
Is it a super rich man, or a personal speculator.
The answer is no, the vast majority of landlords are "mutual funds".
And who are the fund investors? The most important investors of REITs are mainly "pension funds", "education funds", and "industry association funds".
"Low-risk, low-cost" funds have very low requirements for the rate of return, but very high requirements for investment security.
Low-interest bonds have propped up the US rent and housing market.
Risk classification
"Low-risk, low-cost" funds have very low requirements for the rate of return, but very high requirements for investment security.
Having said so much, these MBS and ABS may still default in the final analysis, so what should we do? What about pension funds and education funds?
Now that you have already found a bad guy to take over the offer, then just find another bad guy to take the risk.
For example, the loan interest rate in the MBS asset package is 5%, or the rental return rate of REITs is 5% (although in reality, even Airbnb is unlikely to have this return, but it is just an example).
Then when it is sold, you can design a product, divide it into two shares, and sell half and half:
Priority: principal + 3% fixed income, sold to "pension fund", "education fund", "industry association fund", and the principal and interest of this part will be repaid first in any case
Inferior: The remaining is divided equally. If the corresponding asset defaults, you have to take the blame and take the risk. If everything is ideal, the theoretical return is 7%
Obviously, some people have a greater appetite for risk and are willing to pay for the latter part.
This is (a type of) CDO.
BarnBridge
What is BarnBridge?
It is CDO.
At present, the project has not come out, only the mine:
Pool1: USDC/DAI/sUSD stablecoin candy pool
Pool2: USDC_BOND_UNI_LP liquidity risk pool (5 days to go)
The specific product is that there are two SMART Yield and SMART Alpha. The SMART here is a text stalk, which is the abbreviation of Smart $BONDS - Structured Market Adjusted Risk Tranches.
Smart Yield
It is a powerful machine gun pool.
The current smart pools, such as YFI and YFII, for example, use Curve and dForce strategies, and the income is fluctuating. Can we make fixed-income products?
Of course it is also possible, this is Smart Yield, look back at the above paragraph:
For example, the loan interest rate in the MBS asset package is 5%, or the rental return rate of REITs is 5% (although in reality, even Airbnb is unlikely to have this return, but it is just an example).
Then when it is sold, you can design a product, divide it into two shares, and sell half and half:
Priority: principal + 3% fixed income, sold to "pension fund", "education fund", "industry association fund", and the principal and interest of this part will be repaid first in any case
Inferior: The remaining is divided equally. If the corresponding asset defaults, you have to take the blame and take the risk. If everything is ideal, the theoretical return is 7%
For example, the current instantaneous annual rate of Curve is about 15%, but because this income is related to the price of $CRV currency, the interest part is not stable, so when it is sold, you can design a product and divide it into two shares , you can sell half and half:
Priority: principal + 5% fixed income, sold to users with low risk appetite, and repayment of this part of the principal and interest will be given priority in any case
Inferior: The remaining is divided evenly. If the corresponding asset defaults, you have to take the blame and take the risk. If everything is satisfactory, the $CRV currency price and mining funds remain unchanged, and the theoretical return is 25%
Smart Alpha
That is, lending and leverage between users is also divided into junior type (low risk preference) and senior type (high risk preference).
According to the current description, for example, for ETH, BTC, or even Tesla stock (sTESLA simulated by Synthetix), a classification can be made, such as jETH and sETH, assuming such a situation, assuming that the shares of the two parts are the same as half and half:
Priority (jETH): principal + 10% fixed income, sold to users with low risk appetite, fixed income bonds, if ETH plummets, priority repayment.
Inferior (sETH): The remaining is divided evenly. If the corresponding asset plummets, you have to bear the risk. If everything is ideal, you can earn more than buying ETH directly
It is equivalent to sETH holders borrowing twice the leverage from jETH holders with 10% interest.
The 10% low-risk interest rate is already very high for the dollar, which is prone to negative interest rates.
Compared with, for example, what are the benefits of going to AAVE to directly borrow and increase leverage?
AAVE is a multi-asset shared fund pool. Compared with LINK, ETH is of course more volatile. In theory, it will continue to develop like this, because the asset volatility corresponding to ETH is relatively smaller. From the perspective of risk preference, single-asset mortgage increases Leverage can have lower interest rates than multi-asset.
ARCx.Game
Looking at it this way, it reminds me of a project in early September, ARCx.Game. This project is currently another Maker. I call what he makes "non-homogeneous stablecoin". , more stable”, so it will support mortgagers in the future to mortgage such asset portfolios and sell them to lenders with different risk preferences:
70% ETH-collateralized stablecoin + 30% LINK-collateralized stablecoin (for users with low risk appetite)
70% LINK-collateralized stablecoin + 30% ETH-collateralized stablecoin (for users with high risk appetite)
Obviously different interest rates.
dig? is it safe? How much profit? Stud?
Four companies of farmers.
Stablecoins can be mined for free.
It has been audited by two security agencies.
Without liquidity, there is no way to calculate income.
The 200 million Smart Money is staring at me. I personally don’t dare to stud tokens, so I won’t write tokenomics anymore in this article.
As for the project itself, Teacher Mindao commented:
This type of combination, the most applicable scenario is to synthesize fixed-income stablecoin bonds, and create a fixed-rate deposit/borrowing market. However, this thing can actually be done on top of the current lending agreement. I don’t understand why it is necessary to create a token. Now that DeFi has arrived, every feature has a trend of tokenization.
I think so.
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