> For the complete documentation index, see [llms.txt](https://yashish-khurana.gitbook.io/lucidly-finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://yashish-khurana.gitbook.io/lucidly-finance/lucidly-finance.md).

# Lucidly Finance

Stablecoins have always been an area of very intensive research and interest in decentralised finance. Most stablecoins in the ecosystem can be categorised into custodian, soft-pegged over-collateralized and under-collateralized algorithmic designs.

Custodian stablecoins are centralised institutions that allow deposits in fiat and other RWAs and issue tokens on the blockchain that are hard-pegged to the exact value of the currency. Hence a very centralised approach.

Soft-pegged over-collateralized stablecoins have different designs, the most popular amongst them are CDPs(Collateralized Debt Positions). Depositors deposit an asset to issue a stable position at a [premium](https://daistats.com/). These positions get liquidated when the value of the collateral gets lower than the loan issued and depositors need to add more margin to prevent the same. This is a permissionless and decentralised approach and the requirement of a premium to issue stablecoin makes it hard to [scale](https://medium.com/@hasufly/maker-dai-stable-but-not-scalable-3107ba730484).

Under-collateralized algorithmic stablecoins are backed by endogenous assets and provide a highly trustless and scalable model that captures the early Bitcoin vision of decentralized money but with useful stability. They're extremely difficult to bootstrap and highly risky, as seen in the [LUNA-UST crash](https://www.nansen.ai/research/on-chain-forensics-demystifying-terrausd-de-peg).

We've come up with a novel mechanism of multi-asset CDPs which allow depositors to rebalance their CDP collateral between a volatile and a stable position hence reduce risks of liquidations. Lucidly uses a stability pool as the primary mechanism to liquidate risky CDPs. Liquidations happen against the stability pool in a scalable manner with $$O(1)$$ complexity.