How does it work? Don’t Panic!

Published on May 1, 2021 (https://babelfish.money/edc9af2675f948669efb7538c69c90ba)

If you can’t explain it simply, you don’t understand it well enough.

First, let’s see how fiat-backed stablecoin issuers such as USDC and USDT work in essence:

1. User sends fiat to issuer
2. Issuer mints stablecoin to user
3. Issuer invests collateral in short-term fiat money markets (e.g. T-Bills) to earn revenue
4. User can redeem fiat at any time 1:1

BabelFish Money is probably the simplest thing in the DeFi Universe. It replicates the aforementioned flow to serve as a decentralized and chain-agnostic stablecoin aggregator and distributor. It feeds on stablecoins, absorbing all liquidity and excreting the yield to deploy it as protection. The practical upshot of which is that if you stick stablecoins to it, you can neatly cross the language divide between any chains and use your money anywhere to DeFi. Here’s how it works in essence:

1. User sends stablecoins to protocol
2. Protocol mints convertible stablecoin to user, plus FISH tokens to participate in governance
3. Protocol invests collateral in DeFi to earn revenue and create a Bitcoin layer 2 insurance pool for users
4. User can redeem stablecoins at any time 1:1