The Strudel Protocol is not only a trustless bridge, migrating BTC permanently onto the Ethereum chain, it is also a bet on market dominance. In this article we will explain core concepts leading to $TRDL success when Ethereum overtakes Bitcoin as the biggest cryptocurrency.
The Power Pool
The Strudel Power Pool is a balancer smart pool with the ability to programmatically shift weights of its staked assets, ETH and vBTC. Weighted pools allow to maintain the price of an asset, even when one of the assets is less available than the other. By increasing the weight of vBTC the Power Pool is able to gulp up some of the token supply, without affecting the price.
The Power Pool’s liquidity and its weight shifting function can also be used to affect the price in other, smaller pools, as described in this article.
The strudel protocol uses the weight property of smart pools and combines it flash loans and arbitrage trades to implement a pegging algorithm within limited bounds. The bounds are determined by the MAX_WEIGHT parameter, and affect the protocol in two ways:
- When vBTC reaches the MAX_WEIGHT of the pool, the pegging algorithm is disabled, and no trades are executed any longer. This protects the stake of the liquidity providers, while bearing the risk of losing the peg.
- when ETH reaches the MAX_WEIGHT of the pool, the surplus is removed from the liquidity of the pool. The removed liquidity is used to buy $TRDL from the market to half burn and half stake it into the Uniswap $TRDL/ETH pair.
When the weights of both assets float within bounds, trades that shift the weight of the Power pool in the direction of vBTC are only permitted every 24 hours. Trades that shift the weight of the Power pool towards ETH are permitted at any frequency, hence the pegging algorithm leans towards accumulating more ETH overall.
The current MAX_WEIGHT parameter is set at 3, which translates to a 25% and 75% setting as in the figure above. As a governance parameter, it can be changed with a 24 hours delay by the Strudel multi-sig wallet, and soon through token voting by the community.
The liquidity providers in the $TRDL protocol take a special position when entering the Power Pool. They combine their assets into a high-liquidity leveraged long position on ETH vs. BTC. Holding this position they are rewarded in $TRDL, while profiting additionally every time when surplus is skimmed off the pool. The surplus is used to buy $TRDL of the market and burn one half, while staking the other half in the Uniswap $TRDL/ETH pair.
At Strudel, we are proud to provide the Ethereum community with a tool to take an active position in the market dominance discussion. We are launching a coordination experiment to upgrade Bitcoin. Once we have upgraded Bitcoin, we can upgrade the global financial system.
🙌 Join the Discord community: https://discord.gg/fBuHJCs
📜 Have a look at the Strudel Manifesto.