Cub DeFi 2.0 is a protocol with an insatiable hunger for liquidity: a virtual liquidity black hole!

Introduction and Summary:

• Leofinance creator @khaleelkazi is creating a liquidity black hole inside the smart contract code for the newest addition to Cubfinance, the the CubDeFi 2.0 Protocol Owned Liquidity.

• It's called a black hole because Liquidity goes into the Protocol, but no liquidity goes out of the protocol.

• The purpose of this Cub DeFi 2.0 POL or Protocol Owned Liquidity liquidity black hole is the stability of total value locked regardless of market volatility, a steady increase in the total value locked through the growth of protocol owned liquidity, and as I understand it: collateralization of Cub token, Cub token price stability and Cub token appreciation.

• Thats the high level summary without the explanation, and the rest of this post will be the explanation of this concept in the words of someone who isn't a software developer.

• I don't think I can still be considered a normie, having been dipped and fried in cryptocurrency for 4 years, but I hope I still speak and write enough regular English that you understand me.

Protocol Owned Liquidity

As I explained in my previous part one post, CubDefi 2.0 will be defined by POL which is protocol owned liquidity.

POL is created by this process: an investor deposits assets like CUB and BUSD into a trading pair and receives liquidity provider tokens in return. The investor then sells these liquidity provider tokens to the Cub DeFi 2.0 code or Protocol and transfers ownership for the deposited Cub and BUSD to the Protocol with the sale of these Liquidity Provider Tokens, thus the deposited Cub and BUSD, which are now called Liquidity, and which become Protocol owned Liquidity or POL.

• The CubDeFi Project Code now owns the Liquidity Provider Tokens for the Cub and BUSD.
• The Protocol now deposits these tokens into the Cub-BUSD yield farm for ever.
• This is really important because with project owned liquidity the CubDefi Project never again has to worry about investors removing their Liquidity because of market variables like a Bitcoin price crash, because The Protocol now owns the Liquidity.
• This is really important for Cub investors also because this stabilization of Cubfinance Total Value Locked, and steady increase in Total Value Locked is important for Cub token price stability as well.
• In finance Big Money goes where Big Money already exists.
• People like to use Uniswap and Pancakeswap because they are huge and thus are perceived to be safe.
• In the yield farming world, rightly or wrongly Big Money goes to large Farms for the same reason.
• This resukts in steady increases in Total Value Locked

Take a moment to think about this concept and then let’s move on to more cool stuff. This token sale also transfers ownership of your tokens deposited in the trading pair, to the Cubfinance 2.0 Protocol and thus it becomes Protocol Owned Liquidity.

Protocol Deposits Liquidity Provider tokens

Next the Protocol Deposits these same liquidity provider tokens the investors sold for discounted Cub, into the Cub-BUSD yield farm permanently.

This means the Protocol Owned Liquidity goes into the yield farm and never comes out. This is one way the Protocol acts like a Blackhole for liquidity.

The Protocol also deposits all tokens earned on it’s deposited LP tokens into the trading pair, which earns it new LP tokens, and it then deposits these new LP tokens into the yield farm.

This creates a perpetual loop of earning and depositing, which grows the Protocol Owned Liquidity daily.

To restate this for clarity:
The Cub-Defi 2.0 Protocol owns liquidity provider tokens which are deposited in the farms. So the protocol earns Cub. The protocol deposits the earned Cub plus other protocol purchased assets into liquidity pairs, receives liquidity provider tokens and deposits these new liquidity provider tokens into the farms to earn more yield. Thus the Cub which the protocol earns from the Farms becomes more protocol owned liquidity. Thus the liquidity blackhole consumes more liquidity!

The Protocol also earns administration fees.

When new investors first deposit into farms they pay fees and when they trade tokens using the trading pairs they generate transaction fees. These fees are used to buy and burn Cub.
This is another blackhole type strategy. Cub goes into the Null address and no Cub comes out.

This produces the amazing black whole liquidity protocol!

At this point it seems the protocol has an unquenchable thirst for liquidity. And just like a black hole sucks in physical matter, which is never seen again, the Protocol takes in Liquidity which is never released or sold. And the amount of Protocol Owned Liquidity keeps getting bigger.

Why design the protocol like this?

The answer is stable and growing Cub token value or Risk Free Value.

If you read the Cub documents Risk Free Value is explained there. I am unsure if I understand correctly, so @khaleelkazi may have to correct me, but this is my understanding; The financial theory behind Protocol Owned Liquidity or more clearly called Assets, are considered collateral for Protocol Tokens.

Example:
If the value of the Protocol Owned Liquidity reaches one million dollars and the total number of Cub tokens in existence is one million than the Risk Free Value of a Cub token is one dollar.
Because it can never be sold, it is considered Risk Free Value. This type of guaranteed or Risk Free Collateralization is only possible when the Protocol owns liquidity.

So explained with other words, Protocol owned Liquidity gives permanent value to the Cub token because the Liquidity can never be withdrawn by investors because they don’t own it anymore, the Protocol or code owns it, and is programmed never to sell it.

The last conceptual piece of this is that as the value of the Protocol Owned Liquidity rises, so does the Risk Free Value of the token. So if the value of the Protocol owned liquidity rises to two million dollars and the number of Cub is still one million, than the Risk Free Value of the Cub token rises to two dollars.

Summary

So that is my understanding of Cubfinance DeFi 2.0, POL: Project Owned Liquidity and the Black Hole Theory behind POL and achieving Risk Free Value. I hope I have explained it in understandable terms and still maintained accuracy of concept.

The End. . . for now. @shortsegments

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About @shortsegments

Shortsegments is a writer focused on cryptocurrency, the blockchain, non-fungible digital tokens or NFTs, and decentralized finance for over four years.

He is also a project builder, with two current projects:

• No Loss lottery, a prize linked savings account here on Hive, which awards more the 100 Leo in prizes weekly, and which recent surpassed 5000 tickets sold. @nolosslottery
• Easy DeFi, which creates a community investment pool allowing community members to invest in the Cubfinance DeFi project created by a known Hive Community member and whose code is audited and modeled after PanCakeSwap, the largest and perhaps safest project on Binance.
• This allows pool members to benefit from being liquidity providers and earning high APR yields as high as 128% on their investment capitol.
• Cubfinance is the Hive communities home grown Yield Farm and is audited by CertiK, a third party which certifies DeFi projects on Ethereum, Binance and polygon ecosystems.

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