To elaborate, if the grantee does not maintain the project and is not reachable, the community should be able to be granted authority to maintain it, right?
For zSOL Program, it would eventually be an immutable program. At the initial stage, the stability fee and deposit fee are customizable and can be decided by the DAO.
However, these would be eventually computed by a formula on-chain, which needs more careful consideration after launch. Of course, this would be reviewed by the DAO and the decision is also upon them.
1. Stability Fee Formula: Based on zSOL/SOL ratio, mSOL APY 2. Deposit Fee Formula: Based on deposit value, mSOL APY
After this is complete, which would be months after launch, LP Finance would not suffer a risk even if our core devs go silent. And I believe that is a key component of DeFi.
Additionally, the part where you mentioned
I do not find any problem. zSOL program would be open-source, and the community can fork the project to continue and attract liquidity from the existing program. If forking is not exactly what you mean by āprovide continuityā, Iād like to get a more detailed explanation on this.
We meant that, whatever the Marinade DAO funded, should continue to exist independent of the grantee, and that the community should able to use it regardless of the grantee being around or their decisions around it.
Some examples I can think of:
An open-source command-line application that anyone can build and run;
Something that builds on Marinadeās SDK;
An application that depends on a centralized server for offchain calculation, which the grantee pays for, but where the calculation service itself is open source and could be run by someone else;
A fully open-source onchain product that the community can fork and support if it decides it has value, in case the were to not support it anymore or decide to rip out whatever Marinade integration there was;
The short version is that whatever the Grant Committee funds should be able to continue existing and operating independent of the grantee, their decision to continue supporting it (or paying a service) or, in this case, decisions that another DAO might make.
If it helps as a razor: if thereās a switch anywhere the grantee could flick off, and the mDAO community couldnāt flick back on again if they wanted, then mDAO canāt provide continuity.
While Marinade could fund closed-source projects, or those where continuity isnāt ensured, those are beyond the purview of the Grant Committee and need to go through the governance process.
Thanks for the clarification. As explained in the previous reply, LP Finance meets all the requirements, therefore there are no issues being unsuitable for the grant. Are there specific concerns that you have about LP Finance, which might violate the requirements?
I havenāt dug into the specifics and this is fully on the committeeās hands - if they deem it qualifies, great!
I did want to clarify what we meant by the criteria, to be sure you were aware of it, and given this is one of the first grant requests that we have gotten. Itāll likely be useful for future grant applicants to have a description they can fall back on.
Can you elaborate a bit on this part please? What makes you so sure that increased leverage staking yields will lead to more mSOL adoption? How many wallets are currently looping mSOL?
It is a no brainer strategy to leverage liquid staking yield with no liquidation risk except smart contract/oracle risk, if you are ok with being exposed to SOL price.
Data from Solend also shows that most mSOL deposits are borrowing SOL against their mSOL. LP Finance will be able to offer much better rates as long as there is liquidity for zSOL
To look at leveraged staking usage, I will use Solend as an example.
Current collateral compositions on Main Pool are as follows - USDC: $93.0M - USDT: $23.4M - mSOL: $64.1M - stSOL: $72.9M
Total borrowed SOL is $61.6M.
Here, we can assume SOL borrowers are either taking short positions or leveraging staking yields.
If all USD deposits are shorting SOL at 20% LTV, the total SOL borrowed for short-selling would be $23.28M.
Therefore, the remaining $38.32M (62.2%) is borrowed for leveraged liquid staking.
Assuming users used max leverage, total mSOL + stSOL required for collateral would be $51.09M.
This means 13% of total supply of stSOL and mSOL circulating are used for leveraging staking yields. This is only on Solend.
Additionally, the demand would rise as staking yield and loan interest delta increase.
At current rates, - mSOL Yield: 5.7% APY (6.87% if LM accounted) - SOL Loan Interest: 4.42% APY (2.58% if LM accounted)
the delta is not huge.
However, with LP Finance, the yields would be higher and stable, bringing more leveraged liquid staking adoption. As explained above, this strategy is already widely used, and LP Finance is at a competitive position to take big shares off it.
Mango hack is a good point. In fact, LP Finance has always been conservative on collateral onboarding. The collateral requirements are as follows
Non-bridged assets
Not backed by centralized assets
Sufficient liquidity (If deposit cap sold instantly, price impact should be smaller than 10%)
The third criteria allows LP Finance to stay safe, as, in the most dramatic situation, the protocol does not have to carry on bad debt. If commenting on systemic risks, it would be better if a detailed scenario is given so that we can explain better.
Also for what @dobby has asked, I provided a clear explanation on the comment above.
This would set the precedent for the 100s of projects that are about to launch on mainnet to request a grant just because they utilize mSOL in some way
With all due respect, I am not sure where this sense of entitlement comes from? After all, your protocol is pre-mainnet with 0 TVL. My understanding of mDAO grants is not that this some kind of shadow VC in disguise.
I also donāt see something particularly novel in your protocol approach that would justify an early-stage investment. As you acknowledge, there are already protocols that allow for these strategies. Your self-proclaimed USP that āLP Finance allows users to borrow at the lowest interest rateā is something I would suggest to observe play out on mainnet.
LP Finance does allow users to play out this strategy. If you take a look at how stability fee works while allowing zSOL to scale, you would be able to understand.
Additionally, the protocols that allow this strategies are all lending protocols. As far as we know, there are not synthetic asset issuance protocols that allow users to play out this strategy.
And yes, LP Finance is pre-mainnet, but this grant is not the form of any VC investments. Our development is complete, and we are requesting the grant in order to boost the initial scaling process, which is mentioned here.
LP Finance might experience high demand on leveraged liquid staking, which means zSOL sell pressure would be too high for initial liquidity to absorb. As zSOL is minted, staked LPs earn APR as follows.
More importantly, how would mSOL benefit from this? This reasoning is also clearly outlined.
zSOL will allow LSD leverage strategy to grow, which means more people will stake with Lido or Marinade.
If Marinade provides grant and incentivizes mSOL users on LP Finance, mSOL would be able to take dominance over stSOL.
Even if the grant is not given, as LP Finance advances mSOL for liquidation engine, Marinade Finance would still benefit.
To organize, LP Finance growth is directly related to Marinade Finance. If Marinade Finance can provide a grant of ā$10,000 to boost the growth, it is a very good deal. Also, the funds are not the only thing in grants. We expect marketing support, which would be worth more than $10,000.
Ser, I was being polite. āLetās see how it plays outā = I donāt think it is an attractive value prop for users (to borrow at 1.5% + slippage with a new protocol, vs. 2.2% & no slippage at a lindy protocol)
You say this like it is a bad thing?
FWIW, previous attempts at these strategies on Synthetify have shown little demand from users (and thatās a generous classificationā¦)
I therefore would advise the DAO to exercise caution.
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Side note: If this strategy is launched with externally subsidized incentives from Day1, it will be impossible to tell whether there is PMF or not. So another reason why I think it makes sende for mDAO to re-consider the proposal a few weeks post launch on mainnet.
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Whatās the verdict from the prospective grant committee member, I wonder?
Even more importantly would be the question how many incremental users would employ such a strategy, and why. (Per my ballpark, it is barely more attractive than current looping.)
Sure, we are happy to follow the consensus of mDAO. However, let me correct a few parts.
Synthetify uses āglobal debt poolā like Synthetix. LP Finance uses a completely different model, therefore sacrificing exact swap (oracle based), but better in leveraging positions and scaling.
I am not saying lending protocols are bad. If you look at the āreal rateā, loan interests are volatile, and in bear markets, it is likely for it to spike, which brings loss for the strategy (I experienced it).
And here, we know that the slippage would exist at the initial stage. This is why MNDE grant would be helpful for attracting LPs. Even if MNDE grant is not given, the protocol would be able to scale fine. But we just want the additional boost for a smooth landing. The loss occurring here would not be us, but mSOL users.