The Cat-in-a-Box protocol is built on liquid staking derivatives on Ethereum, initially using ETH proof-of-stake and stETH issued by Lido Finance as the main building block on launch with support for more assets in the future. It is built by previous Alchemix protocol engineer.
he aim of the protocol is to enable enhanced utility for yield bearing token holders, offering additional options to those with a long term outlook on staked tokens.
By depositing yield bearing tokens in Cat-in-a-Box, this deposit is used as collateral to mint and borrow a synthetic at a 1:1 ratio. Users have access to a broad LTV which can be minted against their deposit.
The yield bearing asset deposited in the protocol continues to earn yield. The yield can be used to pay back any loans or compound their yield bearing token deposit balance.
Cat-in-a-Box also offers a new paradigm for trading their yield bearing asset (such as stETH). User’s can sell with more benefits than typical market selling. See Selling with Benefits for more information.
A main feature of the Cat-in-a-Box dynamic lending protocol is to reward good borrowing habits and to discourage over-leveraging. This dynamic forms the self-stabilising nature of the protocol - it removes the need to incentivise liquidity pools to support the peg of the synthetic borrowable asset.
The first iteration of Cat-in-a-Box will offer stETH backed loans meaning future references to the yield bearing token will be in the context of stETH.
Cat-in-a-Box offers enhanced utility for stETH in the following ways:
Earn higher yield on their yield bearing assets
When a user deposits their yield bearing asset into Cat-in-a-Box they immediately begin to earn at least 99% of the yield they would normally earn, plus a proportionate amount of the yield generated by the total debt in the system.
Even users who take on a loan can receive higher yield on their over-collateralised portion of their deposit.
Release capital against their staked assets
Mint and borrow boxETH against the stETH at a healthy loan-to-value (LTV) to use across DeFi at any time
Sell your yield-bearing token with added benefits
Users who take on higher than average system loan-to-value debts are likely to have at least a portion of their collateral resolved. These users can be thought of as delayed sellers. These sellers benefit from the following compared to sellers who typically sell using DEXs.
- Users receive boosted yield on the over-collateralised portions of their deposits.
Since there is a delay between the taking the loan and having a portion of their deposit resolved there is a time period where the user has the chance to repay (or self-repay!) without selling.
If the peg is below 1:1 when a user takes on their loan, their loan health will improve if the peg recovers. This reduces the chance the user's deposit will become resolved since the incentive to do so is removed from the resolvers. See ‘Resolve’ for more information on resolvers.
Up to 25% of a user's loan can be resolved at any one time. After each resolve the debt user will have a more healthy loan LTV making it less likely to be resolved. The health of a user’s loan improves every time they are resolved, this helps to secure the remaining deposit.
Provide liquidity in the LP
Provide liquidity in the stETH-boxETH pool and earn fee share from the DEX.
Earn protocol fees
Purchase the fee token that can be staked to earn yield distributed from the protocol fees.
Earn profit through arbitraging
Earn profit through arbitrage by resolving other users' debt where their loan has relatively high LTV and where the synthetic is at a profitable market price.
Participate in the protocol by developing and applying your own DeFi strategies.
