Disclaimer – I am a member of the TFL team.
Context
Similar to the last community proposal, Degen Strats Part Three, this prop continues on the same theme: to bring better utility and liquidity to UST outside of the Terra ecosystem, further cementing it as a cross-chain stablecoin. One of the best ways the Terra Community can help UST growth on other chains is by seeding popular and innovative lending pools. The Terra Community pool is uniquely positioned to help with this expansion since UST can be lent out to kickstart borrowing demand and utility in these money markets, earn yield, and eventually return the funds back while leaving permanent distribution channels for further UST growth. As early supporters of these new projects, we most likely will also get rewarded with governance tokens and interest payments.
Seeding lending pools with enough capital allows lovely affects: 1. UST is positioned to become the cheapest asset to borrow in these money markets, a spicy proposition for those to choose UST over 3CRV; 2. Creates a new healthy yield source for UST lenders once these markets are established enough to no longer require the community pool’s involvement; 3. Sparks a cyclical effect - UST being borrowed raises lending yield, rising lending yield leads to more depositors, and more deposits make UST more attractive and liquid to borrow.
Similar to Rari Fuse on Ethereum, the Terra Community should seed the following lending projects that are putting a special focus on decentralized stables <3.
Market.xyz (Polygon, Fantom, Avalanche)
Market is an official Rari Fuse partner creating isolated lending and borrowing pools on Polygon and Fantom that will also soon be launching on Avalanche and BSC. Market has over $37m in assets lent on Polygon along with $68m on Fantom. Market is innovating in the isolated pool market through a dominant multichain expansion, unique pool based governance, and the ability to provide staked and auto-compounding LP positions as collateral.
With the help of Beefy Finance on Fantom, users can deposit auto-compounding UST LP positions and other assets as collateral on Market and borrow UST to use within DeFi or further compound positions. This is especially spicy given the Spookyswap and Spiritswap incentives proposed for UST/Luna pairs from this proposal.
The Terra Community should seed $10M UST into Market pools on Polygon, Fantom, and Avalanche for six months. At six months, or earlier if the community decides, funds and their yield can be withdrawn or extended. On Fantom, the Terra Community should seed the SpookySwap pool along with creating its own pool for borrowing against Terra-related Beefy Finance LP Positions. On Polygon and Avalanche, deposits should be made in the pools recommended by the Market team. Similar to Fuse, this creates an alternative way for UST depositors to earn interest on lending and allows better utilization of LP positions.
Total Funds: 30M UST
Transparency plan: Follow up posts in the Agora thread when funds are deposited into pools, along with monthly updates on UST utilization ratios and yields generated.
Themis (Ethereum)
Themis is a new project launching on Ethereum that created the first-ever money market for borrowing stables against UniV3 NFT positions - finally one can collateralize and degen leverage their LP positions. Themis plans to treat UST, FRAX, and (hopefully) MIM as first class riders over 3CRV stables. This means UniV3 LP positions that contain UST, FRAX, orMIM will be whitelisted as collateral first and be prioritized through rewards.
A good example would be the UST/USDC LP pair, users are able to collateralize their LP and borrow up to 65% in supported stablecoins like UST and other whitelisted assets, which makes the current UST/USDC pair at least 165% more capital efficient.
Themis will be bootstrapping its lending liquidity via Lockdrop & LBA pioneered by the Delphi Digital team and utilized by Astroport. In a Themis x UST x FRAX x MIM partnership the Terra Community should seed $10M in UST deposits to Themis for 9 months, which FRAX will be doing as well, to help improve utility and liquidity of UniV3 UST positions.
Total Funds: 10M UST
Transparency plan: Follow up posts in the Agora thread when funds are deposited, along with monthly updates on UST utilization.
Risks
Smart contract risks: Both projects have had their smart contracts audited by reputable 3rd parties. Themis will be launching ImmuneFi bug bounties as well.
Borrowers default: Themis will be whitelisting selected V3 LP pairs that fit their risk model of liquidity, reputation, and volatility to ensure the safety of our lenders. Their liquidation kicks in at 80% ensuring that borrowers are always over collateralized at any given time. Market will set LP positions to 65% LTV and Stable deposits to 80% hence lenders are also always overcollateralized in most circumstances besides black swan events.
fin
All funds withdrawn from the Community Pool will be kept in the following Terra multisig wallet: terra1jrhxdtwxrsxw3t2al6t3sga89974juhpccuxct
The multisig wallet on Ethereum is: 0x9538D438d506Fc426dB37fb83daC2a0752A02757
Both multisigs will be controlled by 5 members with 4/5 quorum required: @JeremyDelphi, a member of the TFL Finance team, myself, @Papi, and @lejimmy
If you’re interested in the individual wallet addresses that control the multisig you can find them by looking at the multisig’s address on Terra Finder.
Transparency plans for each proposal have been listed to keep the community aware of fund allocation.
Happy to hear feedback from the community on these strategies and if you’d like to see more.
tldr
MarketXYZ: 30m UST to seed lending pools on Polygon, Fantom, and Avalanche
Themis: 10m UST to seed lending pools
Total funds: 40m UST