Add new collateral assets to the Borrowing module

There should be a new AIP regarding this matter, once all technical issues associated with the possible introduction of the collateral referred to below have been analyzed.

Some points on this topic:

  1. I understand that some of the new collaterals did not have a major impact on increasing the existing volume of the Borrow Module.
  2. However, the largest volume on the Borrow Module corresponds to the use of wstETH on the Ethereum Mainnet. I wonder why this collateral is not available on the Optimism Mainnet, Arbitrum Mainnet and Polygon PoS?
  3. The fact that wstETH presents the largest volume of collateral on the Ethereum Mainnet means that there is a market willingness to use ETH, and in particular, stacked ETH as collateral, so I believe it makes perfect sense for the protocol to consider the introduction of wstETH, reth, frxETH and stfrxETH as collateral on the Ethereum Mainnet.
  4. Finally, why not introduce as collateral: SNX on Optimism Mainnet and ARB on Arbitrum?
1 Like

Thanks for your point @pedrolopes.vng!

We could indeed think about adding wstETH as a collateral on Optimism, Arbitrum and Polygon. The main tricky thing is that wstETH is a bridged representation there and so comes with less security guarantees.
On rETH and sfrxETH, it’s the same, we could think about it as well, as you point out, I fear it leads to a cbETH effect where no one comes to borrow from it.

As for SNX and ARB, this kind of gov tokens is often the most tricky collateral assets to use as they’re highly volatile, sometimes barely liquid and can lead to the creation of bad debt.

Overall, you’re raising excellent points imo, my take at the moment is just that it’s not the launch of new collateral assets that’s going to change from 0->1 adoption of the protocol which is what most of the focus should be about

1 Like

Thank you for the response @sogipec sogipec, I understand the argument about the security associated with bridged tokens, however the implementation of the protocol on Ethereum L2 platforms implicitly involves interaction with bridged tokens (L2 are bridges per se), namely bridged ETH.

Furthermore, the implementation of Ethereum L2 rollups and their rapid adoption compared to other alternative platforms results from the fact that they are the preferred channels for the availability and deployment of ETH liquidity, mainly in the form of ETH LST’s and, soon, ETH LRT’s (also on mainnet).

We all know that those who invest conservatively choose to stake ETH in the form of LST and, eventually, use it in DeFi, as collateral or as an LP component.

It is no news to anyone that using the Ethereum Mainnet is prohibitive for the majority of current and future DeFi users. Yes, I know that the latter are not those who have the liquidity of the DeFi market, especially if they do not have tools available at their disposal to use the liquidity they have available.

It is obvious that the priority of the developer team is to bet on markets (and users) that have the greatest volume of liquidity (the concept of efficiency and adaptability of this team in managing its resources and reacting to market conditions is incomparable, which is why I invested in tokens from this protocol, all of them locked, at a time when their value tended towards zero), however betting on L2 platforms is investing in greater inclusiveness of users, those who normally invest in ETH or staked ETH.

I reiterate that the implementation of ETH LST’s as collateral in L2, I do not say that all, but the one that presents greater security guarantees should be motivating the launch of AIP regarding this subject.

Regarding $ARB as collateral, I question what the difference is in having $AB as protocol collateral in Arbitrum L2 (not available) and $OP as collateral in Optimism L2 (available)?

Wouldn’t it be a point in favor of the current Angle Protocol STIP in progress if $ARB is already a collateral of the protocol on Arbitrum L2?

Good engineering and liquidity management are not enough to gain market share, it is also necessary to focus on marketing and expanding the user base.

Best Regards

1 Like