Teddy Cash is a decentralized borrowing protocol that allows you to draw interest-free loans against AVAX as collateral. Loans are paid out in TSD (a USD pegged stablecoin) and need to maintain a minimum collateral ratio of
In addition to the collateral, the loans are secured by a Stability Pool containing TSD and by fellow borrowers collectively acting as guarantors of last resort. Learn more about these mechanisms under Liquidation.
Teddy Cash as a protocol is non-custodial, immutable, and governance-free.
Stable-value assets are an essential building block for Decentralized Finance applications and have grown to represent tens of billions of dollars in value.
However, the vast majority of this value is in the form of fiat-collateralized stablecoins like Tether and USDC. Decentralized stablecoins like DAI and sUSD make up only a small portion of the total stablecoin supply, meaning the vast majority of stablecoins are centralized.
Teddy Cash addresses this by creating a more capital efficient and user-friendly way to borrow stablecoins. Furthermore, Teddy Cash is governance-free, ensuring that the protocol remains decentralized.
Teddy Cash’s key benefits include:
- Governance free — all operations are algorithmic and fully automated, and protocol parameters are set at time of contract deployment
TSD, short for Teddy Dollar, is the USD-pegged stablecoin used to pay out loans on the Teddy Cash protocol. At any time it can be redeemed against the underlying collateral at face value. Learn more about the stability mechanism.
TEDDY is the secondary token issued by Teddy Cash. It captures the fee revenue that is generated by the system and incentivizes early adopters and frontends. The total TEDDY supply is capped at
100,000,000 tokens. For more information on how the tokens are allocated and released over time, please refer to TEDDY Rewards and Distribution.
To borrow TSD, all you need is a wallet (e.g. MetaMask) and sufficient AVAX to open a Trove and pay the gas fees.
To become a Stability Pool depositor or TEDDY staker, you need to have TSD and/or TEDDY tokens. TSD can be borrowed by opening a Trove while TEDDY can be earned as a Stability Pool depositor. You can also use Pangolin or another (decentralized) exchange to buy both tokens on the open market.
There is a one-off fee whenever TSD is borrowed, and when TSD is redeemed:
- For borrowers, there is a borrowing fee on loans as a percentage of the drawn amount (in TSD).
- For redeemers, there is a redemption fee on the amount paid to users by the system (in AVAX) when exchanging TSD for AVAX. Note that redemption is separate from repaying your loan as a borrower, which is free of charge.
Both fees depend on the redemption volumes, i.e. they increase upon every redemption in function of the redeemed amount, and decay over time as long as no redemptions take place. The intent is to throttle large redemptions with higher fees, and to throttle borrowing directly after large redemption volumes. The fee decay over time ensures that the fee for both borrowers and redeemers will “cool down”, while redemptions volumes are low.
The fees cannot become smaller than
0.5%(except in Recovery Mode), which protects the redemption facility from being misused by arbitrageurs front-running the price feed. The borrowing fee is capped at
5%, keeping the system (somewhat) attractive for borrowers even in phases where the monetary is contracting due to redemptions. Other than that, the two fees are identical and are depicted as "Fee" in the following exemplary chart:
There are two different ways to generate revenue using Teddy Cash:
As a non-custodial system, all the tokens sent to the protocol will be held and managed algorithmically without the interference of any person or legal entity. That means your funds will only be subject to the rules set forth in the smart contract code, which is being audited twice by Trail of Bits and once by Coinspect (find their reports here).
There are two scenarios under which you may lose a part of your funds:
- You are a borrower (Trove owner) and your collateral in AVAX is liquidated. You will still keep your borrowed TSD, but your Trove will be closed and your collateral will be used to compensate Stability Pool depositors.
- You are a Stability Pool depositor and your deposited TSD is used to repay debt from liquidated borrowers. Since liquidations are triggered any time borrowers’ collateral drops below
110%, you will receive more AVAX in return with a very high probability. However, if AVAX decreases in price and you maintain exposure, you may lose value in your total pool deposits.
Please note that although the system is diligently audited, a hack or a bug that results in losses for the users can never be fully excluded.