This was great as explanation, albeit pretty much over my head.
I’ll watch the videos, but I hope that your response actually helps someone more knowledgeable than I am in better understanding and being able to provide better insight.
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Hi @LiveFast9986 , I appreciate your feedback, and apologies if I couldn’t provide a clear explanation. Let’s go through an example to help you understand the concept of Zero-Liquidation Loans:
Assume you hold $100 worth of $APE in your wallet and you need some short-term liquidity but don’t want to sell your $APE as you are super bullish on $APE and its ecosystem. You essentially have two options:
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You can use a traditional DeFi lending platform, pledge your $100 worth of $APE and borrow e.g. 60 USDC (60% LTV). Traditional lending platforms have a liquidation threshold in place: if the price of $APE falls below a certain threshold, for instance, let’s say 65% in this example, the platform automatically sells your collateral/your $APE tokens to cover the outstanding loan. Now, let’s assume the price of $APE drops to $63 but then quickly rebounds to $85 the next day. In this case, your collateral would have been sold to cover your loan, and you wouldn’t be able to get your $APE tokens back.
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Now, let’s compare this to Zero-Liquidation Loans: When you utilize MYSO, you’d also pledge your $100 worth of $APE and receive a $60 USDC loan. The key difference with MYSO is that these loans have a fixed expiration date, and during the loan term, your collateral is never forcibly liquidated. In the previous example, even if the price of $APE drops to $63 and then recovers to $85 shortly after, you, as a borrower, will always be able to reclaim your collateral during the loan tenor (if you wish to do so).
Zero-Liquidation Loans therefore act as a mutually beneficial risk transfer mechanism, in which the loan liquidation risk is transferred from the borrower to the lender, and the lender thus earns a yield for bearing this risk. However, it’s important to note that MYSO operates as a peer-to-peer lending protocol, which means each lender defines their own risk/terms for every loan offer that they make!
Please keep in mind that this is a simplified explanation. For a more detailed understanding of how ZLLs work in various scenarios, such as when collateral prices rise, fall slightly, or fall significantly, you can visit https://www.myso.finance/, where we provide more comprehensive explanations.
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This is a simpler explanation, which is what is needed. It will definitely bring practical benefits to $APE holders. Everything, of course, will depend on the rates, whether they will be interesting in comparison with other platforms. But zero liquidation in this case will give a significant advantage
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So it operates the same way that NFT-collateralization platforms have already been operating?
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hi @StrawberrySith yes correct, the underlying no-liquidation mechanism is quite similar with NFT-collateralized platforms!
Hi @dominic,
The community feedback period for your proposal would be ending in approximately 24 hours.
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If you’re content with the feedback received, your next steps are to finalize your proposal using the AIP Draft Template.
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A moderator will reach out to the author to finalize the AIP Draft. Upon receipt of the final Draft, we will review and provide instructions on the next steps.
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Are you ready to proceed to the next phase or do you wish to extend community discussion for another 7 days?
We look forward to hearing from you.
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hi @Chris.Admin thanks for following up on this. From my perspective, we can move forward with this proposal (should already be in the right format/template). Please let us know if there is anything else needed from our side to proceed. Looking forward to next steps & best regards, dominic
This topic was automatically closed after 7 days. New replies are no longer allowed.
Hi ApeCoin DAO Community,
@dominic has completed editing their AIP Idea to be their AIP Draft.
Follow this Topic as further updates will be posted here in the comments.
Kind Regards,
I spent some time looking at this proposal and reading the MYSO website. Here is what I inferred:
- Borrowers post a different cryptocurrency as collateral and cannot be liquidarted
therefore, the DAO relies on one of the following to be true:
- The borrower repays the loan on their own free will because they’re presumably good people
- The borrower is compelled to repay the loan because the underlying collateral has become more valuable than the cryptocurrency they borrowed
In a way this is betting against $APE? If the DAO did get into lending IMO it would be via a properly organized venture vs. directly lending out the treasury. As such, it may not be possible to move this proposal to vote as currently written.
One other consideration is that there is some degree of risk we’re accepting when putting tokens into a smart contract. The contract is audited by a few companies but that was also the case with ParaSpace and others who have been hacked. Doing smart contracts safely is very challenging and requires a combination of defensive coding, audits, blockchain monitoring, on-going pentesting engagements, and a comprehensive response plan.
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Hi @secengjeff many thanks for taking the time to review the proposal and for your valuable comments, very much appreciated. Happy to address your comments:
Yes, that’s true – the borrower is pledging $APE as collateral and will be borrowing a stablecoin or ETH (or any other lending currency chosen by the ApeCoin DAO).
With Zero-Liquidation Loans, the borrower has the option (but not the obligation) to repay the loan. A rationale borrower will be repaying the loan if the collateral is worth more than the borrowed amount. At expiry, if the loan amount is worth more than the collateral amount, a rationale borrower would not be repaying the loan. In such a scenario, the lender (e.g., the ApeCoin DAO) can claim the collateral (e.g., $APE), akin to a buyback strategy implemented by various DAOs. However, it’s important to mention that the ApeCoin DAO is defining its own terms at which they would be lending (e.g. to reduce the risk, they can for instance define a lower LTV).
The borrower is not taking a bet against $APE. Instead, the borrower can utilize their idle $APE to borrow stables against it. If, at expiration, the value of $APE collateral is lower than the borrowed amount, a rationale borrower will not repay the loan and $APE becomes claimable by the ApeCoin DAO (there will be no market sale of $APE).
Would you mind elaborating what you mean by “via a properly organized venture”? How could that venture look like?
@secengjeff Yes, this is absolutely true and anyone claiming that there are no risks associated with smart contracts is not being truthful.
However, at MYSO, we’re committed to maintaining the highest possible security standards for our code, ensuring that user funds are secure and that the platform is protected from different attack vectors. This is why our v2 codebase has undergone 3 independent security audits with top teams from the code security space, including Trail of Bits, Omniscia and Statemind!
The DAO wouldn’t likely lend money but could choose to fund creation of a new entity/company that exists for the purpose of writing $APE loans.
Absolutely, that could be another option to consider. I recently had a discussion with 0xAmplify, and they suggested that the Governance Working Group might handle these loans. I’m curious about the advantages you foresee if a distinct entity were to manage this instead?
It keeps the DAO out of the business of running businesses. Generally speaking, I do support the DAO acting as a limited partner who contributes capital to a venture but is not involved in day to day operations.
I see, makes totally sense! It’s definitely a possibility worth exploring for us as well!
Hi ApeCoin DAO Community,
Our team has reviewed and discussed @dominic’s AIP Draft and have sent a list of initial questions. We await answers.
Follow this Topic as further updates will be posted here in the comments.
Kind Regards,
Hi ApeCoin DAO Community,
@dominic has responded to our questions and has provided consent to share them in this forum for the community.
1. The Overall Cost of this AIP is exclusively a recommended seeding allocation. Are there any expenses, either one-off or ongoing, payable to MYSO for the services rendered in this proposal?
No, there are no other expenses. The protocol fee from MYSO, applicable only upon a successful borrowing transaction, will be covered by the respective borrower.
2. The proposal mentions that the ApeCoin DAO would own a lender vault, and the Governance Working Group would oversee its operations.
Have you confirmed with the Governance Working Group that they would be capable of maintaining these operations and custody of any relevant assets (such as wallet keys)?
Yes - I am in regular contact with the GWG and they confirmed that if the AIP passed, they would be willing/able to deploy the capital.
3. How long have MYSO smart contracts been in operation?
MYSO v1 was deployed on Ethereum in January 2023. MYSO v2 was deployed on Mantle end of August 2023, on Ethereum end of September 2023 and on Arbitrum mid of October 2023. As of today, MYSO has a $1.25m TVL.
4. Which organizations, if any, have successfully implemented MYSO’s lending protocol?
Olympus DAO ($500k pilot project for a gOHM/DAI lending market), Mantle (created a lending market for $MNT), Rocketpool (we launched the first RPL/rETH credit market for their community), Pendle (seeded a lending market for PT-sDAI Token), IndexCoop (to seed a lending market dsETH), …
5. What bugs or exploits, if any, have been identified in the MYSO protocol?
As mentioned in the AIP, MYSO v2 has undergone three independent security audits. To date, there have been no instances of bugs or exploits identified in MYSO v2.
6. Do you provide consent to share these questions and answers with the community in this forum?
Yes, definitely
A DAR package is being worked on and upon completion this AIP will move into Administrative Review. Follow this Topic as further updates will be posted here in the comments.
Kind Regards,
1 Like