We are proposing to be whitelisted so we can create a new Fuse pool for Debt DAO to deploy with USDC, and DAI as the base tokens. This pool will serve as the main liquidity pool for our DAO debt service.
Debt DAO is looking to hook DAOs on debt. We believe that the DAO ecosystem currently could benefit greatly from the introduction of uncollateralized loans in order to fund growth-stage DAOs. Only when there is a protocol hack do DAOs begin to explore debt financing, but we believe that the lower cost of debt should be used by early-stage DAOs during their growth phase, allowing many more avenues for innovation, growth, and funding of operations with little or no dilution of the community of token holders.
The average liquidity mining program will cost a DAO millions of dollars. While somewhat useful as a token distribution mechanism, they are usually using it to sell equity in order to buy liquidity. Taking a loan, even at 15% APY, to provide liquidity directly from their treasury would cost orders of magnitude less and the DAO retains upside in the success of their product. We expect this to drive high utilization and APY for our Debt pool and give depositors some of the highest returns in any lending markets, all backed by the DAO economy.
We already have a short list of several mid to large cap DAOs that we have been in discussions with that are potentially interested in taking on these loans.
We want to launch a USDC + DAI Fuse pool to serve as the liquidity source for our Debt service. We are interested in having anyone being able to supply liquidity and borrow against collateral like other Fuse Pools, while allowing Debt DAO to whitelist DAOs that undergo our due diligence process as zero-collateral borrowers.
The members of Debt DAO originally met through Llama DAO, the treasury management and account service DAO. We will be leveraging our knowledge/connections to do credit analysis and due diligence on DAOs who apply to our service, while conducting ongoing analysis on the deployment of borrowed funds.
Initial pool parameters (subject to to change):
Close Factor: 50%
Liquidation Incentive: 8%
Primary assets for DAOs to borrow
USDC Collateral Factor / Reserve Factor: 90% / 5%
DAI Collateral Factor / Reserve Factor: 90% / 5%
As an uncollateralized pool defaults can lead to potential losses to liquidity suppliers of their capital and accrued interest. Centralized stablecoins could be subject to regulatory scrutiny as well as censorship of the accounts that interact with the fuse pool.
Our whitelisting process will be public and auditable so lenders can withdraw funds if they do not agree with Debt DAOs decision
Members of Debt DAO will be providing $50k of initial capital to seed the pool so our funds will be at risk with everyone else's.
One Pager: https://docs.google.com/document/d/1Keb73wgkGq-NrAr4erEHrLt0UPtKxdknmfblmOfODbo/edit?usp=sharing
Multisig address: 0xA097856Ef35D368184DE4c3771E7F363B5Cb01E5
Pros: We’re looking to add an Arbitrum component that utilizes Nova, and the creation of this Fuse pool will potentially be a way for Rari to test Nova in production.