Unlocking $APE’ potential: Building a credit market with MYSO Finance
Ecosystem Fund Allocation
At MYSO, we are changing the way users borrow and lend. Our mission is to become the Amazon for crypto loans, where users can find a vast selection of loan options like nowhere else. By using the so-called Zero-Liquidation Loans primitive, we bring together borrowers who don’t want liquidation risk with lenders who want exposure to a payoff similar to a covered call.
Our core team comes from a varied background of finance and engineering and has several years of professional experience in crypto. We have a deep understanding of both DeFi and TradFi (in particular financial derivatives), which allows us to synthesize concepts from both worlds.
- Aetienne, Founder & Developer
- Jamie, Lead Full Stack Developer
- Mykola, Senior Full Stack Developer
- Denis Golub, Growth and Research
- Matan, Designer
- dominic, Operations and Partnerships & Author of this proposal
MYSO Finance is building a novel peer-to-peer DeFi lending and borrowing protocol, using Zero-Liquidation Loans (ZLLs). ZLLs are a novel DeFi primitive that allow (i) borrowers to borrow without liquidation risk and (ii) lenders to lend in underdeveloped credit markets with higher yield potential.
For DAOs, ZLLs are a powerful new tool to increase the utility of their native token and to enable them to use their reserves in a more productive and strategic way.
We’d like to propose that the ApeCoin DAO creates its own lending market for $APE, using MYSO’s v2 protocol. ApeCoin DAO can offer its community members access to non-liquidatable loans and thereby increasing the utility of the $APE token, while providing the ApeCoin DAO treasury access to a new yield source. If ApeCoin DAO is bullish on the sustained growth of $APE and wants to provide additional incentives to community $APE holders, a non-liquidatable lending market allows putting their treasury to use while attaining this very goal.
BENEFIT TO APECOIN ECOSYSTEM
By using above described convertible Zero-Liquidation Loan product, ApeCoin DAO can:
- Create credit markets for the $APE token without lengthy governance processes, oracle integrations, etc.
- Lend their treasury reserves in a more strategic way that creates value for the overall community.
- Provide a unique borrowing experience to the DAO’s community, without liquidation risk.
- Reduce selling pressure for the $APE token and incentivize long-term holding.
- Earn higher yield and improve capital efficiency.
- Fully customize and control the loans the DAO underwrites.
- Signal high conviction on the $APE token and participate in a possible synthetic buyback strategy.
ApeCoin DAO can use MYSO to create fully customizable loan offers to $APE token holders. For this, the DAO simply creates a lending vault and defines the loan terms at which it would like to lend.
For example, the DAO could set up a vault to lend out USDC (or any other token) and accept its native $APE token as collateral. The DAO treasury can create multiple loan offers concurrently and define at which LTVs, tenors, and interest rates they’d feel comfortable lending. Updating/deleting these loan offers is also possible in a matter of minutes.
The protocol fee starts at 0.1% and scales linearly to +0.4% for a loan with a duration of 1 year. To illustrate, the protocol fee for a loan with a 90 day tenor would therefore be at 0.2% of the collateral amount.
From a financial risk-reward perspective, the DAO treasury bears default risk that a loan may become undercollateralized and not be repaid. This resembles a deep in-the-money covered call strategy with a low delta. It’s worthwhile to mention that the risk premium is set by the DAO and can be hedged outside and independently of MYSO, if needed.
STEPS TO IMPLEMENT & TIMELINE
The following steps are necessary to set up an $APE credit market and can be completed with just a few clicks:
- Governance Working Group to create a lender vault on MYSO v2
- Governance Working Group to add the respective lending currency to the newly created vault (e.g. $USDC).
- Governance Working Group to create fully customizable loan offers/quotes by defining the accepted collateral currency (e.g. $APE), the lending currency (see previous step, e.g. $USDC), the loan tenor, the LTV and the fee structure (see screenshot below). It’s important to highlight that MYSO has created a Loan Risk Tool as well as a Loan Pricing Tool to support the ApeCoin DAO creating these quotes. Moreover, MYSO would also be more than happy to offer bespoke support in creating these quotes.
- Governance Working Group to delete/update loan offers/quotes where they see fit
It’s important to emphasize that MYSO is built with utmost flexibility in mind. MYSO not only supports multi-sig setups but also offers the option for the ApeCoin DAO to delegate loan quoting to an on-chain representative, where the DAO would only need to sign off the already created quotes. Additionally, there is also a whitelisting function that allows the DAO to create customized loan offers that can only be executed by eligible borrowers.
In order to enable meaningful borrowing capacity, MYSO would recommend seeding $250k. It’s important to note that the ApeCoin DAO retains full control over their lender vault, as well as the credit markets and loans they underwrite. The ApeCoin DAO also has the flexibility to withdraw their funds at any time, excluding the portion currently being lent out, or add more funds to their lender vault if they wish to do so.