Proposal for Poloniex and Tron Team Wrapped Bitcoin and Wrapped Ether CDPs on Just!
This post is a suggestion to the Tron Foundation to fully exploit the strengths of the Tron blockchain and two dApps JustSwap and Just, to provide millions of DeFi investors a lower transaction alternative then Ethereum blockchain and the dApps Uniswap and MakerDao for Bitcoin and Ethereum CDPs!
To those not a part of the Tron Foundation, and who might not be familiar with MakerDao and CDPs, here is a brief explanation of what CDPs:
Brief Explanation of CDPs
Collateralized Debt Products are also called by their abbreviation “CDPs”.
Loans are a Debt
Loans are a Product created by a bank or a credit debt facilities. Loans are secured or Collateralized. In the Decentralized Finance World, Loans are called “Collateralized Loan Products“ and also called Collateralized Debt Products, Collateralized Debt Products are also called by their abbreviation “CDPs”.
Why Collateralize your Ethereum
As an investor your rate of return on Ethereum is variable, for example if the price for Ethereum increased 5% in one month your ROI was 5%.
If you owned $100 worth of Ethereum your 5% ROI was worth $5 USD. But what if you owned 10 times as much Ethereum? $1000 worth of Ethereum at a 5% ROI would mean $50 USD.
If you had 100 times as much Ethereum your 5% ROI would be worth $500 USD. So to make more money, you need to buy more Ethereum. But with collateralization you can buy more Ethereum without having more money.
Optional In-depth Review of CDP
Or use this link to go to my post explaining what the MakerDao is, and what CDP’s are! And a link at the end will bring you back here! CDP Post
Wrapped Bitcoin or WBTC is available on Poloniex
I recently was exploring opportunities to earn cryptocurrency tokens and I noted that wrapped Bitcoin is available on Poloniex. and this wrapped Bitcoin or WBTC is a Tron Token or TRC token which can be traded on the Tron blockchain. When I say TRC token, I refer to the fact that the TRC token on Tron performs the same function on the Tron blockchain which ERC tokens perform on the Ethereum blockchain. Thus Bitcoin, which cannot be traded as a native token on the Tron blockchain, thus you normally couldn’t use it on dApps on the Tron blockchain like JustSwap or Just.
However, now that Poloniex is providing wrapped Bitcoin as a TRC token, you can swap your real Bitcoin for WBTC on Poloniex, and Poloniex will be the Custodian of your Bitcoin. While you get WBTC to trade on the Tron Blockchain
This allows you to become a Liquidity provider with your WBTC on Tron to earn Transaction fees, while still Hodling Bitcoin.
Now I am waiting for the Team at Tron to implement CDP for Bitcoin and Ethereum on Just
I think that would be huge! Just image being able to wrap your Bitcoin or ETher on Poloniex, then take that wrapped BTC or wrapped ETH , currently called ETH on Tron, and deposit it in a CDP on Just like people are doing now on the MakerDao on Ethereum. Then you could borrow 30-40 percent of the value in USDT or USDJ, then use that USDJ to buy WBTC OR WETH on Justswap, then deposit it in your CDP and then borrow against it again, then buy more WBTC or WETH on Justswap, then deposit it again, borrow USDT against it, buy more WBTC, deposit it and borrow USDT again, and repeat it until your unable to borrow more without going over 40% collateralization.
It would look like this:
A-1: On Poloniex Swap 1 Bitcoin for 1 Wrapped Bitcoin on Poloniex
A-2: Transfer 1 WBTC on Poloniex to Just and deposit it in a CDP
A-3: Now At current BTC price of 25,000 USD borrow 40% or 10,000 USDT
A-4: Now Transfer 10,000 USDT to JustSwap
B-1: Now Trade 10,000 USDT for 0.4 WBTC
B-2: Now Transfer 0.4 WBTC to Just
B-3: Now Deposit 0.4 WBTC in Your CDP
B-4: Now your CDP balance on Just is 1.4 WBTC
C-1: You can Borrow 40% of 1.4 WBTC , which is 0.56, but you borrowed 0.4 already, so you can borrow the equivalent of
0.16 WBTC worth of USDT or 4000 USDT
C-2: Now Transfer the 4000 USDT you borrowed to Justswap
C-3 Now Trade the 4000 USDT for about 0.1667 WBTC on Justswap
C-4: Now transfer 0.1667 WBTC back to Just
C-5 Now Deposit the 0.1667 WBTC into your WBTC CDP
C-6: Now Your WBTC balance in your CDP is now 1.5667
D-1: You can borrow 40% of your current balance of 1.5567, or 0.624 WBTC, but you already borrowed 0.4 + 0.1667= 0.56, so you can borrow the equivalent of 0.064 WBTC or 1625 USDT
D-2: Now you transfer 1625 USDT to JustSwap and trade it for 0.064 WBTC
D-3: Now you transfer 0.064 WBTC from Justswap, back to Just and deposit the 0.064 WBTC into your WBTC CDP.
D-4: Now your WBTC balance in your CDP is 1.6307 WBTC
Stop and examine.
We started with 1.0 WBTC in the CDP, now we have 0.6307 more WBTC in our CDP, and we have borrowed against our asset WBTC to buy additional WBTC. So we now control 63.07% more BTC.
Mathematically, as long as the rate of appreciation or increase in BTC price continues at a rate greater then the rate we are charged to borrow USDT, we will profit.
This maybe a lot to process at first, and you may need to review how CDP’s work to fully understand.
But the bottom line is the DeFi investors understand, and that’s what would drive them to swap BTC for WBTC on Poloniex.
And swap ETH for WETH on Poloniex.
This is the main advantage of Tron blockchain over Ethereum blockchain, faster transactions, lower fees. So this would allow Tron to fulfill its true potential. Now I am not a coder, just a trader, and I think this is part of the Roadmap for Just, JustSwap and Tron.
The Big question is... are we there yet? 🚗 🛣