Piggy Finance provides consumers with Stablecoin financing at 0% interest and the lowest collateralization ratio available.
Piggy is a decentralized borrowing system that lets you obtain interest-free loans in exchange for $BNB as security. Loans are paid out in $PUSD (a USD-pegged stablecoin) and borrowers must maintain a collateral ratio of at least 110 percent.
The loans are backed, in addition to the collateral, by a Stability Pool comprising $PUSD and by other borrowers collectively acting as guarantors of last resort.
Stable-value assets, which have grown to represent billions of dollars in value on BSC, are a fundamental building component for blockchain applications.
However, there are just a few projects on BSC that are dedicated to Stablecoins. Furthermore, in order to obtain a loan, users must maintain a large collateral supply in existing Stablecoin initiatives, often greater than a collateral ratio of 150 percent.
Piggy solves this issue by developing a more capital-efficient and user-friendly method of borrowing Stablecoins. Furthermore, Piggy is governance – minimal, assuring the protocol’s decentralization.
- Open a PiggyBank to borrow $PUSD against $BNB.
- In return for prizes, secure Piggy by contributing $PUSD to the Stability Pool.
- Stake $PIGGY in order to profit from the fees paid for borrowing or redeeming $PUSD.
- When the $PUSD peg goes below $1, redeem 1 $PUSD for 1 USD worth of $BNB.
A PiggyBank is where you make and keep your loan. Each PiggyBank is associated with a BSC address, and each address may only have one PiggyBank. PiggyBanks are similar in principle to Vaults or CDPs found on other platforms.
PiggyBanks have two balances: one is an asset ($BNB) that serves as collateral, and the other is a debt in $PUSD. By adding collateral or repaying debt, you may adjust the amount of each. As you adjust your balance, your PiggyBank’s collateral ratio changes correspondingly.
Piggy’s main advantages are as follows:
- 0% interest rate – as a borrower, you won’t have to worry about continually accruing debt; Piggy assesses a one-time borrowing and redemption cost that is adjusted algorithmically based on the last loan redemption time. This enables Piggy to run completely decentralized, without the need for governance micromanagement.
- A collateral ratio of at least 110 percent ensures more efficient use of deposited $BNB. With Piggy, you may increase the liquidity of your collateral $BNB by obtaining a dollar loan for up to 90.9 percent of its value. Loans are interest-free for your convenience, as Piggy creates $PUSD on its own.
- $PUSD pegged to the US dollar – The protocol’s architecture, with algorithmic governance and direct redeemability, ensures $PUSD’s peg to the US dollar. As an added bonus, $PUSD holders may help to stabilize the system while profiting from liquidation profits and cheerfully earning even more $PIGGY, which can be staked right now.
- Minimized governance – all operations are algorithmic and entirely automated;
- Directly redeemable – At any moment, $PUSD can be redeemed at face value for the underlying collateral.
Piggy has debuted on the BSC mainnet, supplying the inaugural liquidity for the PIGGY/BUSD pair on Pancakeswap. Because the protocol is still in its early stages, the circulating supply of $PIGGY is limited, and the PIGGY/BUSD liquidity pool is depleted. Furthermore, due to the x*y = k formula used by the Pancakeswap AMM, traders may encounter significant slippage on their swaps as well as significant volatility in the $PIGGY pricing. This is a friendly reminder that there are certain dangers associated with participation in an early-stage procedure through AMM DEXs such as PancakeSwap.
Borrow is a basic function of the Piggy Protocol that allows users to put $BNB to their own PiggyBank as collateral and borrow $PUSD, which is the Piggy Stablecoin. Collateral is any asset that a borrower must offer in order to get a loan and serve as security for the debt. Piggy currently only accepts $BNB as collateral. The protocol will only charge a one-time fee when you borrow; no more interest will be added to the loan in the future.
The fundamental mechanism for keeping the $PUSD pegged to the USD is redeems. When the market price of $PUSD falls below $1, arbitrageurs can redeem with $PUSD worth $1 from the protocol’s most risky PiggyBanks (the riskiest PiggyBank is the lowest CR in the protocol). This will limit the supply of $PUSD in the market, causing the $PUSD price to return to $1.
Stability Pool & Liquidation
The Stability Pool serves as the first line of defense in ensuring the system’s solvency. It does this by serving as a source of liquidity for debt repayment from liquidated PiggyBanks, guaranteeing that the entire $PUSD supply is always backed.
When a PiggyBank is liquidated, an amount equal to the PiggyBank’s outstanding debt is burnt from the Stability Pool’s balance to satisfy its obligation. In exchange, the PiggyBank’s whole collateral is transferred to the Stability Pool.
Users contribute to the Stability Pool by depositing $PUSD to it (called Stability Providers). Stability Providers gradually lose a pro-rata portion of their $PUSD deposits while receiving a pro-rata portion of the liquidated collateral. However, because PiggyBanks are projected to be liquidated at just under 110 percent collateral ratios, Stability Providers are predicted to get a higher dollar-value of collateral compared to the debt they pay off.
Stability Providers will benefit from liquidation profits (detailed below) as well as early adopter awards in the form of $PIGGY tokens.
Recovery Mode is a system-wide security feature. When the system’s Total Collateral Ratio (TCR) goes below 150 percent. PiggyBanks with a collateral ratio less than the TCR (i.e., up to 150 percent) can be liquidated during Recovery Mode.
Furthermore, the mechanism prevents borrower transactions that would reduce the TCR even further. New $PUSD may only be created by modifying current PiggyBanks to enhance their collateral ratio or by starting a new PiggyBank with a collateral ratio more than 150 percent. In general, if an existing PiggyBank is adjusted, the transaction is only conducted if the resultant TCR is greater than 150 percent.
When the system is under the Recovery Mode, the notice will be shown on the dashboard overview.
The incentive for $PIGGY holders and liquidity suppliers is at stake. They currently have one Staking pool:
$PIGGY Pool – stake the Piggy Token to split the borrowing and redemption fees.
The pool’s purpose is to incentivise $PIGGY holders.
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