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Author: Admin | 2025-04-28
ApproachInstead of creating a pool with DAI, USDC and PAX, an idea would be to first lend DAI and USDC on a lending platform, like Compound, and then create a pool with their respective lending vouchers (cDAI, cUSDC) and PAX (which to date is not yet available for lending on Compound).However, since the interest rates offered on Compound for each of these assets is usually different, the price ratio between them would naturally change over time. This could cause impermanent loss for liquidity providers of the pool. Even worse, such loss might not be impermanent since systemic interest rate discrepancies are expected among different stablecoins. In other words, over the long run the price ratio between those cTokens is expected to diverge.The UX for traders also degrades since the real price of the underlying tokens originally lent becomes a bit obscured: “How much in actual DAI is cDAI worth now? Is the current cDAI/cUSDC price ratio in a Balancer pool reasonable (i.e. in accordance with the external market)?’’. Unfortunately, less straightforward pricing negatively impacts trading volume, which of course is bad news for liquidity providers.The best of both worldsIt is possible for liquidity providers to earn trading fees from a stablecoin Balancer pool WHILE ALSO accruing interests from lending platforms with no expected impermanent loss.To make this possible while keeping a great trader UX we need to introduce a wrapper of the stablecoins used that maintains their pegged value while also benefiting from the interests generated on lending platforms. One such solution that has gained prominence lately is the rDAI project.rDAI makes it possible for users to hold an asset that maintains the USD peg (i.e. redeemable 1 to 1 for DAI) while still earning interests from Compound or other lending platforms. Credit to the rDAI team.Instead of a Balancer pool with cTokens, one could create a pool comprised of rTokens. The payout of interests created by the rTokens can be triggered by anyone. Without having set up a specific beneficiary for the interests, these go by default to the holder of the rTokens, in this case the Balancer pool.Although straightforward, this simple design would generate arbitrage opportunities whenever anyone called function payoutInterests() for any of the rTokens in the pool. To understand why, remember that the prices in a Balancer pool are defined by the token weights and balances. The execution of payoutInterests() would increase the balance of a
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