vUSD/vETH Lending that changes the game

Locked LP Tokens for Loans/Credit

Poll Social Media asking which top pairings they would like to see on Liquid which will be a mix of Value pairings and non Value pairings. Small sized sample to Beta Test for launching of full release.

We will go off the assumption that Value incentives for providing liquidity will be very limited and could handicap massive incentives (APY) for launch. Take this with a grain of salt but Value has been said to be fully dispersed in less than 3 weeks. Also to premise this idea will go hand in hand with the tech and innovation behind Phase 2 Vaults as well as Value Liquid. The goals and ideas below will try to make the Value platform a full circle and a one stop shop to maximize your Defi gains and bring more revenue to the Governance Vault holders.

Liquidity added to Value Liquid in the form of both assets at the set ratio of the flexible pool or single asset being provided will always face IL. They will always earn swap fees for providing their liquidity. Flexible Farming in P4 of Value Liquid will allow users to swap between LP tokens for better farming opportunities without ever leaving the Value Liquid platform at the click of a single button.

Here is the next step in providing liquidity with my plan; Liquidity providers receive VLP on Value Liquid, UNIv2 for Uniswap, BPT from Balancer, and SLP from Sushi will all be accepted LP tokens for Value Vaults in the near future.

Introducing the Value LP Vault:

  • Liquidity provider tokens are locked into this Vault in exchange for a loan or line of credit in vUSD or vETH.

  • Need an Oracle Partnership preferably with LINK to get the price of vUSD stable around 1$. vUSD and vETH become crypto backed assets and now provide a use case instead of just another elastic coin similar to established AMPL.

  • These locked LP tokens will be utilized by the innovation and tech coming from P4 Value Liquid and P3 Value Vaults to automate the best utilization of the LP tokens across multiple platforms. The locked LP tokens stay within the Value ecosystem and LP providers are in return getting an accessible loan for their assets. To receive the LP tokens back users must return the loan simply put and I suggest when a user falls into the “liquidation zone” the assets remain locked in the ecosystem to maintain liquidity permanently. Selling the asset off and other parameters for mechanics will need to be thought out carefully and some will need a community vote to gauge how the platform should be maintained preferably through a singular or multiple DAO’s

  • So what other incentives besides having your LP tokens locked into this Vault will there be? Rewards earned through the innovation and tech behind Vault strategies should be used to help buffer and maintain the LTV ratio minimizing the chances of being liquidated and assets lost forever while also extending this credit line over time if the user shall want to take on more debt in the future. When the user wants to pull out from the LP Vault they will return vUSD with interest to unlock their initial LP tokens with the rewards gained.

  • How does this help Gov Vault holders? Well the 6.7% is a starting place we have for the Value Vaults and a reference point but I think we need to allocate some of the cut for a Value Debt Fund to keep a balancing check for downturns in the markets and keeping enough $ to cover failed debts. Also when Value becomes a limited supply and buying them back dwindles down vUSD and vETH can still be distributed as APY through rewards from the Value Ecosystem. Perhaps more thoughts into Gov Vault holders dumping vUSD and vETH can be added through a discussion from this topic.

  • A burning mechanism for returned vUSD will be in play to keep the stability and backing of the vUSD as close as possible to 1$. LP tokens with a Value pairing should be able to get 10-15% more on their loan then non Value pairings. Whales and all users will love to be able to get competitive loans for providing LP tokens and a safeguard of not being liquidated by stacking their rewards earned onto their starting liquidity.

Closing thoughts

This implementation of being able to lock LP into the Value ecosystem and receive a loan while earning rewards will make Value a top echelon protocol. No other competitor is offering this in the market and they do not have the tech with Vaults and swapping LP tokens seamlessly to optimize farming for the best APY possible. This is a light framework that needs more technical help and thoughts on how to maintain this lending service but this idea will keep liquidity within the platform for a long time bringing Value to the forefront of innovation in Defi. Liquidity is going to be key and the more we have on the platform the better the rates for all users wanting to make swaps/trades and being able to get a loan will attract an absurd amount of users. Other platforms will want to go through Value whether it be routing the best APY for LP tokens and seamless swaps or taking out loans for leverage with their own users liquidity they provide on other platforms.

-Written by Whose Forgotten

14 Likes

I think this is great idea. It increases use case for vUSD, vETH and ultimately adds value to governance vault holders, all liquidity providers and prospective liquidity providers / VALUE investors. It really is a win win for everyone. Being able to use LP tokens as collateral would be a huge step forward and take the protocol to another level.

It becomes massively complex of course as you combine LP tokens / impermanent loss / elastic supply coins in to one so would probably make sense to stick with high volume, stablecoin LP tokens initially simply to prevent a situation where people get rekd as soon as they take a loan with the entire market dropping combined with a vUSD / vETH rebase wiping value too. Biggest obstacle to this working is probably user education and the sharp learning curve attached. For that reason marketing it would be important as there’s a risk others can come along and do it better with a simpler interface.

First mover advantage in LP token lending could be key as once people take on a loan, they won’t be in any rush to pay it back if their rewards eclipse interest repayments - so you could potentially have those customers for a very long time.

3 Likes

This idea would negate the entire elastic rebasing function and complexity it would bring. Also I had previous drafts that included having an approved asset for the loan but the idea expanded into LP tokens and the same would apply. Which LP pairings the team could optimize the best with their strategies should be the ones approved for these loans USDC-ETH, ETH-WBTC, so on and so on. Also something to help prevent liquidation in down markets is starting with a lower LTV ratio on the collateral as to not expose the debtor on too much personal risk which things and parameters should be discussed on what a good starting point would be.

I think the team is digesting this and would love to further this idea

3 Likes

Thanks for good and interesting idea. Let’s discuss further on this.

2 Likes

Where can we start? Maybe with the elastic and rebasing function?

Does the rebasing plan interfere with this proposal or any ideas on if it can be added in the mix? The rebasing function coming from experience based off Ampl is very binary and simple in terms of the functionality of supply and demand. What are your thoughts on if rebasing could be sprinkled into this?

1 Like

There is a new protocol/token from Andre Cronj : https://twitter.com/AndreCronjeTech/status/1306596538550943751

Could something like this be useful? Or this would be quite a pivot - from “being ampl” and rebasing on price demand to just rebasing on how much demand for loans based on how much LP is being provided, essentially being a stablecoin printed/destroyed and so stable, not exactly ponzi-rebase-game mechnics.

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Or, actually , theres not a great need for 2 “ponzi games” imo. AMPL had it’s fun, it might come back… but then the others, ympl, rmpl, based, yam… basically all shit/dead all just literally ponzi games and competing with each other too with no usp. Maybe we could keep vETH to be the ‘ponzi game’ if people really want one - it’s actually eth so that’s it’s usp rather than being $, and have vUSD as the rebase-on-loans-issued token (so no risk for people taking it, they are not ALSO playing a ponzi game gamble and risk losing their LP or unable to pay back a loan etc etc.

isnt this just Andre’s DAI? except it can take any collateral other than ETH

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Yes it is , I just meant it a an alternative form of rebase, or to adapt that so our token rebases up and down with loan issuance basically. Other forms of rebase are possible

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The only problem is that we already have been minting vusd/veth without anything to back it and we will continue to mint the entire supply, then what?

To implement DAI we need to start fresh and we could not just hand it over like we hand over vusd/veth

This is interesting - liquidation risk will be a hassle with regards to rebasing

Interesting idea for sure. I was just mentioning in telegram that another excellent form of yield for the Gov vault would be using the VALUE as collateral to automatically buy AAVE over collateralization liquidations which are at a discount and then sell them right away and return the profits to the Gov vault by market buying VALUE and splitting the profits among stakers or do a burn. I suppose if Value Liquid offered its own lending identical to AAVE then it would be all possible within the same platform which would be ideal.

1 Like