dTRINITY
dTRINITY is a stablecoin liquidity protocol designed to reduce borrowing costs and provide sustainable interest rates, thereby improving looping strategies for yield-bearing assets like sFRAX, sUSDe, and sDAI. [1]
Overview
dTRINITY is a decentralized liquidity protocol that delivers lower borrowing costs, sustainable yields, and essential DeFi infrastructure on new Ethereum Layer 2 and Layer 3 ecosystems. Launching in Q3 2024, it will initially operate on Fraxtal, a Layer 2 network that offers native blockspace incentives. dTRINITY has three core components: dUSD stablecoin, dLEND money market, and dSWAP exchange, along with the TRIN governance token. dUSD is a community-centric US Dollar stablecoin on the Fraxtal L2 network, redeemable for USDC or fiat collateral, facilitating on-chain transactions and fiat on/off-ramp activities, with yield from its collateral reserve subsidizing borrower interest rates. dLEND, a fork of Aave v3, supports collateralized lending/borrowing of dUSD and other digital assets, while dSWAP, a fork of Uniswap v3, enables efficient trading and collateral liquidation, with dUSD as the base pair. [2]
Fraxtal
Fraxtal is an Optimism (OP) Stack modular rollup Layer 2 blockchain featuring "fractal scaling." It is an EVM-equivalent rollup using the OP stack for its smart contract platform, enabling secure, cost-effective application deployment similar to Ethereum rollups like Optimism and Base. Fraxtal is modular, incorporating multiple components and middleware for other chains and networks, and currently employs a data availability module developed by the Frax Core Team. It offers blockspace incentives (Flox) that reward users and developers with FXTL points for gas spending and smart contract interactions, which are convertible to tokens. The native gas token is Frax Ether (frxETH) from Frax Finance, allowing users and smart contracts like dTRINITY to earn FXTL points for additional incentives. [3]
Features
dUSD Stablecoin
dTRINITY USD (dUSD) is a decentralized, US Dollar-pegged stablecoin fully backed by on-chain collateral assets. The dUSD collateral reserve includes stablecoins like FRAX and USDC as well as yield-bearing assets such as sDAI and RWA (real-world asset) tokens. [4]
Each dUSD is backed by 1 USD worth of collateral and can be minted or redeemed permissionlessly through smart contracts. [4]
dUSD aims to provide a secure on-chain store of value with unique benefits for its borrowers, lenders, and liquidity providers. By utilizing a diversified and non-custodial collateral reserve, dUSD can maintain stability and independence from the traditional banking system while providing 24/7 transparency to its users. [4]
Utility
dUSD is dTRINTY’s native stablecoin and unified liquidity layer, serving as the base pair for both dLEND and dSWAP. Unlike centralized stablecoins that do not externalize the float income from their reserves, dUSD prioritizes the dTRINITY community by sharing a majority of its float income as interest rate subsidies to stimulate growth and adoption of the protocol. [4]
This approach reinforces a community-centric model where the success of protocol translates directly into enhanced value for community members as both dTRINITY and dUSD continue to scale. [4]
dLEND Money Market
dLEND is a collateralized lending market fork of Aave V3 on Fraxtal, allowing users to borrow against their collateral and provide liquidity to borrowers in return for continuous interest payments. It supports various financial strategies, including leverage, short positions, and hedging, focusing on yield looping strategies. [5]
The protocol facilitates collateralized lending and borrowing of dUSD and other digital assets on Fraxtal. dUSD borrowing rates on dLEND are regularly subsidized to stimulate demand and utilization, generating sustainable stablecoin yields for dUSD lenders alongside other protocol and network incentives. [5]
On dLEND, lenders earn interest on their lent capital when borrowers utilize it, often resulting in loans paying a higher APR than what lenders earn. Interest rates for lending and borrowing are determined by utilization rates, with higher rates incentivizing borrowers to repay loans and attracting more lenders, ensuring liquidity for new borrowers. [5]
Borrowing Subsidies
Borrowing dUSD benefits from subsidies, making it the most cost-effective option against collateral. Projects on dLEND can further boost usage by rewarding lenders or borrowers with additional tokens. dTRINITY's governance can introduce new reward tokens for current markets, incentivizing user participation. Due to these subsidies, dUSD's borrowing APR might fall below its supply APY, leading to higher utilization rates than in non-subsidized markets. [5]
dUSD Markets
dUSD is the designated stablecoin for borrowing on dLEND, offering borrowers consistent and lower borrowing costs without switching between stablecoins. This simplifies the borrowing process and ensures lenders benefit from sustained utilization and higher yields, supported by ongoing borrower subsidies. [5]
Oracles
dLEND utilizes a mixed oracle approach depending on market conditions. It primarily relies on RedStone Oracles for assets with extensive external price discovery venues. For assets exclusive to Fraxtal or lacking liquidity on external markets, dSWAP is the price oracle. If RedStone prices are outdated, dSWAP also acts as the fallback oracle. [5]
Liquidation
Borrowers on dLEND face potential liquidation if their loan-to-value (LTV) ratio drops below a specified threshold, which varies by market. To avoid liquidation, borrowers can add more collateral or repay a portion of their debt. When liquidation occurs, both the liquidator and the protocol levy a fee, the amount of which depends on the specific market involved. [5]
dSWAP Exchange
dSWAP operates as a CLMM (concentrated liquidity market maker), a variant of Uniswap V3 tailored for Fraxtal. Unlike traditional AMMs, CLMM allows liquidity providers (LPs) to concentrate their capital within specific price ranges, maximizing efficiency by focusing liquidity where it's most needed, typically around current market prices. This setup reduces slippage and enables larger order sizes, which is particularly beneficial for stablecoin and pegged-asset swaps where price stability is critical. LPs earn trading fees, receiving full fees on dUSD pools and sharing fees on other pools, with 50% going to protocol revenue. Emphasizing dUSD pools enhances trading efficiency by minimizing transaction hops and lowering fees, benefiting LPs and traders alike. [6]
DeFi FlyWheel
dTRINITY’s FlyWheel is designed to attract liquidity and user activity through exogenous and endogenous incentives, scaling sustainably with TVL growth. The protocol incorporates the ve(3,3) framework to enhance interaction between governance token holders and supply-side participants, such as lenders and LPs providing dUSD liquidity. [7][8]
Exogenous incentives include dUSD rewards and subsidies, FXTL network rewards, and incentives from ecosystem partners. Endogenous incentives include TRIN token/point rewards and protocol fee sharing with vote-escrowed TRIN (veTRIN) token holders post-TGE. [7]
Yield Looping
Yield "looping" involves leveraging yield-bearing assets like sFRAX as collateral to borrow stablecoins. These stablecoins are then reinvested in more of the yield-bearing asset, amplifying exposure with leverage. This strategy can be profitable if the yield generated exceeds borrowing costs. [9]
dTRINITY enhances this process by integrating dUSD with DeFi components. Thanks to its float income, users can supply yield-bearing collateral to dTRINITY to borrow dUSD at subsidized rates. This setup enables more efficient leveraging and lower borrowing costs, enhancing the yield looping experience. [9]
Partnerships
- Stably
- Frax
- Fraxtal
- Cream Labs
- Coin98
- Verichains
- RedStone Oracles [10]