Introduction to OpenState

OpenState is a protocol that maximizes the yield of the underlying through its modular architecture, osTokens usually have the following core features:

Peg-Stability Modules (PSMs)

PSMs allow the minting and redemption of osTokens at a fixed price against another asset (for example using the iBGT PSM it is possible to both mint and redeem osBGT against iBGT), they typically have a native yield which goes to the protocol and enables for yield optimization (osBGT has oriBGT, osUSD has sUSDS+s and osETH has apxETH).

Staking Module (sosTokens)

For most osTokens there is a native way to stake the osToken, the user receives a sosToken which grows i share price overtime. sosTokens staking rate has a base rate linked to the risk free rate + premium and a variable rate on top which kicks in when the PSM balance starts running low.

Lending Module

OpenState as a protocol doesnt have native CDPs, instead it leverages the infrastructure provided by third party protocols such as Morpho and Euler to do its lending activities, the lending module mints osUSD, converts it into sosUSD and then lends it in one of this third party protocols within vaults closely curated by both OpenState and another curator.

There are two distinct type of users within OpenState:

Lenders

They just want the highest risk adjusted yields with the ability to exit at anytime, they can zap in and out of their sosToken position, their yields will on average be higher than the comparable alternative due to greater capital efficiency whilst sharing the same withdrawable liquidity.

Borrowers

Unlike in other protocols here borrowers denominate their debt in sosTokens which means they pay both the sosToken staking rate and the money market borrow rate on top (for example if the sosToken APR is 5% and the Morpho Borrow APR was 3% then the borrower would be paying an effective 8% APR total). The advantage is able to access the PSM liquidity to easily swap their sosToken proceeds to other tokens and unlike in other markets the borrow rate will fluctuate less due not being as linked to the internal money market's utilization ratio.