Cat-in-a-Box is a lending protocol that self-stabilises by incentivising the conversion of debt from users with unhealthy loans into buying pressure for the system's borrowable asset. This process supports the value of the soft-pegged synthetic asset to ensure it remains attractive to borrow.
The Cat-in-a-Box protocol is built on stETH as the main yield-generating asset. A user can simply deposit their stETH into the deposit contract and continue earning yield. Only 1%* of the yield a user would normally earn through stETH is redirected to the Cat-in-a-Box protocol. The upside of depositing stETH into Cat-in-a-Box is that the yield is boosted by a proportional share of all collateralised (deposits directly securing users debt) stETH in the protocol.
Any stETH deposited in the smart contract can be used to mint and borrow a 1:1 soft pegged asset issued by the protocol as boxETH.
Once the borrower has taken a loan they can use it to:
- Convert it into an asset of choice on a DEX or DEX aggregator
- Resolve another users debt to earn arbitrage profit
- Purchase fee tokens
- Provide liquidity to the boxETH-stETH liquidity pool
