Analysis of Lybra Finance v2: Create eUSD application scenarios, attract TVL and Tokenomics optimization

$LBR has been going up, I probably sold 0.1x. In almost a month, $LBR has been sold ten times since I sold it. When I wrote these things, it was about 1.8u. I think the rise so much is inseparable from the team's efforts in token price and products. In terms of token price, the team did not use a high-emission model, but instead focused on long-term development, so the TVL of the protocol has also been rising. In terms of products, the team has not stopped because of its own achievements, and now it will launch the v2 testnet in mid-June (after Immunefi and code4rena audits and bug bounty).

Therefore, today I will share my personal insights on Lybra Finance v2.

A few exciting things about v2 are:

1. Full chain expansion through LayerZero;

2. Add more LST asset types;

3. New Tokenomics of LBR;

4. Agreement revenue/fee capture reform;

5. DAO governance;

The first point is the expansion of the whole chain. The first cross-chain target is Arbitrum. As far as I know, the team has started to talk about cooperation with the agreement on Arbitrum. I guess, Layer2 is the first choice for cross-chain, and eUSD may be cross-chained to other alt-layer1 in the future. The protocol will create a weUSD for cross-chain purposes. In fact, in addition to cross-chain, weUSD scenarios will be more extensive, such as participating in other DeFi protocols and so on.

The second point is to add more LST asset types for collateral. The difficulty of this matter is that stETH is automatically compounded, so eUSD is also automatically compounded. If other LST assets are introduced, how should the automatic compounding of eUSD be realized. I guess, if it returns to unity, then the automatic compounding function of eUSD will be cancelled—only ETH pledged APY can be obtained by pledging eUSD. After staking, users can obtain the weUSD version, which can be used for cross-chain or participate in other DeFi protocols. If the user wants to withdraw, he needs to convert weUSD to eUSD to obtain principal + profit.

The third and fourth points, Lybra introduced investors, VC has at least one year of unlocking period, VC will help Lybra develop the market and ecology. The other is to introduce deflationary elements for $LBR and increase the vesting period of esLBR (increased to 60 days), as well as allowing a longer lock-up period.

In order to ensure the token price, the protocol v2 also creates some scenarios for $LBR, such as the introduction of the DLP (Dynamic Liquidity Supply) mechanism. To mine $LBR from the eUSD pool, it is necessary to provide DLP tokens with a minimum pledge of 5% of the total value. Token deflation will be reflected in this scenario: if the 5% DLP is not reached, other users can purchase these esLBR rewards with LBR at a 50% discount. After the agreement receives LBR, 10% of it will be destroyed and 90% will be resent to the reward pool.

Fifth point, DAO governance. After introducing esLBR into DAO governance, Lybra will allow the community to participate in the decision-making power of the protocol.

It is also worth noting that Lybra is thinking about how to ensure that eUSD has sufficient liquidity and a more stable peg in the future. The main idea is to introduce eUSD into Curve. However, this needs to be done step by step, and the protocol needs to accumulate $CRV.

Overall, I am quite satisfied with the idea of Lybra v2. It is committed to solving the problems encountered in the development of its own protocol (TVL and Tokenomics) and the lack of application scenarios for eUSD. Next, how to create sufficient liquidity and rich circulation scenarios for eUSD will become a crucial link in the development of the protocol.