New Midas pool for ankrBNB

Ethan Nelson

Ethan Nelson

February 9, 2023

5 min read

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Ankr Launches new Midas pool for ankrBNB on Binance Chain

The new Midas pool for ankrBNB is now live, marking the next stage of BNB Liquid Staking with Ankr. Binance Chain is the fastest-growing blockchain and we’re excited to spearhead the addition of liquidity to BNB with the help of Midas – a cross-chain money market solution that brings isolated and customizable money markets to EVM-compatible blockchains.

By teaming up with Midas we can incentivize the pool to source the initial liquidity for ankrBNB – the liquid staking token users who stake BNB receive against their holdings.

Why did we choose to Partner with Midas?

The BNB/ankrBNB Midas pool will allow users to provide liquidity across multiple liquidity sources (centralized and decentralized) for the best price every time. We’re essentially indexing the BNB Staking Reward to the Borrowing interest on the Midas Ankr Isolated pool to increase LP APY.

This is one way to curb the large spread of BNB borrowing interest vs. lending interest. But why is it necessary to do so?

Lending platforms charge high fees and come with a high reserve percentage but a low utilization rate. The borrowed amount is divided by the supplied amount and the low collateral ratio of other assets in the shared pool results in a conservative utilization rate.

These parameters are not designed for isolated pools composed of liquid staking and the underlying asset. Novel cross-chain market makers like Midas Capital allow more freedom in customizing the pool to adapt to the needs of the liquid staking tokens and associated assets.

By teaming up with Midas, we can trigger a convergence between the BNB lending APY and BNB staking APY to maximize returns. The goal is to achieve the best of both worlds – a relatively high APY and low implementation loss (IL). The Annual Percentage Yield, or APY, is the rate of return on an investment after compounding interest is taken into account. It takes into account the interest you earn on that payout. You will not receive any additional interest on the interest because it has already been factored into the APY.

How do Midas Isolated Pools Work vs. Single Cross-Collateral Pools

The Midas Protocol eliminates the need to lobby for money market protocols such as Compound Finance or Aave. Given the potential risk to the rest of the pool, newer tokens in the ecosystem have a very low chance of being listed on these large money markets.

Aave relies on a model that uses stable loans, which maintain their interest rate at the time of issuance until the rebalancing conditions are met. Aave's interest rate strategy is designed to manage liquidity risk while also optimizing utilization. Interest rate parameters can be adjusted as market conditions change.

With the rise of liquidity mining, Aave adapted its borrowing costs by lowering the Uoptimal (an indicator of capital availability in the pool) of the assets affected. This increased borrowing costs, which are now only partially offset by the liquidity reward, resulting in lower overall interest rates.

Midas, unlike Aave, employs isolated pools as opposed to the traditional single-cross collateral pools offered by major DeFi providers. Pools run in standalone environments with different parameters and supported assets under the isolated pool model. The isolated pool model adds an extra layer of security by isolating the risk(s) to only the single affected pool and not putting the entire TVL at risk. This allows users to participate in Midas with greater confidence.

Midas enables any DeFi project to create customized pools in which they have complete control over pool parameters such as supported assets, interest rate curves, oracles, collateral factors, and pool fees.

Pools with an isolated structure have several advantages over traditional pools.

First of all, isolated pools add an extra layer of security to users by ensuring that one pool is not affected by other pools in the protocol. Because all assets are not stored in a single pool, users do not need to be concerned about the protocol's overall risks and can instead concentrate on the pool in which they wish to invest.

Second, isolated pools provide users with a greater range of options. Because each pool may have different parameters, users can choose to invest in the pool based on their risk tolerance and asset selection. Pool creators can generally change parameters like supported assets, fee structure, collateral factor, and Loan to Value (LTV) liquidation factors.

Midas gives pool creators complete control over the creation and customization of their money markets on the platform. Each pool includes a number of parameters that can be changed before the pools are available for investment. Custom assets, custom oracles, platform fees, admin fees, liquidation incentives, close factors, collateral factors, and reserve factors are among the parameters.

Pools with custom parameters can have the same supported assets but different parameters and risk levels. As a result, Midas users will be able to select pools based on their assets and risk tolerance.

Let's consider the following two pool example: A and B. Both pools A and B accept USDT, ETH, and BTC. Pool A, on the other hand, has a 75% LTV ratio, whereas Pool B has a 33% LTV ratio. As a result, users in Pool A can borrow up to $75 in assets for every $100 deposited, whereas users in Pool B can only borrow $33 in assets for every $100 deposited. Because of this, pool A will be a higher-risk pool with potentially higher returns, whereas pool B will be suitable for investors seeking low-risk and low returns.

Finally, Midas makes use of the new ERC-4626 standard, which is a standard API for tokenized yield-bearing vaults. The standard reduces the effort required to integrate different protocols, and projects can seamlessly unlock access to yield in various applications.

Unique Yield-Generating Opportunities With ERC-4626

Midas seamlessly integrates with multiple protocols across DeFi, using the ERC-4626 tokenized vault standard, to bring users unique yield-generating opportunities right in Midas pools. Users can collateralize a variety of LP tokens in the Midas pool to borrow BNB and increase their exposure to the LP tokens, or use that liquidity to participate in other DeFi strategies.

Ankr looks forward to supporting all the projects that will use the new BNB/ankrBNB Midas pool for their yield & liquidity needs.