Primer: B.Protocol has an AMA with CRE8R DAO on 1st Nov 2021. This summary highlights the main points covered during the AMA session. This includes the newest updates on what is happening with B.Protocol, including mentions of some of the other platforms that they are going to integrate with.
The team behind B.Protocol
Founder and Lead Developer - "The brain, muscles and vision" of B.Protocol
Before this, was the CTO of Kyber Network
Met Lui Loo, Kyber's CEO, while working on PhD in Computer Science
Started SmartPool as a semi-academic project in 2016 with Victor Tran, current Kyber's CTO. SmartPool was the first decentralized mining pool on Ethereum
This evolved to become Kyber in 2017 and Yaron took the CTO role till early 2020
Involved as a co-designer of the architecture and smart contracts of the WBTC protocol with BitGo team
Did development work on on-chain market-making tools created for DeFi before that term was even coined
After leaving Kyber in 2020, went into consulting with a few private companies to build liquidation bots for DeFi and CeFi
Realised that liquidations in DeFi are broken compared to CeFi
In Mar 2020, Black Thursday came and his worst fear came true
Liquidations on DeFi were not working when they were most needed
Yaron decided to develop B.Protocol and build a permissionless backstop liquidity protocol for DeFi lending platforms
Head of Growth and Ecosystem Development
Went into crypto in 2014
Co-founder of La'Zooz - a decentralized car pooling dapp built on top of Bitcoin blockchain using MasterCoin (aka Omni Layer)
In 2017, led a project by Toyota Research Institute building mobility services on top of Ethereum and met Yaron
Joined B.Protocol before the project went live
What is B.Protocol?
B stands for Backstop
B.Protocol is democratizing the liquidation systems in DeFi through a Backstop liquidity protocol to unlock better capital efficiency in the entire DeFi ecosystem
Democratize liquidation system - everyone can take part and profit from DeFi institutions
Backstop Liquidity protocol - lending platforms get a stronger safety net since there is a committed and dedicated pool to ensure that liquidations will take place
Unlock better capital efficiency - with better liquidation systems in place, higher leverage can be used so users can enjoy higher capital efficiency with better liquidation thresholds
The goal is to be a unified backstop primitive for DeFi across multi-chains and multi-layers
Which chains will they operate in?
Currently B.Protocol is integrated on top of L1 lending platforms
Will be working on L2 (Arbitrum, Polygon) and other chains (BSC, Fantom)
The protocol is blockchain agnostic and can work with any EVM compatible blockchain
Any measures with regards to smart contract security?
Each integration is audited
B.Protocol also has a bug bounty on Immunefi and hats.finance
What is B.Protocol trying to solve?
Problem #1: Liquidations are very technical and lucrative, so the business is reserved for techy users and inner circle friends only
B.Protocol pools user's funds to be used for liquidations
This opens up liquidation to anyone in DeFi to participate
No technical knowledge is needed to do this as it is done using the protocol
Problem #2: Lending platforms have low leverage - not capital efficient
Having a committed and transparent liquidity for liquidations frees lending platforms from the need to maintain inefficient collateral factors
By having the assurance of a committed pool for liquidations, there is a clear and strong safety net that liquidations will happen even in sub-optimal market conditions
This allows lending platforms to move from the average 66% - 75% (x3-x5 leverage) to 90% - 95% (x10 - x20 leverage) collateral factors
This unlocks better capital efficiency for DeFi
Problem #3: Fighting Miners Extracted Value (MEV)
No gas wars are needed to handle liquidations because there is a dedicated pool to be used for liquidations and is open to anyone to deposit
This profit that is otherwise taken by the miners will be passed to the backstop depositors in the liquidation pool, sharing the revenues with the users rather than with the miners.
How does B.Protocol work?
There are 2 interfaces - one for the integrated protocols, and the other for Backstop pools depositors
Backstop Pool depositors
Users of B.Protocol can deposit into the Backstop pool to gain rewards from liquidations
A Liquidity Mining program, available in the early stages of the pool and run jointly with the integrated platform, will help to incentivize and reward early depositors
Liquidations do not happen all the time, so the idle funds in the pool will be deposited in yield-bearing platforms for the backstop depositors
Once liquidations take place, the capital for paying back the debt is provided from the Backstop pool to the platform in return for a discounted collateral
This collateral is sold automatically, using the B.AMM (Backstop AMM), back to the original asset that was used for the liquidation, then deposited back into the Backstop pool
This allows the capital to be recycled back to the pool for more liquidations to take place
For Integrated platform
Under the hood, the integrated platform will give priority to the backstop pool to handle liquidations
Doing so will guarantee its users can get higher collateral factors and lower liquidation thresholds because a dedicated backstop pool makes sure liquidations will happen when needed
Users can have these benefits if the platform is integrated with B.Protocol:
Unlocks greater capital efficiency - can employ higher leverage if needed. Even if higher leverage is not used, there is a greater margin of safety before liquidations happen for their loans
Since there is a committed pool for liquidations, the users' collaterals will not be sold at prices far below the market price
Ensures that the platform will not be insolvent. If that happens, nobody can withdraw their assets out and everyone suffers
Which stage of development is B.Protocol currently at?
Platform integration progress
V1 was launched in Oct 2020
Already integrated with MakerDAO and Compound
V2 was launched around Jun 2021
Currently integrated with Liquity, Pickle Finance and Instadapp
Others in the pipeline:
New MakerDAO vault
Hundred finance (over Arbitrum)
MakerDAO is known for being conservative and risk-averse in the space, but they managed to work with them after many months of work and succeeded
Instadapp only has 8 DeFi protocols integrated with them, and B.Protocol is one of them
B.Protocol DAO has funded the first Growth Squad with 25k BPRO native tokens
Their task is to focus on growth and marketing for the protocol
Growth Squad is made up of 3 veteran community members
First attempt by the DAO to further decentralize its development
Active community on all social media platforms like Discord, forum, Twitter and Reddit
Why should people use Liquity via B.Protocol?
How does Liquity work?
Liquity uses a stability pool that functions like a backstop pool for liquidations
Users of Liquity deposit their LUSD (native stablecoin) into the stability pool
Stability pool will use these funds to liquidate unsafe Liquity Troves (the equivalent of Maker's Vaults)
Once liquidation happens, users will need to rebalance their positions
They get ETH from the collateral of the loan
Will need to sell the ETH for LUSD
Then deposit the LUSD back in the stability pool
This will cost a lot of gas which will take most of the profits from smaller accounts
How does B.Protocol add value to Liquity users?
B.Protocol automates the rebalancing part of the liquidation in Liquity, using their Backstop AMM (B.AMM)
The ETH collateral will automatically be sold back to LUSD and deposited into the stability pool
Users will benefit from the following:
Auto-compounding profits that optimize their LQTY rewards, since only LUSD will accrue LQTY and not ETH
Saves them the effort of manually doing so
Saves gas for transactions and increase their profits
Any incentives to help bring in users?
Yes - their second liquidity mining program is running to offer incentives for users of B.Protocol
Partnered with UMA KPI Options program
UMA KPI options
B.Protocol DAO deposited 90k BPRO into a UMA KPI option contract
Minted 30k uBPRO, an ERC-20 token that is distributed on each block to users of B.Protocol
KPI set by the DAO is to bring TVL up to at least $150M by the end of the program (around 17th Dec)
If TVL is at least $150M, each uBPRO will be redeemable for 3 BPRO, distributing the full 90k BPRO in the UMA vault
If TVL is less than $150M, then each uBPRO will be redeemable for only 1 BPRO, so only 30k BPRO will be distributed to users while 60k BPRO will be returned to the B.Protocol DAO reserve
This way, everyone is aligned to bring the TVL higher as the incentives are aligned
Is B.Protocol trying to do what KeeperDAO is doing?
True that KCompound, one of KeeperDAO products has a similar logic to B.Protocol v1
Using a whitelisted group of liquidators that users of KCompound have given priority to make liquidations
B.Protocol is also doing the same for MakerDAO and Compound users since Oct 2020, more than 6 months before kCompound launched
Did not follow KeeperDAO closely but knew that they had slashed their rewards to KCompound users
Might have reached a ceiling
Offer the same conditions as underlying platform with no value add
Scaling into new platforms will take a lot of developmental work for each platform
B.Protocol v2 is much better as it unlocks new capital efficiency in DeFi, which v1 (and kCompound) doesn’t
Who are their competitors?
No active Backstop protocols currently
KCompound has similar product to their v1
Other protocols are building products to help users avoid liquidations
But these do not solve the capital efficiency problem in DeFi
Any tokens for their project?
B.Protocol is fully decentralised since launch
Controlled and owned by users
6 months after mainnet launch, the users voted to tokenize the governance
Now the protocol is governed by BPRO holders
What are the challenges ahead?
Challenge is to showcase that their solution works even during severe market conditions
They had been accepted by one of the most risk averse DeFi protocols through a full governance vote approval, MakerDAO
Also passed a governance vote of one of the most Degen protocols - Abracadabra
B.Protocol can cater to the full spectrum of DeFi users in the space
Still trying to raise awareness about the benefits of B.Protocol as liquidation is a complex subject.
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