What is Balanced?

Balanced @BalancedDAO is the decentralised bank of ICON @helloiconworld with a gorgeous UI that allows ICX holders to:

  • take out a loan by minting a stable coin called Balanced Dollar (bnUSD) against their ICX collateral (similar to @makerDAO)
  • as well as swap assets and supply liquidity (similar to @uniswap)
  • earn yield for borrowing and supplying liquidity in the form of BALN tokens which if staked can earn participants network fees
Balanced overview

Why have a stable coin?

bnUSD

Having a native stable coin on the ICON network is a big deal. As of today, you can use bnUSD for payments, trading, leverage and providing liquidity on Balanced and Omm (@ommfinance).

With the launch of ICON 2.0 and the new Blockchain Transmission Protocol (BTP), bnUSD will become the default stable coin on the Balanced decentralised exchange for trading pairs from ICON’s BTP partners such as:

  • Ethereum ETH/bnUSD
  • Polkadot DOT/bnUSD
  • Binance BNB/bnUSD
  • Moonriver MOVR/bnUSD
  • Edgware EDG/bnUSD
  • Acala ACA/bnUSD
  • Near NEAR/bnUSD
  • Plasm PLM/bnUSD
  • Kusama KSM/bnUSD
  • Harmony ONE/bnUSD

How can you obtain bnUSD?

Currently, participants can either:

  • deposit ICX collateral to mint bnUSD (more collateral types are coming such as Ethereum, Polkadot and Near)
  • sell their crypto assets via the Balanced decentralised exchange for bnUSD

How does bnUSD maintain a 1:1 peg with the US Dollar?

With all these use cases for bnUSD and to give confidence to investors that they can always redeem 1 USD worth of an asset for 1 bnUSD, it’s important that bnUSD keeps its 1:1 peg to the US Dollar.

@benny_options and the @BalancedDAO team developed this novel mechanism called rebalancing. After minting bnUSD (maximum 25% LTV), the participants’ collateral and debt position is used to maintain the peg of bnUSD 1:1 with the US Dollar on the Balanced decentralized exchange.

This is how:

  • When bnUSD is below 1 US Dollar by more than 2.5%, rebalancing sells borrowers’ sICX collateral (staked version of ICX) at a high price and uses the bnUSD proceeds to repay a larger amount of their debt and burns the bnUSD in the process.
  • When bnUSD is above 1 US Dollar by more than 2.5%, rebalancing increases borrowers’ debt (free of charge), then uses the bnUSD to immediately buy sICX at a cheap rate and add it to the borrowers’ collateral balance.

Rebalancing example

  1. $ICX/bnUSD is 10% above true value: price of ICX = 2.2 bnUSD on Balanced but only 2 US Dollars on other major exchanges such as @binance or @krakenfx
  2. A borrower is automatically rebalanced by selling a portion of their underlying $ICX for 2.2 bnUSD and their debt is repaid using the proceeds
  3. After they’ve been rebalanced, every other borrower will take a turn before it happens to them again
  4. Rebalancing is done in groups of 50, using a maximum of 0.05% of the group’s debt
  5. This happens repeatedly until $ICX = 2 bnUSD on Balanced and 2 US Dollars on other major exchanges

But you may be thinking… Hey! That’s my $ICX! It’s mine! Give it back! Well, to mitigate the effects of rebalancing, you can participate in the sICX/bnUSD liquidity pool!

Rebalancing mitigation

rebalancing

Rebalancing trades borrowers’ collateral against the sICX/bnUSD pool, so if you maintain similar percentages of the liquidity pool and total debt, your position in the sICX/bnUSD pool will counteract the effects of rebalancing.

Simple maths right?

Borrower and liquidity provider rewards

And to sweeten the deal, @BalancedDAO incentivises users to borrow and supply liquidity with some juicy yields currently at 17% APY for borrowers and 31% APY for liquidity providers 🤑 

borrow2
supply3 8

And that’s a wrap! Thanks for reading along. Now go discover more at balanced.network!
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