About Lybra

Bhim5551

"eUSD is a stablecoin backed by pledged ETH reserves. Holding eUSD generates a stable income stream, with an annual yield of approximately 8LBR governance tokens. However, its utility is limited. With the launch of Lybra v2 and the introduction of several new features, it is expected to address some of the protocol's shortcomings.

Here's my view on $eUSD:

1. Lack of Capital Efficiency: The overcollateralization model limits the capital efficiency of $eUSD, as users need to deposit more funds than they receive. Additionally, there is always a liquidation risk as the collateralization ratio should always be above 150%.

2. Limited Value Proposition Compared to Competitors: Emerging LSD-backed stablecoins need unique value propositions to have growth potential. However, despite having an early advantage, $eUSD has not offered competitiveness in terms of collateral requirements or significant improvements.

3. Not a Medium of Exchange: eUSD is a yield-bearing stablecoin, and the protocol doesn't prioritize using it as a medium of exchange. Most users hold eUSD to benefit from its high annual yield.

4. Anchored Stability: eUSD holders are eligible to receive ETH rewards for staking. As a result, most users prefer to buy eUSD in the market, creating demand pressure. This demand surpasses the supply, causing eUSD to break its $1.00 anchor unless the system undergoes changes. This could pose long-term issues for holders.

5. Yield-Bearing Asset: Since eUSD can generate income for holders, there will likely be demand to use it as a store of value. If users trust its anchored stability, it can be a good way to earn ETH yields.

6. Multiple LST Collateral: With the launch of Lybra v2, new LST collateral such as rETH and WBETH can be used, potentially increasing the possibilities for minting $eUSD. However, we should not overestimate its impact.

7. Poor Tokenomics: LBR is the governance token of the protocol. However, due to almost all LSD-related income flowing into eUSD rather than LBR, the token has limited utility. Poor tokenomics also sustain the premium of eUSD, keeping it above its anchor, as users have an incentive to hold eUSD due to its interest-bearing nature, causing demand for holding eUSD to significantly exceed the demand for minting $eUSD."