Introducing Piggy: Interest-Free Loans for $BNB

6 min readJun 3, 2021

TL;DR

Piggy is a new BSC borrowing protocol based on Liquity
Piggy brings unprecedented liquidity for $BNB collateral with zero-interest loans, low-collateralization, and extraordinary staking and stability rewards for the widest possible participation
Piggy also improves on Liquity tokenomics through a more inclusive distribution, among other features.

Binance Smart Chain, the fastest-growing ecosystem in Crypto, has a lending problem. There is a certain monotony with the current offering of lending protocols in our ecosystem that results in borrowers paying high-interest fees and putting their capital at a high risk of liquidation whenever market volatility hits, without the possibility of hedging that risk.

A recent spate of problems at Venus earlier this month illustrated the problem clearly, leaving that protocol with bad debt after a drop in the $XVS price caused a cascade of liquidations totally over $200M.

Against this backdrop, a team of ex-FAANG and ex-BAT engineers joined forces with several DeFi experts to bring a much-improved lending model to BSC, one we hope will leave once and for all the days of borrower suffering behind us. We call this protocol Piggy because its design represents such an improvement, it will make you believe pigs can fly!

What is Piggy?

Piggy is a decentralized protocol that offers interest-free loans of $BNB with low collateralization requirements. Unlike competing DeFi lenders, Piggy runs liquidations by making use of a Stability Pool mechanism instead of auctions, which allows it to make a more efficient use of capital and offer loans with collateral ratios as low as 110%. Piggy is an adaptation of Liquity from Ethereum, where currently over $3B in $ETH are deposited.

Your loans on Piggy are drawn in $PUSD, a dollar-pegged stablecoin. You can use your $PUSD to join the Stability Pool and earn $PIGGY rewards. When participating in the Stability Pool, users will see their $PUSD balances decrease as they receive a pro-rata share of $BNB liquidations along with $PIGGY.

$PIGGY is the secondary token of the protocol, which can be staked to receive a share of protocol fees (from loan originations and redemptions), paid in both $BNB and $PUSD. In due time, following the principles of progressive and orderly decentralization, $PIGGY will also be used to participate in the protocol’s governance-minimized organization and decide on Upgrades, Treasury matters, and Contributor grants.

The Piggy Difference

Piggy presents a number of major improvements over exisitng borrowing protocols on BSC. Let us introduce the three major ones for now.

Zero-Interest Borrowing

Piggy borrowing interest rate is zero. When you draw a loan on Piggy, you deposit $BNB collateral and are issued a stablecoin, $PUSD. The main purpose of Piggy is to open unprecedented liquidity to $BNB holders, not to generate a return to depositors like lending protocols modelled after Compound like Aave and Cream. You can keep your $BNB, and for a low one-time borrowing fee unlock up to 90.9% of that liquidity via $PUSD. An unparalleled amount of research, development, and modelling has gone into building incentives to make sure $PUSD is truly stable. This means as a user, you don’t need to worry about being crushed by a mountain of debt or hidden costs. Piggy makes everything upfront so you can focus on maintaining and healthy collateral and repaying your loan when it makes the most sense to you — without a maturity or expiry date!

Collateral-Efficient borrowing

Piggy loans require the lowest collateralization in the market. This makes your $BNB collateral incredibly efficient. A major risk in the design of current lending protocols is the failure of the liquidation mechanism, which revolve around auctions. Auctions can fail because, if market conditions change so suddenly that auction do not occur fast enough or are subscribed by enough liquid players, the protocol isn’t able to offload collateral that is dropping in price and ends with bad debt. Piggy does not use auctions in liquidations. Instead, the required funds for liquidations are deposited by users in the Stability Pool (in exchange for $PIGGY rewards), so liquidations occur quickly with funds that are readily available within the protocol.

What does this mean for you? When collateral requirements are as low as 110% of your $PUSD loan value, your $BNB is in a safer place. Getting liquidated is not fun. By making the liquidation mechanism as efficient as possible, and backing loans with $BNB, the most liquid collateral possible in BSC, users can rest better knowing their collateral is much less likely to get liquidated in Piggy.

To illustrate the point, let us take the recent Venus price swing. In the space of two days, from May 18 to May 19, the price of $XVS collapsed from $143 to $32 (almost -78%). Loans backed with $XVS collateral at the high price were certainly liquidated. In their post-mortem, Venus suggested collateralization requirements will be increased from already high 200%+ numbers. During this same period, $BNB dropped from $511 to $339 (slightly more than -33%). Meaning, any hypothetical Piggy loan with a collateralization of 200% (the minimum in Venus) would have survived the crash intact.

Sustainable Rewards and Tokenomics

Most existing lending protocols encourage activity and the flow of liquidity into their protocols using their native tokens as rewards. Often, the reward schedules are unsustainable. To avoid the dumping of these reward tokens, rewards are also given to those staking the rewards, a phenomenon sometimes known as “Ponzinomics” — needless to say, a bad practice, and an unproductive use of resources. Piggy rewards (denominated in $PIGGY tokens) encourage early liquidity for stability providers, however, the built-in reward of being a stability provider is being able to obtain discounted $BNB (think of it as automatically “buying the dip”). As the system matures, stability providers increasingly rely on the built-in reward over the token incentive. Moreover, $PIGGY tokens can be staked and receive rewards that come from protocol fees, not Ponzinomics. The value of staking $PIGGY is directly proportional to the usage of the protocol, a sustainable model, yet one that can yield very high yields, particularly in times of high volatility including market ruts, providing a hedge against the volatility of $BNB itself.

$PIGGY-nomics

As mentioned, $PIGGY is a secondary token that allows users to participate in the development of Piggy and capture fee revenue generated by the protocol. The issuance of $PIGGY to participants is what allows for the bootstrapping of the system by incentivizing early adopters, as well as provides for the long-term health of the protocol. For those reasons, Piggy’s distribution is heavily weighted towards the community.

At genesis, we plan to distribute 100,000,000 (one hundred million) $PIGGY tokens, as follows:

We will be explaining the details of the allocation together with our launch in an upcoming article. For now, kindly note that over 55% of $PIGGY will be given as direct incentives to the community.