Unstake is an efficient protocol designed to facilitate the swapping of liquid-staking derivatives (LSDs). Its highly capital-efficient borrow and reserve system often provides lower fees compared to traditional exchange-based swap pairs with substantial (often, millions of dollars) liquidity.
Today, we are excited to introduce two key upgrades to Unstake that further enhance the protocol’s efficiency, bringing the protocol to Version 1.
Unified Reserves
Unstake already supports multiple LSDs with the same underlying asset. For instance, Unstake supports qcKUJI, ampKUJI, and boneKUJI, all derivatives of KUJI. Currently, each of these LSDs has its own reserve, which fragments the protocol’s liquidity.
Our proposed solution is to unify the reserves of LSDs with the same underlying asset by introducing a dedicated Reserve Contract. This contract can be configured to set exposure limits for each LSD, effectively managing the protocol’s overall risk.
Previously, users had to forego additional yield on their assets when providing to the Reserves. The new Reserve Contract deposits idle reserves into Kujira’s GHOST lending vault, allowing users to earn interest on the reserve regardless of its usage. This further incentivizes users to provide assets to the protocol’s Reserves, thereby increasing the volumes Unstake can support.
Prepayment
Currently, Unstake allocates reserves to cover potential shortfalls in the event of sustained high interest rates on GHOST loans used for instant liquidity. These reserves sit idle until they are used to cover the shortfall or returned to the protocol upon completion of unstaking.
Our initial research into efficiency improvements identified this as an area with significant potential. We considered holding the allocated reserves as lended GHOST xASSETs to generate interest during the loan term. However, this introduced considerable accounting complexity and was not the most efficient solution. Hence, we introduce Prepayment.
Prepayment is a straightforward concept. Instead of allocating reserves to cover potential shortfalls, we prepay a portion of the loan upfront. This reduces the debt accruing interest, resulting in a lower overall cost for providing instant liquidity.
Our analyses indicate that the allocated reserves are typically around 11% of the total unstaking amount. Consequently, we anticipate an increase in revenue of approximately 11% from the prepayment of the loan.
Conclusion
We believe these two upgrades will significantly enhance the efficiency and revenue of the Unstake protocol, providing a better experience for users. We look forward to seeing the impact of these changes as we pave the way towards interchain asset support, and further protocol improvements. You can track the implementation status of these upgrades on the Unstake GitHub.
Finally, as always, remember: Don’t Wait. Unstake.