Liquidity as a service consists in lending agEUR minted by the protocol as part of its algorithmic market operations. These agEUR are then matched to the governance token of the partnerring DAO to be put in a liquidity pool for a certain duration.
At the end of the program, lent agEUR can be redeemed by the protocol plus a fee decided upfront. The DAO gets the rest and assumes the impermanent loss on the pair.
As mentionned in the governance proposal about LaaS above, the benefit is that it increases the amount of tokens which are paired with agEUR, and hence utility of agEUR while helping the protocol make revenue. The risk is that if impermanent loss gets too big, it may lead to the creation of bad debt for the protocol (the protocol currently has a >=$5m surplus) so it can resist some bad events.
Paladin is a decentralized protocol specialized in the lending and borrowing of voting power across other protocols. It notably has a product called Warden to borrow veCRV voting power. They have recently made a LBP in which they launched their PAL token, and will soon release a product called Quest that will enable them to double down their offerings on Curve and later on any project that has a ve-model.
This proposal echoes a similar proposal made by Paladin on their governance forum for this program. I invite you to take a look as it’s super explicit.
Specifically, we would be lending 500,000 agEUR for a length of 3 month and at a 4% APR (which means 5000 agEUR of fees over 3 months).
If voted positively, the governance multisig will be minting 500,000 agEUR to be deposited on Ondo’s smart contracts. Ondo will then take care about pairing these agEUR with the PAL tokens from Paladin DAO.
We could then continue this program after the 3 months, in which case we will have to submit this to a vote.
Let us know your thoughts on this! We’ll soon open this to a vote, and will launch the program if it is also voted positively on the Paladin side!