AIP - 6 : Angle <> Lend Flare partnership proposal

Angle Improvement Proposals
1

Summary:

Main goals of the proposal

Create a new euro market on Lend Flare with Angle agEUR by:

  • Integrating 3eur curve pool as collateral on Lend Flare and integrating agEUR on Lend Flare as a supplied asset to be borrowed against 3eur curve pool.
  • With an initial liquidity of 500k€ from Angle protocol, for a duration of 6 months, rewarded, around 8.5 % APR in locked LFT tokens (calculations done in point n°3 below)
  • Giving agEUR a Lend Flare gauge weight (and so LFT rewards, similar to Curve) on Lend Flare, at the initial condition that Angle buy a small amount of LFT tokens (20k$) to get initial voting power (Lend Flare team will also vote in favor of Angle). Secondly, rewards earned by the liquidity provided by Angle have to be locked on Lend Flare, for at least a year.
  • Doing co-marketing.

Benefits for Angle

  • Allow leverage or borrowing of agEUR stablecoin against 3eur used as collateral
  • Accumulate Lend Flare LFT governance tokens, mainly for governance power and also for the possibility to make a financial gain.
  • Get a share of the fees generated by Lend Flare platform.

Benefits for Lend Flare

  • New euro market on Lend Flare
  • Increase of Curve LP collaterals deposited (increase of LendFlare TVL)
  • Increase of loan liquidity (increase of LendFlare TVL)

Project Presentation:

  • Protocol name: Lend Flare
  • Audit(s) links: V1: Certik V2: Ongoing audit by Peckshield
  • Supported chain(s): Ethereum
  • Twitter/Discord/Telegram links: Twitter /[Discord]/[Telegram]

Project metrics:

  • Current protocol TVL: 30m
  • Market cap: 3.5m
  • FDV: 10.5m
  • Uniswap liquidity size: 5m
  • Tokenomics: ve-model, no insider allocations outside 2% for the team
  • Community size on Twitter/Discord/Telegram: 8,7K/1,3K/2,5K.

Context and motivation:

More than a dex, Curve can be seen as a liquidity reserve or somehow a DeFi saving account. At the moment, this liquidity earns a yield composed of curve rewards and trading fees. Nevertheless, there are few additional opportunities for curve LP holders to take advantage of this huge liquidity, especially with low risk and high flexibility. Lend Flare aims to provide an optimised solution to this problem.

Lend Flare is a decentralised borrowing platform on Ethereum blockchain. Its added value is to allow Curve LP holders (the borrowers) to draw fixed-rate, fixed term and high LTV loans against Curve LP used as collateral, with no concerns for assets being liquidated due to price fluctuation, and without commission fees.

Liquidity providers (the lenders) who deposit loan liquidity for borrowers on Lend Flare receive in exchange a share of loan fees and an incentive in LFT token (Lend Flare governance token) for their participation. LFT tokenomics follow the curve ve-model, with a fair launch (no VC, team get 2% of max supply with a 2-year linear vesting)

Angle is a decentralized stablecoin protocol composed of smart contracts mostly deployed on the Ethereum blockchain. It can be used to issue stablecoins, called agTokens, that are pegged to a specific value. For example, the agEUR is the EUR-pegged stablecoin issued through Angle Protocol. As Lend Flare Team, we believe that Lend Flare low risk platform could expand and improve the use cases of agEUR, and so both protocols can benefit from a mutual partnership.

Proposition details:

1) Concerning the integration of 3eur curve pool as collateral:

Lend Flare is a decentralised Borrowing/Lending platform, with curve LP used as collateral to borrow single tokens.

Angle_borrow_lending
Angle_borrow_lending1920×1031 103 KB

Here is a screenshot of collateralizable assets (left column) and borrowable assets (right column) on Lend Flare. 3eur curve pool will be integrated as a collateralized asset like other Curve LP pools, and agEUR as a borrowable asset, like other single assets.

Besides, 3eur curve pools (new collateralizable asset) on Lend Flare will be then deposited on Convex. They will receive the normal yield from convex (Lend Flare don’t take any fees on it), in an optimised way (Lend Flare compounds the rewards through CvxCrv). At the same time, users will be able to borrow agEUR at 85% LTV.

2) Concerning the agEUR initial liquidity

To support the opening of the euro market on Lend Flare, we propose Angle to supply an initial liquidity of 500k€. This initial liquidity will be borrowed against only curve 3eur as collateral: On Lend Flare, it’s only possible to borrow single asset pegged to the assets inside the curve pool used as collateral. For instance, with steth-eth curve LP, it’s only possible to borrow an asset theoretically pegged to ETH (ETH, ankrETH, stETH)

3) Concerning the gauge weight for Angle on Lend Flare

Giving agEUR a Lend Flare gauge weight (and so LFT rewards, similar to Curve) on Lend Flare, at the first condition that Angle buy a small amount of LFT tokens (20k$) to get initial voting power. Secondly, rewards earned by the initial liquidity has to be locked on Lend Flare, for at least a year. Here is the explaination.

In addition to the fees agEUR loan liquidity suppliers will received if their liquidity is borrowed by 3eur holders, Lend Flare incentives loan liquidity suppliers, with Lend Flare LFT token. It’s something common to all loan supply pools, each of them having a gauge weight, similar to curve gauge weight. LFT token incentives for a pool is based on the gauge weight for this pool, and every two weeks, there will be a gauge weight vote.

We demand Angle to buy a small amount of token, to participate in the initial gauge weight vote. Lend Flare team will also vote in favor of Angle agEUR, to get it approximately a 10% gauge weight.

After the initial gauge weight for Angle, the initial liquidity provided by Angle protocol (500k€) will earn LFT rewards, as well as the agEUR deposited by future users. These rewards can be seen as an interest for the loan liquidity Angle provided on Lend Flare.

More in details:

With an initial open market buy of 20k$, angle could buy 6m LFT at current price, and have 6m veLFT in terms of voting power for the initial gauge weight (probably 8% of total voting power), if locked for 4 years.

With an initial gauge weight of 10%, an average total loan liquidity of 2.5 m€ agEUR on Lend Flare over the next 6 months, and a max boost (x2.5) given Angle locked initially 6m veLFT, Angle will earn 35000 LFT per day. Over 6 months, Angle could collect 6.3m LFT, more than the initial amount locked of 6m. Overall, at current price, it corresponds to a 8.5% APR yearly yield. Given Lend Flare current market cap (3.5m$), yield could be considerably higher with Lend Flare growth and the right market conditions.

We ask Angle to lock these rewards for at least a year. The first reason, we would like to onboard Angle as a long term partner, so we would like you to maintain at least partially your voting power overtime. Secondly, we don’t want Angle to trigger sell pressure on our governance token, given the recent launch of Lend Flare in march 2022.

4) Concerning co-marketing:

The main actions will be:

  • Create twitter space and have live AMA with Angle / Lend Flare communities.
  • Create joint Medium articles, explaining the benefits of both protocols working together, and how to provide agEUR on Lend Flare
  • Mutual communication inside both communities, about important news or incoming updates.

Voting options:

  • Yes for the full partnership
  • Abstain
  • Do nothing

The Lend Flare Team

2

Hey Julian, thanks for your proposal!

I have a few questions:

1) How does LendFlare have no concerns for assets being liquidated due to price fluctuation?

I’m not aware of any such mechanism and would like to know how this can work in a sustainable way. Maybe this comes from the fact that borrowers can only borrow tokens similar to the ones deposited in the Curve LP tokens?

2) Differences between LendFlare and traditional lending markets

This is rather a precision than a question. As I understand it, LendFlare has 3 types of interactions rather than the two traditional ones in lending markets:

  1. Deposit Curve LP tokens to get borrowing power
  2. Deposit classic tokens to give liquidity to borrowers
  3. Borrow classic tokens from the Curve LP token deposits
    The other aspect is that they are fixed-rates loans instead of having the rates driven by supply and demand. Why is that?

Except for the fixed-rate, how would LendFlare differ from traditional lending markets accepting Curve LP tokens as collateral?
Also, are only Curve LP tokens available as collateral, or other more exotic tokens can be used as well? If only Curve LP, how do you choose / assess risk of the different Curve LP tokens?

First thoughts

As I see it, the more “composed” tokens available as collateral are, the more risky the platform becomes as borrowed funds can be backed by unhealthy or unsustainable collateral. In our case, if doing an AMO on top of this it would increase the risk of having uncollateralized agEUR on the market.

Thank you for the proposal and looking forward to learn more!

3

Hi @tuta ,

1)

Yes, it’s more or less the reason.

A user can only borrow an asset which is in the curve LP used as collateral. Also inside the curve LP, all the assets have to be pegged to the same theoretically value.

For instance:
→ You want to borrow with steth-eth as collateral, the only option is to borrow steth or eth.
→ it’s not possible to borrow with tricrypto2 (eth+wbtc+usdt) as collateral, given usdt/wbtc/eth are not pegged to the same theoritical value (eth->eth, wtbc → btc, usdt → 1$)

It further means, that usd stablecoin/btc/eth markets on Lend Flare are completely separated. It’s going to be the same for the euro market with Angle.

In practice, it implies that the biggest risk for loan liquidity providers is the lose of the peg of an asset inside a curve pool (collateral value decreases)

In our V1, we launched the elementary version of Lend Flare app, with basic safety rules (no curve factory pool for instance) and no liquidation.
In our V2, we have planned a risk assessment process (rating of assets, similar to AAVE ratings), and to add more specific rules for borrowing.

2)

Yes, on Lend Flare, only Curve LP can be used as collateral, and only single tokens (existing in the Curve LP used as collateral) can be borrowed.
Concretely, 3eur (eurt+eurs+ageur) could be used as collateral on Lend Flare only to borrow eurt, eurs or ageur.

Concerning the fixed rate:
The rate is fixed and prepaid for the time of the loan, but at the time of the subscription, the rate users will get depend on the utilization rate of the asset you want to borrow. (Similar to protocols like Notional for instance, or AAVE fixed yield)
From a business point of view, team did it to give visibility to borrowers, given the low positive spread between borrowing rate/yield in some general market situations. It also prevents borrowers to suffer from borrow interest spikes in bull market conditions.

Concerning the distinct points of Lend Flare:

  1. We don’t have and so don’t lend our own assets (like Abracadabra with MIM).

  2. Curve LP collaterals keep earning yields from Curve and Convex. In V2, CRV/CVX rewards will be auto-compounded using CVXCRV (similar to the Concentrator by Aladdin DAO). We also plan to integrate the Convex alternative proposed by Stake DAO (based on CRV liquid locker). We concluded a partnership together, the proposal is visible here: Stake DAO proposal

  3. We aims to be a low risk plateform: restrictions on the collateral asset - borrowed assets pairs (see the beginning of this message), our markets are independent (usd stablecoin/eth/btc/euro stablecoin etc…), soon a transparent risk assessment policy etc…

  4. In V3, loan liquidity suppliers will receive synthetic assets similar to Alchemix alUSD and alETH.

  5. Concerning the tokenomics, ve-model, fair launch with only 2% for the team, decreasing inflation (50% for first year including all vestings, then 20% for the second year)

At the moment, Lend Flare team has planned to integrate only Curve LP as collateral, on top of Convex or Convex alternatives, like Stake DAO.

Concerning ageur, the only option at the moment is going to borrow it with 3eur curve LP as collateral

2 Likes
4

Re, 1)

Exactly. This is important to make sure that agEUR lenders on LendFlare understand that by lending on the platform they effectively take on the risk of EURs or EURt depegging. I see it as highly unlikely for EURt, but am not as confident for EURs to be honest.

In any case, this is a “hidden” risk in the sense that it doesn’t seem very straightforward from the point of view of someone just lending agEUR, and can hopefully be made crystal clear to users.

Leveraged Curve LP positions

As I see it the main use case would be to leverage Curve LP positions. In the 3EUR case, it would increase its TVL but also imply that the agEUR borrowed from it would be increasingly backed by EURt and EURs (as part of the pool), which is important to keep in mind as well.

About the AMO

In general I think letting users borrow tokens from Curve pool tokens is a good idea, and having 3EUR and agEUR made available on LendFlare would be great if risks are made sufficiently clear for users.

As with most AMOs, the goal for Angle should be to bootstrap liquidity rather than be the liquidity and have to roll over the AMO endlessly. To that extent, I think a 6 months AMO is too long and we should start with a 2 months engagement.

Then, rather than stopping the AMO all at once, we could find a way to reduce liquidity gradually depending on the overall situation for Angle and LendFlare.

5

Concerning curve LP as collateral for leverage, you summarize pretty much everything about it.

Concerning the duration of Angle AMO, we are flexible on it and 2 months is fine. For us, it doesn’t change much, and apart from the short-term financial aspect, we see the partnership more as a chance to work together in the medium-long term.

If no one has any other comments/suggestions about Lend Flare or the partnership proposal, I guess we can go with the conditions mentioned above.

1 Like
6

Hi Julian,
Concerning the vote options, could add options for partial partnership, that is to say provide the liquidity only and not buy LFT ?

7

Hello @Picodes,

The main goal of the LFT buy is to partially guarantee incentives for Angle users after the AMO. We have in mind Angle to have 10% of governance power (and so 10% of the daily incentives) on Lend Flare for the following months.

The thing is, without the initial buy, LendFlare team will still incentive agEUR deposits, to make it more attractive for users to deposit agEUR on LendFlare. But:

→ Without the initial buy, given the length of the AMO (2 months as discussed with tuta), if Angle locks its future AMO LFT rewards for 1 year, it will not be possible to reach this 10% voting power, and so 10% of the daily incentives.

→ Also, during the AMO, without the initial buy, it means less rewards for the agEUR pool, and so less agEUR deposits. Given Angle will supply an AMO, it means short term that the AMO will represent a larger part of the agEUR deposits, to the detriment of other agEUR users and more globally to our partnership.


Nevertheless, given the price drop between our initial proposal and today, it’s definitely possible to lower the initial LFT buy to 10k$, especially if Angle community agrees to lock the future AMO LFT rewards for 4 years (instead of 1 year).

1 Like
8

Hello everyone,

Following our discussion, we submitted our proposal on Snapshot.

Please have a look:
https://snapshot.org/#/anglegovernance.eth/proposal/0xccbfb488c3558d4f26a00dd658d3c4ef516fbca274de4b03477d90510f1a1413

The vote is live until June 8 12:00 am.

1 Like