BIP#27: Proposal to Add Additional Tokens for Borrowers to Borrow

Final BIPs
,
#1

Author: 0xcchan
Date Created :February 23rd, 2023
Date Posted: April 11th, 2023
Reference: Add Additional Tokens for Borrowers To Borrow

Proposal Background:

BendDAO has been a leading NFT lending protocol with high transaction volume and NFTs on the platform. Currently, users can only borrow ETH against their NFTs which is understandable since this is the de-facto currency for majority of the NFT transactions. However, we note that there has been an increasing preference for stablecoins as well, primarily USDC and USDT as seen from other platforms such as Paraspace.

Brief Analysis of stablecoin demand on Paraspace

Paraspace Cumulative Borrowed Value
Link: https://dune.com/queries/1954258/3226316

According to Dune Analytics, cumulative volume borrowed on its platform stands at:

  • WETH: $13m
  • USDC: $7.38m
  • USDT: $3.93m

Evidently, there is a clear demand for stablecoins as an alternative. The pools on Paraspace for USDC and USDT are also utilised at 60.1% and 63.46% respectively.

To empower BendDAO to remain at the forefront of NFT lending, this proposal suggests expanding the collateral options available on the platform to bring additional demand and liquidity to the protocol. To begin with, USDC will be offered as the new venture before proceeding with USDT should there be high demand on the platform. This enables borrowers to have access to USDC and attract more lenders who prefer to loan stablecoins instead.

Goals of the Proposal:

  • Create a USDC vault for lenders/borrowers to utilise
  • The following parameters are suggested as a guide for USDC

Borrow Interest Rate:

Uoptimal Ro Rslope1 Rslope2
ETH (Current) 80% 0 8% 100%
USDC (New) 85% 5% 8% 100%

With the other parameters constant, only UOptimal and Ro are different (but similar to Paraspace):

  • UOptimal can be increased given that these are stablecoins and prices will not be as volatile.

  • Base rate for USDC can be placed at 5% to incentivise borrowing volume on the platform as an initial trial. This is aligned with the T bill rates and provides an attractive option for lenders too.

I believe this also provides a good testbed for BendDAO to experiment with more competitive parameters and interest rates to maximise capital efficiency of the pools on the platform.

Risk Parameters: Same with existing collections

** The ETH will be denominated in USDC based on prices derived from Chainlink feeds.

** Borrowers will be required to repay in USDC

  • As for the bootstrapping of liquidity using $BEND Tokens on the liquidity pool, we suggest an initial formula of an average weighted distribution for a equitable distribution :

(Volume of Pool/Total Volume of All Pools) * Number of $BEND Tokens Distributed

  • Should the USDC vault witness surging demand, BendDAO can implement the same modus operandi by opening a USDT vault with the aforementioned parameters. This will be left for a subsequent governance proposal in the future.
  • Yes
  • No

0 voters

1 Like
#2

I think it needs to be implemented immediately

#3

looks like if no stable coin liquidator, the ETH liquidators can hedge the ETH price to join the liquidation, so I would like to vote yes for this.

1 Like
#4

how to incentive stable coins pool is another important thing to included here, if the protocol need to be competitive in stable coin borrowing, that means it has be token incentive like ETH pool.

So looks like we need to get some of the bend incentive tokens from 40% of the total incentive tokens to reward depositors and borrowers of stablecoins, and the revenue generated by the protocol need to be shared to veBend as well.

2 Likes
#5

yes, it is necessary to share the token for all the groups, this will encourage everyone to use the protocol better, if compared to the paraspace, we are at the forefront and we have the advantage position in encouraging the use of the protocol to receive reward tokens

1 Like
#6

Can I vote yes twice

#7

Thanks @PirateCode!

how to incentive stable coins pool is another important thing to included here, if the protocol need to be competitive in stable coin borrowing, that means it has be token incentive like ETH pool.
So looks like we need to get some of the bend incentive tokens from 40% of the total incentive tokens to reward depositors and borrowers of stablecoins, and the revenue generated by the protocol need to be shared to veBend as well.

  • For the distribution of $BEND tokens to incentivise activity on the stable coins, we can still adhere to the same formula in the post : (Volume of Pool/Total Volume of All Pools) * Number of $BEND Tokens Distributed. This ensures an equitable distribution, and since ETH has been the de-facto transaction currency for NFTs, there is not a need to intentionally overtly shift this dynamics, so we can understand the actual demand for these pools.
    Rates on BendDAO have also been the most competitive relative to the other platforms and I believe, it is sufficient to attract both sides of the market given that these are stable coins which provide a much safer hedge.

Ref Link : Tweet by Paraspace on the Comparison -https://twitter.com/ParaSpace_NFT/status/1640812446721146880/photo/1

  • Platforms such as Paraspace have also witnessed organic activity without the need for additional incentives and I believe this launch provides an opportunity for borrowers to move between these platforms to arbitrage the differences, and this attracts depositors to provide the necessary liquidity.

  • As for the revenue generated, likewise, it can be shared in the similar way as ETH to veBend with the following:
    a. To earn 100% of USDC income collected from NFT-backed loans (30% of borrowing interest).
    b. To earn 50% of USDC income collected from NFT exchange fees (2% of the sale price).
    c. To earn 50% of USDC income collected from NFT down payment fees (1% of the sale price).

Ref Link - Bendenomics - Portal

Should there be no objection by Tuesday 23:59 (UTC), I will proceed to add this to the post and create a subsequent snapshot for the community to vote and decide.

1 Like
#8

cool, LFG. I agree with you that we should push it forward.

2 Likes
#9

Guys, BIP#27 voting is passed. Here’s the roadmap for the implementation plan which comes from dev team:

:white_check_mark:1) Listing & Testing USDT on Goerli Testnet.
:hammer_and_wrench:2) Evaluate interest rate models and risk parameters for USDT.
:hammer_and_wrench:3) Security audit for the lending protocol to support stablecoins;
:hammer_and_wrench:4) Updating the Front End to support USDT.
:hammer_and_wrench:5) Creating adapter contract to support swap debt from ETH to USDT;
:hammer_and_wrench:6) Listing & Deploy USDT on Mainnet.

The dev team will update the development progress in time, welcome to put forward your suggestions.

1 Like