Liquid farming: Shibaswap liquidity provider tokens as collateral
In this section, we will review the specifics of using Shibaswap LP tokens as collateral and receiving the respective rewards within Unit Protocol.
Unit Protocol lets users borrow USDP stable against Shibaswap Liquidity Provider (SSLP) tokens locked in the system as collateral. The benefits of locking the LP tokens in the protocol include receiving the AMM commissions on the respective swaps, BONE token rewards and the ability to mint the liquidity in the form of USDP stable. There is no need to withdraw the collateral from the protocol in order to receive and claim the respective BONE tokens rewards.
Shibaswap is a decentralized DeFi platform providing such tools as AMM trading, liquidity mining, farming and staking. Its unique token set includes three flagship tokens - SHIB, LEASH, and BONE.
On Shibaswap users can earn rewards or multiply their yield by utilizing some of the following features:
- BURY (Stake): Stake SHIB, LEASH, BONE to gain returns.
- DIG (LP): Provide liquidity as SSLP (Shibaswap liquidity provider) to earn BONE and other rewards creating respective 50/50 pairs and adding liquidity to the exchange.
- WOOF (Farm): Deposit/withdraw LP token pairs in the different pools to earn BONE.
BONE token is distributed in a form of the reward for providing liquidity to the DEX (decentralized exchange), staking, and farming. BONE takes the role of a governance token. Its ownership grants users the voting power on important proposals. The more BONE tokens holders have, the more voting weight they own, which reflects their power to impact the future decisions.
All SSLP tokens staked by users are sent to the TopDog contract. It’s also the one responsible to mint BONE and distribute it to all allocation rewards pools such as BONE-WETH, WETH-USDT, DUCK-WETH… and many more. As a result, users are rewarded with BONES.
Rewards are distributed between all pools of SSLP tokens every block according to weight of the pool. Inside the pools, rewards are distributed among the users according to their share of staked SSLP.
To save on gas fees, minting BONE doesn't necessarily happen every block, it's done as part of any user action taken on the system.
To implement the idea of gaining the BONE token rewards while holding SSLP tokens in the Unit as collateral, we came to creating a pool contract for wrapping and unwrapping SSLP tokens.
Wrapping and depositing to Unit protocol going on in one transaction. In short, the same moment the tokens are deposited into the protocol they get wrapped and become a WSSLP collateral for minting USDP stable. In addition, the user is able to earn rewards without withdrawing wrapped tokens from the protocol.
Notice that transferring wrapped tokens between users is prohibited.
In order to supply the SSLP collateral in the protocol to mint USDP stable the user goes through the same standard process of opening a debt position. In the supplement, by pledging SSLP token as collateral the user can claim the rewards. In view of the user interface (UI), all of these activities take place within the same collateral page.
As the owner of a debt position within Unit Protocol, you can claim your rewards without withdrawing your collateral from the protocol.
Rewards are sent to the user with every deposit or withdrawal, also, user can deposit 0 tokens to get their rewards.
It’s necessary to perform either action as rewards are tracked by a certain proxy contract interacting with TopDog and Bon Locker contracts and created for every new user within Unit Protocol. Hence, on every new deposit or withdrawal rewards are sent to the proxy contract and become claimable for the user.
At the moment, 33% of earned rewards are claimable by the user at any point in time, but the remaining 67% will be locked in the Bone Locker contract for 6 months. When this period ends, the locked rewards become claimable.
On the page of your open debt position scroll down to the block Claim your rewards and simply hit the ‘Claim’ button on the left to withdraw available rewards.
On the right side, you can see the balance of pending rewards available after six months of retention in Bone Locker contract, and the date they become available to claim.
NOTICE: 10% of the BONE token rewards are allocated to the Unit Protocol treasury.
After acquiring a liquidated position, you need to unwrap it first in order to be able to utilize it further within or outside the Unit Protocol.
To perform this action navigate to the collateral page, scroll to the Unwrap section, select the amount you would like to unwrap or simply set ‘Max’ and hit the Unwrap button to confirm.