This repository contains the smart contracts source code and markets configuration for Cygnus. The repository uses Hardhat as the development environment for compilation, testing and deployment tasks.
Cygnus is a decentralized stablecoin lending protocol for liquidity providers. It is a non-custodial liquidity market protocol, where users can participate as lenders by supplying USDC or as borrowers by supplying their liquidity. Lenders are able to provide USDC in individualized lending pools, earning passive income based on the LP's APR, while borrowers are able to supply their liquidity and borrow USDC against it or leverage their positions, increasing their earnings through higher trading fees and/or liquidity mining rewards. As borrowers are borrowing a static value asset (USDC) against their volatile liquidity, they are essentially going long on their liquidity.
Each lending pool is connected to a DEX (UniswapV3, Quickswap, Balancer, etc.). Liquidity Providers are able to collateralize their liquidity in these DEXes to borrow stablecoins or leverage to increase their liquidity positions in the pool to earn higher trading fees.
Cygnus uses its own oracles which returns the price of 1 liquidity token in USDC using Chainlink price feeds. By using third party reliable price feeds, the oracle calculates the Fair Reserves of each liquidity position. This technique is used to price liquidity tokens of protocols such as:
- Balancer
- UniswapV2
- UniswapV3
Anyone is free to use the Oracles for their own project or do their own implementation, if any doubts please reach out to the team so we can guide you.
The main benefit of our oracle is that it is unaffected by impermanent loss, making it easier for liquidity providers to track their earnings (since it's all priced in USDC).
Impermanent loss refers to a "situation in which the profit you gain from staking a token in a liquidity pool is less than what you would have earned just holding the asset" (https://www.ledger.com/academy/glossary/impermanent-loss). In other terms, impermanent loss affects individuals, not the price of the LP. Since the oracle prices the liquidity amount in USDc using the fair reserves mechanism, then redeeming the LP at any time means that the user would always receive the equivalent of USDC in the underlying LP assets. This greatly simplifies the borrowing and lending experience for all users.
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Liquidity Providers. Any user who is already providing liquidity in DeFi can benefit from the protocol, as they can now borrow against their liquidity. Platforms like Compound Finance or Aave provide a similar service but for tokens only (i.e. deposit ETH, borrow USDc). Cygnus is a protocol designed specifically for Liquidity Providers, with the aim to incentivize users to keep providing liquidity in Decentralized Exchanges.
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Stablecoin holders. By lending stablecoins to liquidity providers, lenders earn an APY in stablecoins that is more akin to the higher APY's found in DeFi across the more volatile assets. Each lending pool in Cygnus is connected to a DEX and the interest rate paid by borrowers is relative to the pool's APR. This is why Cygnus can provide higher stablecoin yields than some other borrowing/lending platforms who are isolated from DEXes with liquidity mining rewards/trading fees.
There are NO deposit fees, NO borrow fees and NO lending fees. Users are free to deposit and redeem their positions whenever they want at no cost aside from gas fees.
