Introducing Stack: The Recipe for DeFi Yield on re.al

Pearl Exchange
7 min readMar 15, 2024

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Welcome to Stack, the perfect place to trade your McDonald’s apron for a chef’s hat in the re.al DeFi ecosystem. Stack is the secret recipe of the re.al ecosystem, a CDP (Collateralized Debt Position) protocol where the main ingredients are your collateral, tokens like USTB and Tangible Baskets. Here, you can borrow MORE, our over-collateralized stablecoin, adding a new flavor to your DeFi strategy.

For those who like their stakes high, Stack also offers a special sauce that lets you take leverage on your collateral, looping it to borrow MORE, buy more collateral on a DEX, and keep the cycle going until you’ve satisfied your thirst for levered RWAs.

Stack launches as one of the primary protocols of the re.al DeFi ecosystem serving up sizzling yield opportunities right from the start. Thanks to Stack, newly launched ecosystem tokens like USTB and Baskets tokens are ready for some juicy DeFi strategies.

So, let’s explore the kitchen.

Kicking Off Your Culinary Adventure: Deposit Collateral and Borrow MORE

Users can start cooking by depositing their collateral. At its launch, Stack allows users to deposit re.al ecosystem tokens like USTB and Baskets tokens as base ingredients. Only selected tokens are allowed to be deposited as collateral, and this list can change based on team risk evaluations. This process will eventually be managed through community vote in the future.

Once you’ve gathered your ingredients, it’s time to decide how much MORE you want to borrow based on the LTV (Loan-to-Value). The LTV shows the amount of MORE (in percentage terms) you can borrow against the value of your collateral. The greater your LTV, the closer your liquidation price will be to the actual price of your collateral, increasing your overall liquidation risk. If your collateral is trading at or below the liquidation price, your position will be liquidated.

Before borrowing MORE, make sure to review the following market parameters on the interface — you really want to check these into detail if you don’t want to face unexpected liquidations.

  • Maximum Collateral Ratio (MCR): The MCR represents the maximum amount of debt a user can borrow against the current value of the collateral token. For instance, if you are depositing $100 of UKRE (a Basket tokens) as collateral and the MCR is 85%, then you can borrow up to $85 of MORE. The team determines the MCR based on a variety of risk factors.
  • Liquidation Fee: This is an additional amount of collateral that a borrower loses when their position is liquidated. The fee is deducted directly from the borrower’s collateral as compensation for the time and risks that the liquidator may be taking, like slippage and gas fees. 50% of the fee is kept by the liquidator and 50% of the fee lands in the Stack Insurance Fund.
  • Borrow Opening Fee: A fee that is charged on the amount of MORE that you borrow.
  • Interest (or APY): The annualized rate that your debt will increase by each year.

Note that the market parameters are specific to the collateral being deposited.

With the borrowed MORE, you can explore a variety of yield opportunities, on re.al and beyond, since MORE is designed to be a multichain token.

Turning Up the Heat: Stack Leverage

For those looking to add a bit more spice to their portfolio, Stack’s one-click Leverage tool allows users to get more exposure to their deposited collateral.

Leverage is designed for yield-bearing tokens native to re.al like USTB and Tangible Baskets. As these tokens are yield accruing, leveraging them means having more exposure and more yield generated from these positions. This is how the process works:

  1. The user selects the token and amount of leverage they want to take on that asset
  2. The asset is deposited as collateral and MORE is minted based on the Maximum Collateral Ratio
  3. MORE tokens borrowed are swapped for more of the leveraged token on a DEX
  4. That same token is deposited as collateral, increasing the LTV, and allowing to mint new MORE.

This process repeats until the target leverage is achieved or the borrowing amount is maxed out. With each loop, the amount that can be borrowed decreases as the collateral ratio allows a smaller and smaller amount to be borrowed until there’s nothing left.

Because of how Leverage is designed in Stack, note that you will not receive any MORE tokens as all the MORE borrowed will be used to leverage the collateral tokens. If you want to actually borrow MORE and explore DeFi opportunities with the CDP stablecoin, you should stick to the Borrow interface.

But remember, just like in any kitchen, working with high heat brings its risks, so play carefully with leverage.

MORE: The Chef’s Special

Three different categories of stablecoins currently exist in the market:

  1. Fiat- backed stablecoins (USDT, USDC)
  2. Over-collateralized stablecoins (DAI, crvUSD)
  3. Algorithmic stablecoins (USDD, AMPL)

MORE is an over-collateralized stablecoins backed by tokenized RWAs like USTB and Tangible Baskets tokens. Every $1 of MORE should have more than $1 of collateral backing.

MORE is pegged to $1, and it’s important that it trades consistently at a $1 value. The peg stability relies on three primary mechanisms: Staking, Interest Rates and Arbitrage.

Staking

MORE can be staked for sMORE to earn a portion of the protocol fees. sMORE is an ERC-4626 token that accrues value (goes up in price) as protocol fees distribute to MORE stakers. Staking rewards are variable and change based on the current interest rate being charged by the protocol. The higher the rates, the higher the staking rewards, which creates demand and buy pressure on MORE.

Interest Rates

Stack controls the interest rate to help maintain the peg. Rates will start low to encourage borrowing, decreasing demand for staking (as lower rates = lower fees collected and passed to stakers), keeping MORE in circulation.

However, if MORE begins to depeg, the protocol can set higher interest rates to encourage users to close their positions, while increasing demand for staking, removing MORE from circulation.

Arbitrage

Arbitrage is another way peg stability is incentivized through the activity of market participants.

  • If MORE were to trade below $1, it would be advantageous for debt holders to purchase MORE at a discount and use these “cheap dollars” to pay back outstanding debt. Buying discounted MORE will eventually raise the price back to $1.
  • If MORE were to trade above $1, users holding Stack collateral could open a new position and sell the borrowed MORE, capturing that value between the issuance and sales price. Selling MORE from this behavior will lower the price back to $1.
  • As the re.al ecosystem expands MORE may trade at different prices in different markets. Users can buy and sell from these different markets to close the spread and move prices back to $1 everywhere.

The Safety Net: Insurance Fund and Stack AMO

As liquidated positions incur in a liquidation fee, 50% of this liquidation fee is kept by the protocol and distributed to the Insurance Fund.

The insurance fund is a 4/5 multisig operated by the team that can be deployed to bail out the protocol in the event of a liquidity crisis. In case of a significant MORE depegging, the assets held in the insurance fund will be used to buy and burn MORE to restore the peg.

The Stack AMO “Algorithmic Market Operations Controller” is a set of smart contracts that conduct open market operations intended to maintain the MORE peg.

The AMO works through three mechanisms:

  • Sells if MORE price exceeds $1.01:The AMO pre-mints a large position in MORE concentrated liquidity pool, and offers it from 1.01 to 1.0101 (depending on tick spacing). This ensures more protection to MORE buyers when the price is above $1, even if they have a large buy that would push the price of MORE higher. For stableswaps, the AMO mints and sells MORE as needed to keep the price down.
  • Makes tight markets: The AMO provides liquidity between $0.99 and $1.01. Expecting MORE to most commonly trade in this range, this strategy should provide ample liquidity in the optimal trading range.
  • Makes wide markets: This helps in case of a tail event. The AMO deploys MORE liquidity into the full range ensuring the market for MORE can never completely break in the case of a major depeg.

Start Cooking on Stack

Whether you’re a seasoned chef in the financial markets or stepping into the DeFi kitchen for the first time, Stack provides a range of yield opportunities to let you cook up a storm, turning your crypto ingredients into a gourmet feast of returns. Welcome to the future of finance, where your culinary skills can earn you not just compliments, but a whole new level of financial freedom.

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