AIP-19 - Seed agEUR pool on dAMM

AIP: Seed agEUR pool on dAMM

Authors: Eto and Joshua Baker

Summary

Contribute $250k of agEUR to seed the agEUR dAMM pool. This will allow Angle the ability to earn reliable yield in the form of revenue to the treasury in return for providing market makers and exchanges access to make markets and list agEUR.

Motivation

dAMM is the first under-collateralized lending platform for any token, offering DAO’s and token issuers the ability to lend their assets directly to market makers seeking to provide liquidity in their respective markets. We believe that creating liquid and efficient markets for euro stablecoins is crucial, and we believe that Angle has had success in solving this with agEUR.

We recently announced a similar partnership with Ribbon Finance here:

About dAMM Finance:

dAMM is an under-collateralized lending platform for any token with algorithmically determined interest rates. Any token with a liquidity pool on dAMM, market makers can borrow on dAMM to provide liquidity and trade across all centralized and decentralized trading venues. More details about the dAMM protocol can be found in our whitepaper:

https://damm-finance.gitbook.io/damm-finance/0onmhbd8IPAoHstKw9eg/introduction/abstract

Our investors include many major exchanges and market makers, including: Kronos Research/WOO Network, System 9, AscendEx and Gate Ventures. Our founding team are members of System 9, one of the largest alt-coin market makers in crypto. System 9 is the dedicated market market for more than 80 alt-coins and was founded by market makers from the Chicago Mercantile Exchange, JP Morgan Capital, and Bear Stearns. Our protocol is open source here: GitHub - system9development/compound-protocol: The Compound On-Chain Protocol

Market-neutral market makers

One of the core values of dAMM is that we maintain transparency between counterparties, and that we mitigate risk responsibly with our borrowers. We are working with an established third party credit analysis firm that has direct access to the net exposure of individual borrowers to the market; and we are strictly only seeking to develop relationships with market makers who have a verifiable history of market-neutral trading activities

What does it mean for Angle?

The protocol will make a strategic deposit into the dAMM agEUR Pool, enabling market makers to directly borrow agEUR and provide liquidity across agEUR markets. dAMM also works closely with centralized exchanges that are consistently seeking high quality tokens like egEUR and ANGLE to list. dAMM will work alongside Angle to screen for potential strategic listings. All users and community members of Angle are able to deposit to the agEUR pool and supply additional liquidity for market makers.

Additionally a retro-active airdrop is planned for all DAO’s and token issuers that contribute their native assets to dAMM, this would qualify for that airdrop. We expect the agEUR AMO to show market makers there is strong product-market-fit in non-USD stablecoin lending. agEUR holders can directly capitalize on their holdings through the agEUR dAMM pool, and further bolster liquidity amongst CEX and DEX listings and pairs. Additionally several reputable exchanges are working with us in search of listing tokens we are working with including agEUR as a quote currency/base pair. We conservatively expect a 5% yield on deposits.

Implementation:

If successful this AMO will be implemented at the beginning of August, when dAMM Finance lists its genesis pools, and the strategic asset committee will deposit the funds in the pool.

For: Seed $250K agEUR to the agEUR Pool on dAMM

Against: Do nothing

2 Likes

Thanks for the great proposal!

I think it can be interesting for the protocol to expand in such AMOs. Still curious to see whether we’ll have market neutral players actually willing to borrow agEUR when it’s not listed on CEX. I get that dAMM can help for centralized exchanges listings but this is something that will eventually take time.

Anyway, for the potential opportunity, I believe it can be worth it to implement the proposal for $250k.

More generally, for such under-collateralized lending AMOs, the protocol should make sure that there’s way for other agEUR holders to seize the opportunity. The way I see this is that the protocol is seeding pools with agEUR to get the wheel spinning, and then let other agEUR holders come in (while the protocol either scales up or down its position).

Thanks for the proposal !

Could you provide an example of the documentation / credit score documents for a borrower ? Are there already accredited borrowers out there ?

Furthermore in the vote options could you add a duration ?

1 Like

Hey Picodes, that’s a great question. We use XMargin data to verify our borrower’s net exposure to the market and have an internal team that reviews their data to set borrower limits on the protocol. All of our borrowers have under-collateralized on-chain history on platforms like TrueFi, Maple Finance, or Clearpool already and have amazing track records of repaying all loans to date. The loans we’re working with from Redacted Cartel and Ribbon Finance are callable by the DAO’s at any time and we will be doing a snapshot at the 3 month mark from the launch for a retroactive DAO treasury airdrop.

Hi Joshua,
Thank you for your answer. Is there already examples of such borrowers with their data ?
I personally don’t think I’ll support the proposal until I am able to see the process / credit scoring for myself and check borrowers data

I think the proposal and project are great, but there are a lot of under collateralized projects out there and to me it’s absolutely critical to have a transparent / checkable by lenders credit scoring system so I’d like to see it first

Hey Picodes, yes there is. Xmargin currently runs a pool on Maple Finance, as well as supplies Clearpool with all of their credit oracle data. Both of those advertise their borrowers and their borrow limits.

Thanks. Could you develop on how you see the partnership ? The goal would be to seed the pool for a limited duration with DAO funds, but then we’ll have to withdraw them and switch to a system were users deposit, right ?

Absolutely, so we see this AMO as a limited duration seed with DAO funds, and user deposits eventually exceeding the initial seed amount significantly in the future. The airdrop will be snapshotted at the 3 month mark of the protocol being live.

Here are some additional FAQ’s we thought would be important to share as well:

How is the interest rate of each pool calculated?
Interest rates in every pool are individually managed by the foundation to efficiently capture the maximum yield based on demand for each pool asset. For stablecoins initially the following utilization chart will be used:

Example Interest Rate Chart

The x axis in this chart being utilization, and the y axis being the respective interest rate.

How are defaults managed?
A public USDC insurance pool that receives 5% of all interest payments by market makers will be used as first loss capital in the case of default on any loans. In addition to this protocol insurance 25% of revenue generated by liquidity bond sales (more information on liquidity bonding in our docs linked in the proposal) will be held in third party custody as a further backstop.

What are the agreements in place with borrowers on the protocol?
Market makers onboarded to the protocol are required to agree to a terms of use that will be publically available upon the launch of the protocol. This terms of use agreement details the specific expectations and requirements of all borrowers and lenders on the protocol and the acceptable usage of the protocol by borrowers.

Thanks a ton!

Thanks for sharing all this helps a lot! Might help as well to have a list of whitelisted borrowers in the first place as well as the collateral ratio at which they will be able to borrow.

Other question as well on the default management. Given that there is a legal agreement between the foundation and the market makers, who is in charge to repay the depositors? And how are these lenders repaid? In fiat, in crypto?

Given that the DAO does not have any legal entity and that our users may not want to go through KYC processes, might also help to understand how this is going to happen here!

Thanks

1 Like

The current onboarded market makers include many visible on xmargin’s site (xmargin.io), we’re still finalizing terms with several and more announcements will be made about our first borrowers.

The market makers are directly required to repay the lenders of the pools both interest and principal, as that is part of the terms of use. Their obligation regardless of the KYC is to the depositors.

Non-US users will not have to go through KYC, however we will be screening depositors for any AML restricted addresses.

And of course, thanks so much for the great questions. I think the more information that is available to the DAO the better!