💡How Parabol Protocol Works
Parabol Protocol represents a novel approach to fiat-backed stablecoin systems, offering risk-free yields to savers at a minimum. It also rewards liquidity providers for their role in supplying liquidity to the protocol's ecosystem. Parabol uses paraUSD as its native stablecoin.
Any paraUSD holder can decide to use it as a means of exchange (hold, transfer, trade or utilise it in any DeFi activity) or use it as a savings option by lending their tokens back to the Protocol’s Reserve Stability Pool (RSP) for a maturity of their choice.
Those who choose to lend their tokens help strengthen the stability of paraUSD. This is because those tokens are unavailable for redemption allowing the Reserve Assets to be managed in a maturity matched manner. This mechanism enables Parabol to offer a risk-free rate on these loans to the RSP, which matches or exceeds that of Treasury Bills. Consequently, savers receive a higher return than the risk-free rate.
At the end of the maturity, users can unlock their tokens to access returns.
Individuals who utilize their tokens outside the RSP — by engaging in activities such as trading against other pairs or serving as LP / market makers in DeFi pools —enhance the system's liquidity. By contributing to the Protocol's liquidity, they qualify for rewards, acknowledging their role in enhancing the Protocol's liquidity with native reward tokens.
Depending on the total liquidity available in the system and the volume generated, users may see returns exceeding 20% with top-tier liquidity providers possibly achieving up to ten times higher.
Last updated
