In order to attract fresh investments directly from institutions to the project, I would like to suggest the creation of a new Institutional Pool concept. It would be like a new liquidity pool, based on USDC or USDT, but not meant to provide liquidity to the DEX.
This pool would provide liquidity to crypto investment companies that are looking for additional funds for a lower fees than the ones provided by traditional banks. The Pool would be shared between all authorised institutions, so it makes it easier to manage, and also to project an higher available capital, and became more attractive to interested institutions.
All community members would be able to vest any amount of the mentioned stablecoins for as long as they want, getting in return an interesting profit rate well above what normal market conditions would offer.
Institutions would also be able to use any amount currently available in the pool, and constantly adjust it accordingly to their needs.
In order to ensure a fair and ordered use of the funds, and also to control the risks, it would be desirable to improve the profit rate of the contributors with each increased utilisation level. This could be done by setting an elastic APR based on EURIBOR (1 month) + 0,2% from 0 to 20% utilisation, which would increase up to EURIBOR + 5% at 100% utilisation rate. This wouldn’t need to be a linear increasing rate, but something ordered in tiers. For example:
- EURIBOR + 0,4% from 21% to 35%
- EURIBOR + 0,8% from 36% to 50%
- EURIBOR + 1% from 51% to 65%
- EURIBOR + 1,5% from 66% to 80%
- EURIBOR + 2% from 81% to 90%
- EURIBOR + 3% from 91% to 95%
- EURIBOR + 5% from 96% to 100%
All participants in the institutional liquidity pool would share interest profits on a monthly basis, according to their share in the total amount of available funds, and also considering the average utilisation rate for that period.
Example for a given month period:
Total liquidity available = $100.000
Total funds provided to the pool = $20.000 (20%)
Average utilisation rate for current month = 75% (EURIBOR + 1,5%)
Profits obtained during a vested period of the full month = 3,545% (current EURIBOR 1 month) + 1,5% = 5,045% of 15.000 (20% of 75.000) = $63,06 ($756,75 per year under same stable circumstances)
Also as a concept of insurance, every institution interested in participating in the pool would need to make an initial investment of Hydra, which would be locked until the complete return of the funds back into the Liquidity Pool. This could be something like 10.000 Hydra, and would act as a stake, providing some security in the unfortunate event of a company declaring bankruptcy, and became unavailable to return their funds.
Marketing teams could provide the link to promote this new project feature, and attract new institutions to the Pool.
All specific rates and given values would be subject of further analysis. My contribution is the concept itself, and not the specific financial aspects behind this proposal. It needs to be enough attractive to both contributors and institutions, ensuring a fair share of profits/cost of opportunity.