What is the link to the voting site for this and future proposals please or is that not yet live? Super-excited about this btw
Tokened treasury funds as collateral is a really great idea, i like it!
The on-chain vote will go live on Tally after the C4 audit concludes:
I’m waiting for you on the moon
Really interesting idea. What are the benefits of investing via the tokenized version as opposed to just buying the underlying ETF?
And are you setting up liquidity pools for redemption or how does the redemption process work exactly?
Assuming a YTM of 4.3% (after fees) and OBFR being close to that on average, it seems that the max leveraged position to the borrower would lead to 8.80%. This is good but far from great due to the funding risk.
I would suggest to put the collateral factor at 92% so people can safely leverage up to 90%. Indeed the underlying fluctuation is very limited. It would require an unexpected jump in interest rates of 7% to trigger liquidation. Unlikely.
It is my understanding that most of the volume in borrowing will be done by sophisticated actors. I would argue that the 100% utilization interest rate would be better at OBFR +100bps. Borrowers will quickly unwind when the trade is no longer beneficial especially as the transaction fees are 0% (assuming SHV YTM was somewhat stable).
I would also set the kink to 90%. At the current setup, while OSDG would earn 4.30%, lender would only get around 3%. With 90% it moves to 3.4%
Both the proposal (kink at 90% and max interest rate at OBFR+100bps) are increasing the liquidity risk for lender. But it would also increase their return. This is a new protocol and lender will require some risk premium, the liquidity risk will be, in my view, less a concern.
Thank you for your suggestions @SebVentures. Based on your suggestions, the team decided to update the proposal as follows to increase returns while incentivizing repayments when liquidity is too low:
- OUSG LTV: 90% → 92%
- USDC/DAI IR model kink: 80% → 90%
- USDC/DAI rate at 100% utilization: 2.5 * (OBFR - 50bps) → OBFR + 300bps
Bullish. Love the tokenized treasury lending model.
Trying to catch up on everything in this thread. How does moving the kink up to 90% utilization improve lender returns? My first order assumption is that it should decrease USDC/DAI lender yield since the borrow is cheaper.
Ultimately market will dictate the terminal rate - I’m not sure funding risk changes too much by adjusting the rate kink to 90%, and doing so would add capacity to leveraged OUSG strats. USDC lenders on compound are making sub 2% in arguably riskier pools.
Onboarding OUSG market cap is clearly the goal here so fattening the yields for holders is good.
@FluxFinance - I’m assuming the IR curve proposed is for borrower rates. Could you clarify if the proposed curve also applies to lender rates? And if so, is the protocol configurable to earn a spread here?
Finally, on liquidation - IIRC Compound pays 5% of collateral as reward to the liquidator, I think this would be significantly overpaying given the quality of collateral, and expected position size. The best implementation I’ve seen is the Euler dutch auction, but if that’s too much tech lift the reward % parameter should be brought way in imo (1% maybe?).
Utilization marks the difference between what the borrower pays vs. what the lender gets.
At 80% util and 10% borrow interest the lender gets 8% (less fees)
At 90% util and 10% borrow interest the lender gets 9% (less fees)
You should read compound docs imho, not to say helpful people won’t answer you here too but it would answer nearly all of your questions without kind derailing the thread.
I would rather ship this fast in terms of the parameters (Seb’s suggestions are all gold w/ his track record), rather than trying to hyper optimize right now. Way more important to get usage testing + audits done ASAP.
Not say that stuff isn’t important, would not be surprised at all if FIP-0X would be something related to parameter optimization. I would love to work on it (I work on risk modeling).
Unless we’re using terms differently than elsewhere in defi lending, utilization refers to the % of the usdc/dai pool that is lent out, not the ratio of borrower/lender interest rates.
You’re describing the Reserve Factor - which is in fact what I’m asking about and hasn’t been touched on yet.
Respectfully, I’m familiar with comp docs and don’t think anything I’ve raised really “derails” the thread and I think it’s all reasonable to bring up.
I generally agree with you that parameter tuning isn’t the most important thing to launch and just getting something out is a fine approach, but thinking through initials and challenging our assumptions is good.
We’ve updated the original proposal to reflect additional parameters:
- Reserve Factor: 0%
- Liquidation Incentive: 8% → 5%
- USDC & DAI: 2.8% → 1.75%
- OUSG: 0% (N/A since it’s not borrowable)
Given the proposed markets, we can reasonably expect that the effective borrow rate, rather than the absolute amount of borrowed dollars, will dictate utilization. With this in mind, the kink does affect the lending rate.
Let’s look at an extreme hypothetical example:
- Protocol has 100 USDC in the pool
- Borrow rate is 10% at the kink and much higher at 100% utilization.
- Assume borrowers are willing to borrow as much as possible up to 10% borrow rate at equilibrium.
- (A) Kink at 10% utilization
- (B) Kink at 90% utilization
In (A), only 10 USDC gets borrowed (otherwise borrow rate > 10%), so lenders collectively get 1 USDC in interest (1% lending rate). In (B), 90 USDC gets borrowed, so lenders collectively get 9 USDC in interest (9% lending rate).
While the borrow rate is the same in both variations, the kink affects the lenders’ cash drag, and therefore affects the lending rate.
We agree with @SebVentures’ suggestion to prioritize returns over liquidity, and therefore updated the proposal to move the kink to 90% (therefore reducing cash drag).
Our C4 audit concluded yesterday!
We expect to receive the audit report early next week, and once any findings are resolved, we’ll move the proposal to an on-chain vote on Tally: Tally | Ondo DAO
To incentivize early community participation in light of gas fees, we’re also proposing a 100,000 ONDO reward pool for those who delegate and vote on the genesis proposal. The pool will be distributed evenly for each action (i.e. irrespective of voting power). Delegating and voting will count as separate actions, so wallets that self-delegate and vote will receive two ‘entries’ in the pool.
Is this safe? Have you cleared the audit?
Thanks for the illustration - hadn’t considered the cash drag.
Having read through the plans, it seem like a good way to start things up.
I’m IN ! Next ? What is the timeline on implementation?
Is anyone had a problem to delegate Ondo tokens to vote, I got an error popped
Looks like great idea
No worries, welcome to the community!