Preon: A Bird’s Eye View
Everything You Need to Know About Preon
With Preon’s release coming very soon, curiosity surrounding the protocol has been on the rise, and it may be easy to get lost in the flux of information regarding the Sphere Ecosystem’s innovative CDP lending platform. The purpose of this article is to help you take a step back for a better vantage point of the protocol, and give a brief map of Preon’s immediate future.
Starting Steps: Preon Launch
Preon will be launching in two phases. During the first phase, the CDP functionality will be made live, and in the second phase, in addition to its CDP capabilities, Preon’s gauges and ve(3,3) tokenomics with $PREON, the protocol’s governance token, will be live.
In the primary phase of launch, Preon will open the door for CDPs or “collateralized debt positions,” offering users the ability to deposit collateral in order to borrow the $STAR stablecoin at zero-percent interest. This zero-interest rate will be a defining trait of the protocol extending beyond simply borrowing, however — Preon will also be the very first CDP to allow Balancer pool tokens or BPTs to be leveraged as collateral, again at zero-percent interest. This will offer users the ability to leverage their LSDfi or liquid-staked derivative BPTs, such as $wstETH and $rETH.
This means that users can continue earning yield on their BPTs, boosted via Dyson through Aura, while also leveraging their assets, increasing their yield farming potential. All else equal, it allows the value of a user’s collateral to grow, increasing their ability to borrow more $STAR over time.
Preon will not stop there however, and is interested in expanding collateral options to other yield-bearing protocols. In fact, in this way, Preon hopes to help tie the entire Arbitrum DeFi ecosystem together via the $STAR stablecoin by offering many yield-bearing collateral options across the space.
Hard Assets: The Preon Solution
But what about non-yield-bearing, hard assets such as $wETH? These can still be accepted as collateral on Preon.
Now ordinarily, such assets would sit idle in a protocol; however, thanks to Sphere’s Ecosystem, Preon will be able to route a portion of these idle assets to Dyson to engage in battle-tested yield farming strategies such as through Aave or, eventually, the Ecosystem’s very own SphereLend. This will once again give users the ability to passively increase the value of their collateral over time.
The $STAR stablecoin itself will have many yield-farming opportunities at its disposal, including through our partner protocols, such as Chronos. Chronos is a ve(3,3) dex on Arbitrum with newly-added concentrated liquidity vaults managed exclusively via Dyson, and thanks to Dyson, Sphere has accumulated significant voting power on Chronos which it will use to incentivize STAR liquidity pools.
Additionally, $STAR can be deposited into a single-sided Stability Pool on Dyson to potentially earn auto-compounded yield from Preon liquidations. You can learn all about the Stability Pool through Price Time’s incredible explanation on Sphere TV.
$PREON: The Next Phase
If that wasn’t enough, with phase two of Preon’s launch, $PREON, the protocol’s official governance token, will go live. The $PREON token can be vote-escrowed as an 80–20 LP into $vePREON to earn yield from Preon’s multiple fee structures, and can be used to enact voting power on Preon’s $STAR liquidity pool gauges — with the potential to earn bribes for doing so.
These gauges will be for $STAR LPs as mentioned, and liquidity providers will earn their appropriate DEX LP swap fees in addition to $oPREON rewards emitted proportionally to the amount of $vePREON votes cast on each gauge.
$oPREON is not a liquid token, rather it is essentially a call option for Preon, where users can spend $ETH to redeem $oPREON for liquid $PREON at a discount. This will still represent a net-positive yield for liquidity providers, however, and will bring in additional $ETH yield for $vePREON holders.
As an additional perk, $vePREON holders can earn boosted $oPREON emissions when providing liquidity.
Dyson will also be able to make use of boosted $oPREON emissions through special gated gauges where concentrated liquidity swap fees can be routed to bribe $vePREON to amplify yield for users. This is because $1 in bribes typically yields more than $1 in emissions.
It is worth noting that both $STAR and $PREON will be omni-chain fungible tokens through layer zero, making the process of cross-chain compatibility and expansion seamless.
Conclusion
Finally, because Preon is a standalone protocol within Sphere Finance’s Ecosystem, Sphere will be receiving an allocation of $vePREON to enact governance and funnel yield from Preon to Sphere lockers.
Preon’s launch is imminent, and much more news regarding the protocol is on the way! Visit us on Discord to stay up-to-date on announcements and join our community.
Thank you for reading, Preonauts! Until next time, Preon to the $STARs.
