The Vision for Yield in Collar
How Collar can become a major player in the stablecoin yield space.
TVL in Collar
The most exciting thing for our team about the Collar lending platform (see Introducing Collar if you haven’t yet) is its high potential for enormous TVL. The TVL in Collar will primarily come from 3 areas, and we think each has huge growth potential:
- Retail investors protecting their stablecoin portfolios.
The importance of stablecoins in bear markets is obvious but we are seeing many investors with a preference for large stablecoin allocations at all times. As DeFi’s reach expands this phenomenon will only become more true as many new to the space will be drawn to the familiarity of USD.
- Yield aggregators using Collar as part of their strategy to safely increase yield.
Yield aggregators manage the majority of established stablecoins. Paying the fixed interest rate in Collar to hedge against stablecoin price risk will increase their yield by allowing them to pursue more aggressive strategies.
- Traditional finance institutions using Collar to manage their risk.
There is a huge migration currently happening with trad-fi entering the DeFi space, both in terms of the number of players and the amount of assets. Traditional finance institutions have an obligation to accurately model and quantify risk that is much more stringent than a DeFi protocol. Collar gives these entities a way to do so with its fixed, predictable interest rates that completely eliminate de-pegging risk.
Having these 3 factors present means that Collar’s TVL potential is currently very high, and its ceiling will be rapidly increasing in the near future.
Dressing up that TVL to go to Work
Collar lets you “dress up your stablecoins”: you take your unprotected, Joe Six-pack USDT and deposit it into Collar; it comes out the other end as a sophisticated, monocle-wearing DAI ready to take on the world.
The Collar team thinks your collateral stablecoin should be put to work to generate value too. That’s why one of our Collar Improvement Proposals (CIPs) is to use the collateral assets in Collar vaults to generate yield by depositing it in other protocols. As the concept for Collar was originally conceived by yield farming strategy veterans, we are confident that our team (in partnership with the community) will be able to develop exciting ways to leverage the high TVL in Collar into massive yield. This yield would then be distributed to COLLAR governance token holders.
Of course, this functionality would introduce additional risk to the overall Collar platform and would need to be implemented carefully. That’s why Collar will launch without this functionality enabled and will rely on community input to make key decisions on which protocols to deposit into, the yield farming strategies to pursue, how the yield is distributed, and whether this proposal should even be implemented to begin with. More details on this CIP, our roadmap ,and our DAO structure are still to come, but our team wanted to get this idea out there now to get you even more excited for Collar’s launch later in 2021.
With the right outfit your stablecoins can work harder.