Abstract:

This governance proposal aims to extend the Solid protocol’s collateral framework to include BNB and SOL as viable assets for minting SOLID tokens. The purpose is to broaden the range of supported assets, fostering increased liquidity in the pools, attracting a diverse user base, and generating additional fees for the community.

1. Introduction:

Currently, Solid only supports LUNA, BTCH and ETH as collaterals. The proposal aims to expand this list by incorporating BNB and SOL.

This strategic move seeks to fortify Solid’s presence in the DeFi ecosystem by responding to the evolving needs and preferences of the community.

2. Benefits of Integrating New Assets:

a. Enhanced Liquidity in Solid Pools:

By embracing BNB and SOL as collateral, Solid aims to significantly amplify liquidity within its pools. This surge in liquidity is pivotal for maintaining pool stability, enabling more substantial transactions with minimal price impact, and enhancing overall usability.

b. Increased Participation and Fee Generation:

The inclusion of BNB and SOL expands the potential user base, attracting those who hold these widely-used assets. This diversification is anticipated to augment the number of participants, resulting in increased fees that directly benefit the community.

c. Diversification of Collateral Portfolio:

Diversifying the collateral portfolio with BNB and SOL mitigates concentration risks associated with reliance on a single asset. This measure disperses risk and enhances the resilience of the protocol in the face of specific asset volatilities.

Conclusion:

In conclusion, the proposal to include BNB and SOL as collateral in Solid marks a strategic initiative to foster growth in DeFi. This expansion promises enriched liquidity in Solid pools, a broader user base, and heightened fee generation for the community.

Furthermore, the introduction of these assets contributes to a diversified collateral portfolio, reinforcing Solid’s standing as an inclusive and robust participant in the evolving DeFi landscape. Embracing this proposal signifies Solid’s commitment to offering a versatile and resilient platform for decentralized financial activities.

Abstract:

This proposal aims to extend the Solid protocol’s collateral framework to include Bitcoin (BTC) and Ethereum (ETH) as viable assets for minting SOLID tokens.

1. Introduction:

Currently, Solid only supports LUNA as collateral. The integration of BTC and ETH is needed to enhance liquidity in SOLID pools, increase the number of users that interact with the protocol, diversify collateral options, and generate additional fe es for Capa stakes.

This proposal aims to increase the interaction with the protocol and its viability in order to enhance Solid visibility in the DeFi world.

2. Benefits of Integrating BTC and ETH as Collaterals.

There’s some major point we want to share with you on why we think this proposal will help Solid as a protocol.

a. Enhanced Liquidity in SOLID Pools.
By accepting BTC and ETH, two of the most liquid assets in the cryptocurrency market, as collaterals, Solid protocol can significantly increase the liquidity available in SOLID pools. This liquidity is crucial for maintaining stability, facilitating larger transactions without substantial price impacts and to improve SOLID usability.

b. Increased Minters and Fee Generation.
The inclusion of BTC and ETH will likely attract a broader user base, encompassing holders of these widely-held assets.
This expansion in the user base not only increases the number of minters but also boosts the fees generated, directly benefiting Capa stakeholders.

c. Diversification of Collateral Portfolio.
Currently, the reliance on LUNA as the sole collateral poses concentration risks. Introducing BTC and ETH will diversify the collateral portfolio, thereby distributing and mitigating risks associated with specific asset volatility.

3. Conclusion:

In conclusion, the proposal to include Bitcoin (BTC) and Ethereum (ETH) as collateral in the Solid Protocol presents a compelling opportunity for Solid’s growth in DeFi. This expansion promises enhanced liquidity in SOLID pools, an increased user base, and greater fee generation for Capa stakeholders. Moreover, the introduction of BTC and ETH diversifies the collateral portfolio, mitigating concentration risks associated with a sole reliance on LUNA. By embracing this proposal, Solid aims to position itself as a more inclusive and robust player in the evolving DeFi landscape, offering users a versatile and resilient platform for decentralized financial activities.

Introduction

Capapult is a revolutionary fully decentralized borrowing protocol that introduced SOLID, the first native stablecoin in the Terra 2.0 ecosystem.

We have already described its main features in other articles about SOLID, the governance system, the lockdrop, we have explained its latest changes and explored different ways of using the Capapult protocol to generate profit.

In this article, you can read about the goals achieved by Capapult in the last few months.

Capapult’s objective is to continue to contribute in fulfilling the need for a decentralized currency with low volatility. Supporting SOLID and Capapultmeans supporting decentralization within the Terra ecosystem and a belief in a better decentralized future.

A decentralized economy needs decentralized money.

Proposal

This proposal aims to seek approval from the Astral Assembly for Dual Incentives within the following two pools on the Terra mainnet deployment of Astroport:

• SOLID — axlUSDC
• CAPA — SOLID

It is important to emphasize that both pools meet all the criteria set by the Astroport Incentive Framework:

The pool has been trading on Terra 2 mainnet (Phoenix network) for at least 4 weeks

Both pools were created in March 2023, so they meet this requirement.

LPs in the pool should already receive token emissions (using the Astroport dual reward feature)

Following the approval of both the Capapult Governance Proposal #2 and the ARC-70, the two pools have already been incentivized with CAPA tokens for several months.

Dual rewards should continue for at least 4 weeks from the moment (and in case) the Assembly passes a vote to direct ASTRO emissions to the pool

As mentioned before, 10 million CAPA have been allocated as incentives for the two pools, specifically:

• 7 million CAPA for the SOLID-axlUSDC pool
• 3 million CAPA for the CAPA-SOLID pool

These incentives will be distributed over the course of 2 YEARS, highlighting Capapult’s goal of continuing to collaborate effectively and consistently with Astroport and its users.

The target ratio of fees to incentives should be 0.4, in line with those of Osmosis and Sushiswap as shown above

In order to calculate the amount of ASTRO tokens per block that should be allocated to the two pools we made the following assumptions and observations:

• Terra block times are ~6 seconds
• The amount of ASTRO distributed per Terra block is approximately 0.05208 ASTRO
• We assumed an $ASTRO price equal to $0.050
• SOLID — axlUSDC:
  - Total Volume = $144.310
  - Fees Earned = $72.23
  - Fees/Day = $2.33

CAPA — SOLID:
- Total Volume = $71.228
- Fees Earned = $213.59
- Fees/Day = $6.89

We target a 0.4 fees to emissions ratio

With these points in mind, we propose the following rewards distribution:

• SOLID — axlUSDC: 0.02 ASTRO / BLOCK
• CAPA — SOLID: 0.01 ASTRO / BLOCK

Benefits for Astroport and ASTRO Stakers

We are strongly convinced that incentivizing these pools can bring significant benefits to the Astroport ecosystem and to all Terra users.

SOLID is gaining increasing importance as the reference decentralized stablecoin in the Terra ecosystem and it is crucial to ensure that the token has sufficient liquidity, especially within the main DEX of the chain.

The allocation of rewards in ASTRO, in addition to those already active in CAPA, will lead to an increase in liquidity for the two pools and a rise in trading volume, ensuring an even more stable market for SOLID and attracting more users to the platform.

Furthermore, ASTRO Stakers will benefit as part of the trading fees will be redistributed to them.

Conclusions

This proposal suggests to enable ASTRO Dual Incentives for the SOLID-axlUSDC and CAPA-SOLID liquidity pools.

This will provide more trading and arbitrage opportunities, reduce price slippage and lead to increased adoption and usage of these pools.

Important: the considerations contained in this article should not be taken as financial advice. You should always be careful when investing with advanced financial instruments.

If you are searching for a more detailed explanation of the whole protocol, you can have a look at the updated version of Capapult whitepaper.

Official Rules

1. Introduction

Welcome to the #SolidRebrandingContest, brought to you by Capapult in partnership with Terraform Labs (TFL). We are excited to invite the community to be a part of our rebranding journey and help shape the future visual identity of Solid.

2. Eligibility

• The contest is open to individuals worldwide, except employees and immediate family members of Capapult and TFL;
• Participants must be at least 18 years old to enter.

3. Contest Details

• TFL has generously provided a budget of 5,000$ to be distributed as prizes.
• The contest focuses on the creation of a new visual identity for Solid — which will be the new name of Capapult — including but not limited to:
  - Logo for SOLID (with a short storytelling about the meaning given to the logo);
  - Brand Kit with all the branding assets: fonts, colors and imagery;
  - Social Media Profile Logo (suitable for: Twitter, Medium, Discord, Telegram);
  - Social Media Cover Image (suitable for: Twitter and Medium)
  - Logos for SOLID and CAPA tokens;
  - Draft of how the developed visual identity can be adapted to the official website.

4. Design Guidelines

• Participants are encouraged to leverage the existing color scheme of Capapult. However, if the specific vision calls for a different color scheme and it is deemed appropriate, this is equally accepted. The key is that the concept stands out and reflects the essence of Solid as a stable coin protocol and its values of transparency and trust.

5. Submission Guidelines

• Submit your designs through our dedicated Google Form at https://forms.gle/tV1S7nKWjRTvHNWBA. Please ensure they are in high-resolution, preferably in vector format.
• Include your name, surname, age, email address, Terra Address and a short description of your design concept in the submission.

6. Deadline

• The contest submission period begins on October 27th and ends on December 1st.

7. Prizes

• 1st Place: $3000
• 2nd Place: $1,200
• 3rd Place: $800

Please note that Capapult reserves the right to not accept and use the winning design if it does not meet our satisfaction or requirements.

The prize will be sent to the winner’s Terra Wallet.

8. Winner Selection

• Entries will be judged by a panel of experts from Capapult and TFL based on creativity, originality, and adherence to design guidelines.

9. Winner Announcement

• The winners will be announced on 15 December 2023 via Capapult’s official social media channels.

10. Intellectual Property

• By entering the contest, participants grant Capapult and TFL the rights to use, modify, and reproduce the submitted designs for promotional purposes.

11. Disclaimer

• Capapult and TFL reserve the right to modify or cancel the contest at any time.

Introduction

Capapult is a revolutionary decentralized borrowing protocol that introduces SOLID, the pioneering native stablecoin within the Terra 2.0 ecosystem. By creating an open and accessible financial system, Capapult aims to transcend limitations and foster a decentralized speculative system without limitation. We have already described its main features in other articles about SOLID, the governance system, the lockdrop, we have explained its latest changes and explored different ways of using the Capapult protocol to generate profit.

In view of the many events that have taken place in Capapult over the last few months, this article aims to resume all the most important events that have happened since the lockdrop to date.

Lockdrop

On 3 March at 12:00 PM, the lockdrop phase of Capapult officially began: the lockdrop consisted of a period of seven days during which users were given the chance to lock their Luna into the protocol.

The CAPA tokens from the Lockdrop share were distributed in proportion to the amount of locked Luna.

This was done in two steps:

1. 20% of the tokens assigned to Lockdrop become immediately claimable after the 7 days period had expired.
2. The remaining part, instead, will become available after a period of 6 months, together with the locked Luna and the unclaimed CAPA (which will be distributed in the form of additional rewards). During the 6 month period, the locked Luna and the 80% of CAPA have been used to generate a Liquidity Pool (LP) token, to be sent to the Astroport. After this period of 6 months the token will be withdrawn and both Luna and CAPA will become claimable.

The lockdrop phase ended on 10 March, with over 400K Luna locked.

At the protocol’s launch stage, the total supply of CAPA was automatically partitioned by the protocol according to the following proportions:

• 10% for Airdrop Genesis
• 20% for Lockdrop
• 15% for the Team
• 10% for liquidity pool providers
• 40% for the Gov Pool
• 5% for CAPA stakers

For full details on the lockdrop phase and how it worked, you can read the article “Capapult: lockdrop explained”.

AirDrop & FarmDrop Campaigns

During the period from 11 March to 11 April, both the Airdrop campaign for Luna Stakers and the Farmdrop Campaign were held.

The Capapult Airdrop campaign was directed to LUNA stakers that had stuck around. The specific allocation was calculated using an average of the LUNA staked at block heights 26000 and 3020000. Capa stakers during the same snapshots received a 20% bonus on top of their total claim amount.

The FarmDrop Campaign gave the possibility of claiming rewards to participants who completed specific and announced missions. Delegators to Capapult’s Terra validator as of blockheights 26000 and 3020000 received a 20% bonus.

After the successful conclusion of the Airdrop phase, all unclaimed funds returned to the community pool.

Governance Proposal #1: Upgrade Governance to enable rewards

On 19 May the first Capapult governance proposal officially passed, after a seven-day voting phase.

The focus of this proposal, “#1 Upgrade Governance to enable rewards”, was to allocate 25M CAPA tokens (5% of the total supply of CAPA) to distribute to CAPA stakers over a period of 4 years. The objective that this proposal aimed to achieve is to incentivize community members to contribute to the decision-making process and help build a thriving ecosystem for Capapult.

To learn about all features of this proposal, you can read the medium article that deals with this first proposal in detail: “Governance Proposal #1: Upgrade Governance to enable rewards”.

Governance Proposal #2: Incentivizing Pools on Astroport

On 3 June the second governance proposal was pushed on chain. This proposal, “#2 Incentivizing Pools on Astroport” involved allocating 10 million CAPA to incentivize two liquidity pools on Astroport:

• SOLID — axlUSDC
• CAPA — SOLID

After a seven-day voting phase, the governance proposal officially passed on 11 June.

The goal of the proposal was precisely to increase the liquidity of the CAPA and SOLID tokens in order to provide more trading opportunities, reduce price slippage, lead to increased adoption, more arbitrage opportunities and usage of these pools.

If you want to know all the details of this proposal, you can learn more at “Governance Proposal #2: Incentivizing Pools on Astroport”.

Astroport Proposal 57 and 62: Incentivizing Pools on Astroport

After the passage of the Governance Proposal “#2: Incentivizing Pools on Astroport”, the approval process of the proposal on Astroport began. This was divided into two parts, one relating to the liquidity of the pool CAPA — SOLID and the other relating to the liquidity of the pool SOLID axIUSDC.

On 19 June, the voting phase began on Astroport for Proposal 57, on the request for distribution of 10 million CAPA tokens to incentivise SOLID-axlUSDC liquidity pool. On 23 June, when the voting phase was closed, the official passage of the proposal was announced.

The voting phase for Proposal 62 on Astroport began on 11 July. This concerned the request to the Astral Assembly to allow the distribution of 3 million CAPA to incentivise a liquidity pool on Astroport CAPA — SOLID. On 15 July, the voting phase also closed for Proposal 62 on Astroport, making its passage official.

With the successful passage of both Astroport Proposal 57 and Proposal 62, On 19 July, incentives have officially started on the SOLID axIUSDC and CAPA-SOLID pools.

Shut Down of Mars Validator:

On 21 July, it was announced that on September 15, Capapult validator on Mars Protocol will be shutting down permanently.

Capapult therefore reminds everyone to take immediate action and redelegate today all your MARS tokens staked on Capapult to another validator to avoid any loss of funds.

Governance Proposal #3: Upgrade Market contract with the Flash Mint

On 9 August even the third Capapult governance proposal officially passed, after a seven-day voting phase.

This proposal, #3 Upgrade Market contract with the Flash Mint, involved upgrading the Market contract with a new feature: the Flash Mint.

The Flash Mint allows anyone to mint SOLID with the one condition that they pay it all back in the same block with a small fee (0.025%). This allows anyone to exploit arbitrage opportunities in the DeFi space without having to commit upfront capital

The Flash Mint feature can magnify the profit of executing a successful arbitrage opportunity and provide the following benefits to Capapult protocol:

• Improved market efficiencies for SOLID
• Democratization of arbitrage
• Fees provide an income source for the protocol

If you would like to learn more about all the aspects and contents of this upcoming governance proposal, you can find all the details reading the article “Governance Proposal #3: Upgrade Market contract with the Flash Mint”.

Conclusion

To conclude this brief journey of Capapult’s most important events of the last few months, it is essential to take a look at what the next steps will be:

• Listing of new collateral (LSD Tokens for ATOM, OSMO, INJ)
• Listing LP-Tokens (Luna-axlUSDC)
• Going inter chain
• Creating an automatic debt management protocol

To stay updated on upcoming events, be sure to follow @capapult on Twitter and on Medium.

Remember that this article does not represent any kind of financial suggestion, in any way. Everyone who uses Capapult protocol to generate proceeds has to be aware of the functioning of the protocol and has to know the risks connected to financial operations

If you are searching for a more detailed explanation of the whole protocol, you can have a look at the updated version of Capapult whitepaper.

Introduction

Capapult is a new fully decentralized protocol on Terra 2.0 blockchain. We have already described its main features in other articles about SOLID, the governance system and the lockdrop and we have explained the latest changes.

We also explored different ways of using the Capapult protocol to generate profit.

We are presenting a proposal to add a new feature to the Market contract that will benefit both users and the stability of the protocol.

Proposal

The proposal involves upgrading the Market contract with a new feature: the Flash Mint.

The Flash Mint allows anyone to mint SOLID with the one condition that they pay it all back in the same block with a small fee (0.025%).

The only difference compared to Flash Loans is that in this case, SOLID tokens are not borrowed from anyone but minted by the contract.

Once the SOLID tokens are borrowed they can be used for any other arbitrary actions assuming that at the end of the chain of different steps the initial Flash Mint is repaid. Because the loan has to be repaid within one block there is no risk of borrowers not repaying their borrowed amount.

This allows anyone to exploit arbitrage opportunities in the DeFi space without having to commit upfront capital.

Arbitrage

The Flash Mint feature can magnify the profit of executing a successful arbitrage opportunity.

Let’s imagine that there is a price discrepancy in the SOLID — axlUSDC pools between DEX A and DEX B:

1. A user decides to borrow 10,000 SOLID using the Flash Mint.
2. On DEX A the swap rate between SOLID and axlUSDC is as follows: 1 SOLID = 1.1 axlUSDC. The user swaps 10,000 SOLID for 11,000 axlUSDC.
3. On DEX B the swap rate between SOLID and axlUSDC is as follows: 1 SOLID = 1 axlUSDC. The user swaps 11,000 axlUSDC for 11,000 SOLID.
4. Within the same block the user repays the borrowed amount of SOLID + the small 0.025% fee (10,000 + 2.5 = 10,002.5 SOLID) and keeps the remaining SOLID tokens for himself, having thus generated a nice profit.

A few more considerations:

• Use of a Bot: it is not possible to take advantage of the Flash Mint function without using a bot. New blocks are added about every 6 seconds and manually there would not be enough time to do the calculations, check the arbitrage option, and use Flash Mint to repay it; moreover, there is no graphical interface available.
• Network Fees: arbitrage transactions with multiple steps can be quite expensive. Always take transaction fees into account when calculating your profits.
• Price Slippage: always calculate how much price slippage you’ll experience while executing your order. It depends on the size of your order and the liquidity present in the liquidity pools.
• Frontrunning: this issue is not present on Terra as transactions are managed with a FIFO (First In First Out) queue. Therefore, it is not possible to frontrun a transaction because once it is sent to the mempool, there is no way to insert another one before it.

Conclusion

The Flash Mint provides many benefits to the Capapult protocol including:

• Improved market efficiencies for SOLID.
• Democratization of arbitrage.
• Fees provide an income source for the protocol.

Arbitrage is just one aspect of what can be done using the Flash Mint; other possible uses include:

• Collateral Swap
• Self-Liquidation

The concept of Flash Mint is quite new and there are still a lot of use cases to be discovered in the future.

Remember that this article does not represent any kind of financial suggestion, in any way. Everyone who uses Capapult protocol to generate proceeds has to be aware of the functioning of the protocol and has to know the risks connected to financial operations.

If you are searching for a more detailed explanation of the whole protocol, you can have a look at the updated version of Capapult whitepaper.

Introduction

Capapult is a new fully decentralized protocol on Terra 2.0 blockchain. We have already described its main features in other articles about SOLID, the governance system and the lockdrop and we have explained the latest changes.

We are now presenting a proposal that could bring substantial benefits to the Capapult protocol and its stakeholders.

Proposal

The proposal involves allocating 10 million CAPA, the governance token of Capapult, to incentivize two liquidity pools on Astroport:

• SOLID — axlUSDC
• CAPA — SOLID

By incentivizing these pools, the liquidity of the CAPA and SOLID tokens on Astroport will significantly increase as more users are incentivized to deposit their assets in order to farm the rewards.

Increased liquidity in a pool can bring benefits by providing more trading opportunities and reducing price slippage.

Trading Opportunities

In another article, we explored different ways of using the Capapult protocol to generate profit.

An increase in liquidity can improve the overall trading experience for participants and can lead to increased adoption, more arbitrage opportunities and usage of these pools.

Slippage

Higher liquidity can reduce price slippage, which is the difference between the expected price of an asset and the actual executed price.

When there is low liquidity in a pool, large trades can have a significant impact on the price, resulting in higher slippage. However, with more liquidity, the impact of large trades on the price is reduced, making it easier for traders to execute trades at the desired price.

Benefit to CAPA stakers

CAPA stakers receive rewards in SOLID.

80% of proceeds generated by mint fees are distributed to CAPA stakers, as we have explained in this article about latest changes of Capapult.

Thanks to the increase in liquidity of the SOLID and CAPA tokens and trading/arbitrage opportunities, the usage of Capapult will grow.

The more the protocol is used to mint SOLID, the greater the benefits for CAPA stakers, who will receive more rewards.

Conclusions

The proposal suggests allocating 10 million CAPA tokens to incentivize two liquidity pools on Astroport, which will significantly increase liquidity of the CAPA and SOLID tokens. This will provide more trading opportunities, reduce price slippage and lead to increased adoption, more arbitrage opportunities and usage of these pools.

As the usage of Capapult grows, so will the benefits for CAPA stakers.

Remember that this article does not represent any kind of financial suggestion, in any way. Everyone who uses Capapult protocol to generate proceeds has to be aware of the functioning of the protocol and has to know the risks connected to financial operations.

If you are searching for a more detailed explanation of the whole protocol, you can have a look at the updated version of Capapult whitepaper.

Introduction

Capapult is a new fully decentralized protocol on Terra 2.0 blockchain. We have already described its main features in other articles about SOLID, the governance system and the lockdrop and we have explained the latest changes.

The governance of Capapult is driven by the community through the use of CAPA, the token that is used for voting and decision-making.

Proposal

This proposal involves upgrading the Governance to enable CAPA rewards.

We are excited to propose the activation of rewards in CAPA (the Capapult governance token) for CAPA stakers. These rewards will add up to those already active in SOLID.

This spending proposal is to allocate 25M CAPA tokens (5% of the total supply of CAPA) to distribute to CAPA stakers over a period of 4 years.

This will incentivize more community members to participate in governance and provide an opportunity for those who are already staking to earn additional rewards for their contributions.

It is important to note that updating these parameters will result in the loss of current rewards. Therefore, we strongly encourage all community members who are currently staking to claim their rewards before the proposal ends.

Capapult Governance

As the community grows, it is important to encourage more participation in the governance process. By activating rewards in CAPA, we can incentivize community members to contribute to the decision-making process and help build a thriving ecosystem for Capapult.

The distribution of rewards will be proportional to the amount of CAPA staked.

Users who wish to partake in the governance have to buy CAPA tokens and stake them. Doing so, they gain different rights which have been described in this article. Stakers gain the right to receive rewards in:

• SOLID: 80% of proceeds generated by mint fees are distributed to CAPA stakers.
• CAPA: 25M tokens (5% of the CAPA supply) will be distributed to CAPA stakers over a period of 4 years (besides the normal reward in SOLID).

Conclusions

We believe that activating rewards in CAPA will be a significant step forward for the Capapult community and CAPA stakers.

By incentivizing more participation in governance, we can build a strong and vibrant ecosystem that will benefit all community members. We look forward to your support for this proposal as we continue to work together to build a decentralized future.

Important: the considerations contained in this article should not be taken as financial advice. You should always be careful when investing with advanced financial instruments.

If you are searching for a more detailed explanation of the whole protocol, you can have a look at the updated version of Capapult whitepaper.

Introduction

Capapult is a new fully decentralized protocol on Terra 2.0 blockchain. We have already described his main features in other articles about SOLID, the governance system and the lockdrop and we have explained the latest changes. The time has come to answer a fundamental question: why should Capapult be used?

It could be used for several different reasons, however, in this article, we will focus on some of the possible methods to exploit the protocol and its features to make profit.

Speculation

This is the first, and probably the simplest, strategy to create profit. A user can borrow SOLID when its price is high and then use it to buy another asset. If the USD value of SOLID decreases or if the USD value of the asset increases, the borrower should buy SOLID back. Doing so, he will be able to buy a greater quantity of SOLID than the one he borrowed before. Now the user can close his debt position, having an extra amount of SOLID: he has made profit.

Example 1

Suppose that the user borrows SOLID when its exchange ratio to USD is equal to 1.1. If he borrows 100 SOLID, this means that:

100 𝑆𝑂𝐿𝐼𝐷 = 110 𝑈𝑆𝐷

The borrower can use SOLID to buy any asset he wishes, for example Luna. If the exchange rate of Luna against USD is 4, this means he can buy:

100 𝑆𝑂𝐿𝐼𝐷 = 110 𝑈𝑆𝐷 = 27.5 Luna

We will analyze two simple scenarios.

• Scenario 1

Suppose that the USD value of SOLID decreases down to 0.9 while the USD value of Luna is stable. If the borrower uses 27.5 Luna to buy SOLID.

27.5 𝐿𝑢𝑛𝑎 = 110 𝑈𝑆𝐷 = 122.2 𝑆𝑂𝐿𝐼𝐷

100 SOLID can be used for closing the CDP (collateralized debt position), while the remaining 22.2 SOLID is the user’s profit.

• Scenario 2

Suppose that the USD value of Luna rises up to 4.4 while the USD value of SOLID is stable. If the borrower uses 27.5 Luna to buy SOLID:

27.5 𝐿𝑢𝑛𝑎 = 121 𝑈𝑆𝐷 = 110 𝑆𝑂𝐿𝐼𝐷

100 SOLID can be used for closing the CDP, while the remaining 10 SOLID is the user’s profit.

Let’s do some observations about this strategy. We have not considered the mint fee. In the example, this fee would be equal to:

100 𝑆𝑂𝐿𝐼𝐷 ∗ 0.005 = 0.5 𝑆𝑂𝐿𝐼𝐷

So, the profit in the first and second case would respectively be 21.7 SOLID and 9.5 SOLID. Note that the mint fee has the lowest value if you borrow SOLID when its exchange rate against USD is equal or greater than 1 (if you don’t remember how the mint fee is evaluated, you can have a look at this article). This means that the user should look for borrowing SOLID when its USD value is equal or greater than 1.

Financial leverage

Let’s assume that an investor has a long position in Luna. This means that he has bought a certain amount of Luna in the expectation that its price will rise. Then, he will sell his amount of Luna at a higher price and will gain a certain profit.

However, the amount of Luna he can buy depends on the capital he can invest at that moment. Capapult can be used to increase the amount of Luna a user can buy, without increasing the capital needed: this is called financial leverage.

Example 2

Let’s make it clear with an example. Suppose that a user has 100 Luna and that the exchange rate of Luna against USD is 2 (in other words, 100 Luna are equal to 200 USD). He can use his Luna to mint LSDs, for example ampLuna. If the exchange rate of ampLuna against Luna at that moment is 1, this means that the user will receive 100 ampLuna. Now he can use this LSD as collateral to borrow SOLID. He can borrow up to 100 USD worth of SOLID, because the LTVmax is set to 0.5 and, in our example, 100 ampLuna are equal to 200 USD. Suppose that the exchange of SOLID against USD is 1, in this case he can borrow up to

100 𝑈𝑆𝐷 = 𝟏𝟎𝟎 𝑺𝑶𝑳𝑰𝑫

However, it is not very careful to borrow an amount of SOLID very close to the limit imposed by the LTVmax, so we will suppose that the user borrows 70 SOLID. This amount of SOLID can be used to buy more Luna. Using data of this example:

70 𝑆𝑂𝐿𝐼𝐷 = 70 𝑈𝑆𝐷 = 35 𝐿𝑢𝑛𝑎

What is the result? The user has a long position composed by 100 Luna staked and 35 Luna obtained by selling SOLID.

Now suppose that the exchange rate of Luna against USD rises to 2.2. The user can now sell Luna and buy SOLID back (we suppose that 1 SOLID is still equal to 1 USD):

35 𝐿𝑢𝑛𝑎 = 77 𝑈𝑆𝐷 = 77 𝑆𝑂𝐿𝐼𝐷

He can use 70.35 SOLID (the amount borrowed plus the mint fee of 0.5%) to retrieve his collateral of 100 ampLuna. 6.65 SOLID are left and can be used as he wishes.

Using 100 ampLuna the user can get back 100 Luna which now are equal to

100 ∗ 2.2 = 220 𝑈𝑆𝐷

This means he has made a profit of 20 USD plus 6.65 SOLID. Note that we have not considered the rewards obtained for having staked Luna as LSD: this is an additional profit. If the user does not borrow SOLID, his profit is only 20 USD.

This mechanism can be used over and over again: 35 Luna could be used to mint ampLuna again, then borrow SOLID and buy Luna again and so on. However, this is not convenient if it is repeated too many times. In fact, each time the user borrows SOLID, the amount of SOLID he can borrow decreases because of the LTVmax. For example, the second time he can borrow up to:

35 ∗ 0.5 = 17.5 𝑆𝑂𝐿𝐼𝐷

Note that this strategy could be very risky. In case the value of Luna rises, the profit will be greater than usual. But, if its value decreases too much, the borrower could be liquidated by the protocol, because the LTV of his position could exceed the LTVmax. If this happens, the borrower will lose a little percentage (from 1% to 3%) of its collateral.

Liquidity provider

Everyone who provides SOLID to one or more liquidity pools (chosen from a set of predefined ones) will receive rewards in ASTRO and CAPA. The pools will be on Astroport.

This is another possible way to create profit. Foretelling the precise amount of rewards in ASTRO and CAPA is difficult, because it will depend on different variables which are now unknown. However, when the protocol will be launched and the pools on Astroport will be initialized, everyone who wants to become a liquidity provider will be able to know a valuation of his own future profit from the interface of Astroport, before providing SOLID to the pool.

Note that, for a period starting from the launch of Capapult, liquidity providers will receive an extra amount of CAPA from the protocol, in addition to the rewards received from Astroport.

Governance system

Remember that everyone who participate in the governance system will receive rewards in SOLID. Users who wish to partake in the governance have to buy CAPA tokens and stake them. Doing so, they gain different rights which have been described in this article. In particular, they gain the right to receive rewards in SOLID token. To be more precise, 80% of proceeds generated by mint fees will be distributed to CAPA stakers, as we have explained in this article about latest changes of Capapult.

Conclusions

In this article we have described some of the possible ways to create profit using Capapult protocol:

• Speculation
• Financial leverage
• Rewards received for being a liquidity provider
• Rewards received for being a CAPA staker

However, much more strategies can be found and used: it is up to the users’ financial knowledge and imagination.

Remember that this article does not represent any kind of financial suggestion, in any way. Everyone who uses Capapult protocol to generate proceeds has to be aware of the functioning of the protocol and has to know the risks connected to financial operations.

If you are searching for a more detailed explanation of the whole protocol, you can have a look at the updated version of Capapult whitepaper.

Introduction

Capapult, a brand new protocol on Terra 2.0, is about to be launched and it will provide this blockchain with its first native stablecoin: SOLID. Some important and intriguing changes have been made compared to its first version in order to make it even more favorable and attractive for users. If you need to know more about Capapult or you wish to learn more about its first version, you can check out our previous articles about SOLID, the governance system and the lockdrop.

In this article we will describe recent changes:

• The new mint fee will replace the stability fee and the interest model;
• Proceeds generated by collaterals will not be used by the protocol to buy SOLID;
• CAPA will not be burnt by the protocol.

Mint free

A new fee called “mint fee” will replace the stability fee and the interest model. The mint fee is evaluated at the moment the user borrows a certain amount of SOLID and depends on the exchange rate of SOLID against USD at that moment. If the exchange rate is greater or equal to 1, the mint fee is fixed and equal to 0.5% of the amount of SOLID borrowed. If the exchange rate is less than 1, the mint fee is greater than 0.5% and in particular, the lower the exchange rate, the higher the mint fee.

It is defined by the following law:

Where M is the mint fee (expressed in percentage), x is the exchange rate of SOLID against USD at the moment the position was opened and Rbase is the base mint fee and is equal to 0.5%.

This mechanism helps maintaining the stability of SOLID because users are incentivized borrowing SOLID when its price is high, thus increasing its supply and causing its price to drop. At the same time users are discouraged to open new positions when the price of SOLID is low, thus avoiding its supply to increase and its price to drop even further.

This new fee has interesting consequences for borrowers:

• There is no more any kind of interest. In other words, even if the debt position is kept open forever, the mint fee will not vary because it is evaluated at the moment the user borrows SOLID.
• The borrowers know exactly the amount of fee they are going to pay. They don’t have to worry about how long they keep their position open, they have just to choose the right moment to borrow SOLID and get the lowest mint fee possible.

Example

We are going to show the difference between the old stability fee and the new mint fee with an example. Remember that the old interest rate is defined by the following law:

Where I is the annual interest rate, x is the exchange rate of SOLID against USD and Rbaseis the base interest rate, an internal constant of the protocol equal to 1%.

Let’s assume that a user borrows 1000 SOLID at a certain time and then closes his position after one year. Let’s say that, during this year, the evolution of the exchange rate of SOLID against USD is one of the two represented in the following diagram:

The scenarios are simple and not in line with reality because they have just a demonstrative purpose. Note that they are very similar to each other, they have only an opposite trend: when the first one increases, the second decreases and vice versa.

- In the previous version of the protocol, the stability fee has to be calculated according to the interest model. Doing so, the total stability fees at the end of the year in the first and second scenarios are respectively 7.52 SOLID and 7.48 SOLID.

- In the current version of the protocol, the mint fee depends only on the exchange rate on the day the position was opened. The mint fees in the first and second scenarios are respectively 7.5 SOLID and 5 SOLID.

This simple example shows some interesting aspects: above all, with this new system, fees are usually lower than before if users pay attention on when they borrow SOLID. In fact, the second scenario is more favorable than the first one because the exchange rate of SOLID against USD was greater than 1 at the moment the position was opened.

Proceeds generated by LSDs

The protocol used to sell proceeds generated by LSDs locked by borrowers to buy SOLID. This amount of SOLID was used to emit rewards for CAPA stakers and, in a small proportion, paying Oracles and finance the development team.

From now on, the protocol will not use the proceeds generated by LSDs anymore. They will continue auto-compounding and will be given back to users when they will retrieve their collaterals.

This is an essential news for borrowers. Except for the mint fee, it costs nothing to mint SOLID. Once minted, it can be used as stablecoin, for financial operation such as financial leverage or for one of the upcoming usecases that are being developed especially for SOLID.

Note that now the protocol will use the funds originated from the mint fees to emit rewards for CAPA stakers, paying Oracles and finance the development team.

Burning CAPA

CAPA is the governance token of Capapult. Users can buy and stake them, this way they gain the right to propose pools, cast votes on pending proposals and receive a certain amount of SOLID as rewards from the protocol.

In the previous version, the protocol used the funds generated by the stability fees to buy and then burn CAPA. This mechanism was originally conceived to further incentivize users to participate in the governance system. In fact, regularly burning CAPA would have caused its supply to decrease and its price to rise. This is an obvious advantage for CAPA owners.

In the current version, this mechanism has been completely removed: the protocol will not burn CAPA anymore. At first impression this change is not desirable by users interested in participating the governance system because it means a fewer source of income. However, it should be noted that, thanks to the totality of these changes, the protocol has become much more favorable and attractive for users interested in borrowing SOLID. This is fundamental because the more SOLID is minted, the more proceeds will be generated by mint fees and the more rewards CAPA stakers will get.

Conclusions

This was a description of the latest changes of Capapult protocol. They have been chosen after a careful investigation about Capapult stability and among different alternatives in order to find the best way to improve the protocol and make it even more favorable and attractive for users.

If you are searching for a more detailed explanation of the whole protocol, you can have a look at the updated version of Capapult whitepaper.