Description of Project

Lyrebird ultimately intends to be a community-owned synthetic asset platform that can mint fungible tokens pegged to the values of world currencies, securities, other cryptoassets, and anything else that can have a well-defined price.

Lyrebird’s name comes from the Australian bird famous for being able to mimic any sounds that it encounters. Like the bird, this project aims to deliver a platform that can mimic any asset without ever leaving the Neo ecosystem.

Lyrebird’s first priority will be to introduce an algorithmic NEP-17 stablecoin LUSD that tracks the US Dollar. LUSD will maintain a soft peg using the mechanism used by Terra’s UST – that is, $1 worth of the NEP-17 Lyrebird token (LRB) will be exchangeable with LUSD at any given time, incentivizing arbitrageurs to stabilize the price of the LUSD token by minting or burning LUSD and trading on an exchange – hopefully Flamingo.

This schema fails if enough market participants lose confidence in the Lyrebird ecosystem and refuse to arbitrage. Recently, we have seen the Titan/Iron protocol fail to exactly this risk. To mitigate this risk, Lyrebird will eventually introduce staking for the LRB token with an unbonding period of 30 days. LRB stakers will receive additional LRB due to preplanned inflation during the first 4 years, as well as transaction fees for the LRB/LUSD swap indefinitely. One of the Lyrebird team's first priorities during this phase will be to generate natural use cases for LUSD - such as integrating it into lending and/or payment platforms to build up to critical mass adoption.

Introducing a native stablecoin (or more!) to the Neo ecosystem is fundamental to a successful DeFi ecosystem. Currently, only fUSDT is widely traded in the Neo ecosystem. Because fUSDT originates from the Ethereum ecosystem, Neo’s DeFi growth is limited and at risk due to any issues that arise from USDT and Ethereum. A NEP-17 stablecoin with elastic supply will make it much easier for DeFi projects in Neo to flourish and help keep capital circulating within the Neo ecosystem.

Project Architecture

Front-end

  • https://lyrebird.finance demonstrates the tokenomics of each token at a glance.
  • The dApp integrates NeoLine wallet with the LRB/LUSD smart contracts for LUSD mint/burn functionality.
  • The dApp also integrates with a simple AMM exchange implementation to track current prices and market caps of LRB and LUSD.

Smart Contracts

  • LRB Token - The implementation of the Lyrebird Token. It uses a generic callback architecture to make it possible to introduce new assets without modifying the core contract.
  • LUSD Token - The implementation of the Lyrebird USD token. It uses an Oracle call to find the prevailing LUSD_LRB and reverse rates for mint/burn quantity calculations.

AMM Exchange

  • A sample AMM exchange with a single pair LRB_LUSD is provided to demonstrate the profitability and efficacy of the arbitrage system.
  • LRB is assumed to also be listed externally, so its price moves as a random walk, changing by -1% <= change <= 1% every 30 seconds.
  • LUSD is assumed to be only listed on the exchange, so its price will deviate from the peg significantly with LRB's movements unless an arbitrage bot is running.

Arbitrage Bot

  • The bot "Arby" is provided as an example to demonstrate that arbitrage can be profitable and stabilize the price of LUSD even if LUSD is only listed on an LRB_LUSD pair on an AMM exchange with LRB having external price movements.
  • Arby will be open sourced to the community for stability, and the team will also run the open source version for early stability and community confidence.

What We Learned

  • Neo's N3 platform has a lot of features that make it an exceptional choice for DeFi projects, including Lyrebird. Single block finality and a trivially easy use of native oracle calls made it exciting to map out the vision of Lyrebird as one of the first projects on Neo N3.
  • More than anything, working examples are most critical to helping build new projects in a short period of time. In particular' AxLabs' https://github.com/AxLabs/meme-governance-frontend/tree/master/.github/workflows was essential for front-end development - we wouldn't have been able to finish on time without it and are extremely grateful.

Challenges

  • Each organization's documentation and tutorials are excellent, but there wasn't a single source that could tell us how to navigate between documents by each organization without asking people on Discord. For example, neo-express was excellent for initially developing the contracts, but it took us a while to figure out how to deploy to testnet (using neo-go eventually) and what idiosyncrasies existed in the tooling. Oracle calls ended up being single liners by the end but debugging was hard since there were requirements like HTTPS and debugging oracles was a lot harder due to its callback nature.

Future Work

  • Implement staking for LRB; stakers will receive a distribution of transaction fees on the platform.
  • Implement small transaction fees on LUSD mint/burn functionality.
  • Ideate and implement safeguards against negative feedback cycles of LRB and LUSD prices, such as a daily limit on mint/burn quantities.
  • Implement or integrate a lending platform for LUSD.
  • Implement voting and governance for LRB holders and stakers.

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