B.Protocol: A DeFi Protocol that Maximizes MakerDAO Users' Yield

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Its creator, Yaron Velner, was previously the CTO of Kyber Network and a co-designer of the WBTC protocol.

Original Title: "DeFi Innovation | B.Protocol, a DeFi Protocol Enabling MakerDAO Users to Earn More Yield"

Original Source: The DeFi Way

On October 27, a DeFi protocol named B.Protocol launched on the Ethereum mainnet. Its creator, Yaron Velner, was formerly the CTO of Kyber Network and a co-designer of the WBTC protocol. You can access this application at https://bprotocol.org/app.

Furthermore, this DeFi application has also been audited by Solidified, as well as by Wil Barnes and Lucas Manuel, who are familiar with MakerDAO smart contract code. Both audit reports did not discover any critical issues.

What B.Protocol Users Can Get

It is reported that users utilizing B.Protocol can earn more yield through their MakerDAO vault and help MakerDAO become more resilient to events like "Black Thursday."

Specifically, users managing their MakerDAO vault through the B.Protocol smart contract interface can accumulate user scores. The earlier you start using B.Protocol, the higher your score. After 6 months, a portion of the liquidator's earnings will be distributed to users based on their accumulated B.Protocol score.

To ensure a minimum allocation reward, the B.Protocol team has also allocated $10,000 worth of ETH. After 6 months, users can start voting on the future reward distribution model, with their voting power proportional to their score.

It is worth noting that in the first month, the speed of score accumulation for users will be doubled. Other noteworthy points include:

Score is only allocated to users; VCs or the team do not receive score in advance;

Score is non-transferable and is not an ERC20 token, so it cannot be traded in the short term;

Technically speaking, future governance may tokenize scoring;

The Issue B.Protocol Seeks to Address

Currently, over $100 billion of DeFi assets heavily rely on proper liquidation processes to secure their safety. The Dai ecosystem, lending platforms like Compound and Aave, synthetic asset platforms, and leverage trading platforms all rely on liquidation to maintain solvency.

When a user's debt is about to exceed their collateral, a liquidation process is triggered, where liquidators repay the user's debt in exchange for a portion of their collateral. Currently, all major DeFi platforms outsource this service to the entire Ethereum community, allowing every Ethereum account to participate in the liquidation process and offering a 3%-8% discount on liquidated collateral to incentivize liquidators.

Overall, this is a fair practice, but it brings two main issues: 1) gas wars driving Miner Extractable Value (MEV) growth, ultimately reducing liquidation incentives to zero; 2) due to high uncertainty of potential profits, there is a lack of committed liquidators. These two issues are crucial for the stability of the DeFi ecosystem, especially in the challenging market conditions of March 12th of this year.

B.Protocol is a new DeFi Lego language that incentivizes keepers to share their earnings with platform users to receive priority rewards in the liquidation process. Through this, B.Protocol encourages more responsible liquidators to join the platform and helps redirect MEV back to the community.

How Does It Work?

The B.Protocol team will integrate the protocol into existing DeFi lending platforms, with MakerDAO being the first, allowing users to interact with lending platforms through a dedicated smart contract interface. B.Protocol's liquidators provide a buffer to user accounts near the liquidation price, gaining priority during the liquidation process. You can read more here about how B.Protocol achieves fairness in the liquidation process.

B.Protocol's Simplified Flow

Users earn a score based on their usage of the protocol (borrowing Dai over a certain period). Any liquidation of MakerDAO handled by a B.Protocol liquidator will be split, with 50% of the liquidation discount going into the Jar. After 6 months, the Jar rewards will be distributed to B.Protocol users based on their score.

Who Benefits from Using B.Protocol

Aside from miners...

MakerDAO users can benefit from value-added liquidation proceeds from the MakerDAO treasury without increasing risk;

MakerDAO, as a lending platform, has gained new, professional liquidators who bring more stability to the platform. In the long term, a more stable platform can lower the collateralization ratio;

Liquidators can have better risk management and forecasting capabilities, incentivizing them to build better liquidation tools for DeFi lending platforms, with the return of reduced uncertainty shared with platform users;

The Ethereum ecosystem benefits from mitigating MEV and redirecting value from miners back to users in another way;

Details

How the score is calculated:

A user's score depends on the amount of Dai borrowed and the time elapsed before repaying the loan. Formally, for every 1000 DAI (*), the user accrues 1 point per day of debt;

For example, if a user has a debt of 5000 DAI in 7 days, their score will increase by 35 points;

User scores are non-transferrable for the first 6 months;

Fair Launch Principle: Scores will not be pre-allocated to VCs or anyone, including the project's development team;

To incentivize user participation in the protocol, the score will accrue at twice the rate for the first month after launch;

Key Points

After the initial 6 months, the community will have 100% control of B.Protocol, with the community determining the protocol's future path. Decisions made by a 51% user score will be able to set the adjusted incentive model;

The Jar is subsidized by B.Protocol and has been injected with $10,000 worth of ETH, so even with few liquidations in the first 6 months, users of B.Protocol can benefit;