TeamCAT Explained: What's in the Cat's Box?

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Introduction
Cat-in-a-Box overview
Cat-in-a-Box Architecture
Tokenomics
Backers and partnerships

Introduction

We're back again with the prolonged review format - when the development of a project has been observed over several months! This time we have a project that used to be called Cat-in-a-box, which over time has split into 2 products that still share resources, token and liquidity pools. These are Cat-in-a-Box, MortgageFi and CAT Protocol, combined under the roof of TeamCAT. Who doesn't love kitties? And if there's also a team of cats?

Cat-in-a-Box overview

In order to understand the logic of the development of the project and how the basic protocol works, which became the predecessor of further development - we need to dive into Cat-in-a-Box. The Cat-in-a-Box protocol is built on liquid staking derivatives, initially using ETH and stETH issued by Lido Finance as its primary building blocks at launch, with plans to support more assets in the future. The protocol aims to provide enhanced utility for holders of yield-bearing tokens by offering additional opportunities for those with a long-term perspective on their staked tokens.

Thus, Cat-in-a-Box provides ways to further leverage yield-bearing tokens. It offers a new, potentially more advantageous way to sell yield-bearing tokens compared to traditional market selling. It encourages responsible borrowing habits and discourages excessive leverage, aiming for the self-stabilization of the protocol.

That is, in short, credit for bearing tokens (these are tokens whose rewards are not accrued by rebase, but are pledged to the value of the token), securing the bearing token itself rather than its dollar value, which reduces the risk of liquidation due to a drop in its dollar value.

High-level description of the protocol operation:

• Users deposit yield-bearing tokens as collateral.

• In return, they can mint and borrow a synthetic asset at a 1:1 ratio, with a generous loan-to-value (LTV) ratio.

• The deposited yield-bearing assets continue to earn yield, which can be used for loan repayment or to increase the deposit balance.

Now, let's take a closer look at how it works:

Any sETH deposited into the smart contract can be used to mint and borrow a 1:1 soft-pegged asset issued by the protocol, known as boxETH. Additionally, an MEV bot is used to ensure efficient conversion of stETH to boxETH.

• Deposited sETH earns rewards over time in the form of more sETH.

• If the user has not chosen the self-repayment option, the stETH rewards will be converted into boxETH to repay the minted boxETH.

Cat-in-a-Box Architecture

• Dynamic Lending Contract: This smart contract allows users to deposit yield-bearing stETH, with accumulated income distributed periodically. It also facilitates the minting of boxETH, which can be borrowed at a 1:1 ratio using the user's deposit as collateral.

• PSM (Peg Stability Module): The PSM receives sETH from borrowers who self-repay their loans. It manages the burning of synthetic boxETH in comparison to the received sETH to maintain the peg by removing synthetic boxETH from the market. The PSM also collects boxETH fees that resolvers must pay to settle CDP debt. This boxETH is used to buy boxFEE tokens, which are sent to the treasury.

• MEV Bot: This bot takes sETH from the Peg Stability Module and the fee-staking contract to purchase as much boxETH as possible from the open market.

• Resolver: Resolvers are key participants in the protocol. When there is a liquidity imbalance in the synthetic asset pool, causing downward pressure on the stETH-boxETH peg to fall below 1:1, resolvers can buy discounted boxETH on the open market to restore the peg. They also contribute to peg support by paying fees in boxETH, which are used to purchase boxFEE tokens that are sent to the protocol's multisig treasury.

In addition, cat-in-a-box has several versions with different functionality:
V1 -  for small loans, if the user wants to borrow a small percentage (low LTV) against user collateral.
V1.1 - for large loans,  if the user wants to borrow a larger percentage (high LTV) against user collateral.
V2 - team introducing a new token to support liquidity providers. Users can take these cats to direct liquidity incentives or burn for a one-time fee payment. This twofold utility ensures a natural stabilizing system for sustained growth.

Tokenomics

Tokenomics is an equally important component of the Cat-in-a-Box protocol, on par with its architecture and components. And for understanding the scheme presented above, it is also necessary to understand the logic of tokenomics.

1. boxETH is a token previously mentioned, issued as a soft-pegged 1:1 wrapper for stETH.

2. boxFEE is also an important component of Cat-in-a-Box tokenomics, that provides rewards in the form of boxETH when staked. Platform fees are charged from the yield generated on deposited funds, starting at 1% and rising up to 25% depending on the global CDP system debt. The higher the system's global debt, the closer the fees will get to 25%.

Users who burn their boxFEE can exchange their boxETH for stETH upon exit. boxETH will always maintain a minimum value equivalent to stETH due to the protocol's self-balancing design.

The benefits for boxFEE holders who do not exit early are two fold:

• The more holders that exit, the fewer participants remain to share the protocol fees.

• The fewer holders in the system, the faster the support will accumulate for those remaining.

Protocol revenue will come from a combination of protocol fees charged on underlying restaking yield, liquidations, treasury swaps with partnered projects, and ecosystem builder grants.

50% to existing boxFEE holders and stakers. Each chain gets its own Cat token for a closed, secure ecosystem.

The other 50% is allocated to the team, market liquidity, retroactive goods funding, friends and family, and collaborators supporting v2.

Backers and partnerships

Both co-founders of CAT have previously worked on Alchemix. DrDerivative was the architect behind Alchemix v1 and v2's designs, as well as the person responsible for pulling together most of the first team members who worked on Alchemix. He additionally wrote code that inspired the existing codebase. Snape was another member of the Alchemix core team who produced much of the marketing graphics, other promotional material including videos that were very popular.

Cat-in-a-box also has partnerships with projects such as:

• Defi Garage - they create and implement solutions that offer users strategic and flexible management of their crypto wealth. The mission is to develop decentralised financial products and protocols that challenge traditional models while prioritising security, sustainability and creating value for users. 

• Silo Finance - is a risk-isolated lending marketplace that allows users to deposit tokens to earn interest or as collateral to borrow other tokens.

• Bunni - Bunni is a liquidity mechanism to incentivise Uniswap v3 liquidity. Bunni consists of two parts: a protocol that aggregates Uniswap liquidity positions into exchangeable ERC-20 tokens, and a branching system to incentivise Bunni liquidity.

• DefiLlama

Cat-in-a-box links

Website | Twitter | Discord | Docs | GitHub

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