RFC - POOL loans with PWN

Summary

Debate the idea of setting aside some USDC from PoolTogether DAO Treasury to fund POOL loans on PWN.

Background

PWN is a hub for peer-to-peer (P2P) loans backed by digital assets. PWN users can use any ERC-20, ERC-721 & ERC-1155 as collateral, with no risks of liquidation until the loan expires. There are no liquidations based on price on PWN due to the contracts not having any external dependencies like on-chain oracles.

Additionally, unlike other protocols in this space, there are no whitelists which means any ERC-20, ERC-721 & ERC-1155 can be used on the protocol via the Ethereum or Polygon blockchain.

Description

Given PWN is a P2P marketplace with no on-chain pricing oracles, borrowers on PWN can specify the duration of the loan as well as the Loan-To-Value (LTV). The LTV is not restricted though given lenders who post offers on the loan requests are able to counter-offer and offer an alternative amount of capital based on their risk tolerance of the value of the collateral.

This post aims to find out how the community feels about using USDC from the Treasury to enable borrowing with POOL. Some questions come up if we want to move forward:

  1. Which blockchain (Etheruem, Polygon) should we do the program on?
  2. What LTV would the Treasury want to accept? We should make sure that the price of the collateral does not fall below the price of the borrowed funds.
  3. Maturity date of the loans: for how long should we accept a loan?
  4. How much USDC should the Treasury set aside for this program?
  5. What interest would we require borrowers to pay?
  6. Should we accept other assets such as POOL LPs?

Additionally, in order to approve the $POOL collateral, we would need to discuss whether a multisig committee would be required and if so, who would that be.

The PoolTogether Treasury would be receiving some interest from the loans, but it would be accepting the risk of the price of the loan falling behind the borrowed assets. In that case, the borrower will probably keep the USDC and the PoolTogether treasury would be effectively buying POOL over its market price.

Would you like PoolTogether DAO to provide funds for POOL borrowers using PWN?
  • Yes
  • No
  • Maybe, but… (explain)

0 voters

3 Likes

Great idea!
Would need a bit of work at each loan request so…

But yeah love it.

3 Likes

Supposedly, a tool would allows us to avoid that manual work of accepting each loan request.

4 Likes

Thx for the Gov post!
Overall I like the idea, but I think the protocol is still pretty new right?
Are they audited yet or what is your/Finance team overall security opinion?

To answer your questions:

Which blockchain (Etheruem, Polygon) should we do the program on?
Polygon first pls! :smiley:

What LTV would the Treasury want to accept? We should make sure that the price of the collateral does not fall below the price of the borrowed funds.
50% maybe, so 50$ Loan for 100$ in POOL. Not an Expert for that stuff though, so maybe it should be lower/higher, not totally sure.

Maturity date of the loans: for how long should we accept a loan?
I think the maximum is 90 days, right? I think restricting the time is not really needed, so 90 days sounds fine, maybe even up to 180 if that is even possible.

How much USDC should the Treasury set aside for this program?
5000$, more or less would also be fine, just as a starting number.

What interest would we require borrowers to pay?
2%, more or less would also be fine, just as a starting number.

Should we accept other assets such as POOL LPs?
Yeah, why not, if technically possible, last time I looked they didn’t show as “Uniswap verified” I think, that could maybe make attracting Borrowers less likely. But being able to combine this with the current Arrakis LP would be cool!

3 Likes

Maturity date of the loans: for how long should we accept a loan?

Now, you can do unlimited time loan.
Each loan can setup a custom date.

Overall I like the idea, but I think the protocol is still pretty new right?

Yeah I think we need to keep that in mind, so the Treasury of about 5000$ seem fine, if we lost this that’s not a big deal.

What LTV would the Treasury want to accept?

Well I think the idea is 100% POOL token for USDC
We should define a price we agreed on for the collateral on POOL, For exemple I was using 0.7$ for my loan when POOL was around 0.96 but my loan is more based on trust. Anyway I got 700$ for 1000 POOL tokens

not fall below the price of the borrowed funds.

Do we really care? They are POOL token on collateral, Yeah if it fail to much the pooler could leave the loan end and make a profit with that but if we define a 0.5$/POOL we are sure that won’t happen? (I hope so)

2 Likes

This would be my only concern here, you are giving a floor to an asset that has only speculative monetary value; that’s not a good practice. I’m not sure I would be up for this experiment. Ideally it goes well, the next step is what scares me. We will inevitably look to increase the amount and, again, the lender assumes all the risk here and unless the rates are extremely high, that’s not a risk I’d want to see the protocol assume.

3 Likes

I think this could be a cool experiment if done responsibly (not instantly raising the amount every time we reach our allocated amount in borrowed USDC, etc.)

Agree with @Lonser that 50% LTV is a good starting point - and while Polygon seems like the best bet for an experiment like this, I’d love to see it on mainnet at some point since it’s POOL’s home :slight_smile:

I’d probably want to see basic POOL being borrowed against before trying to integrate LPs into the mix, but if the complexity isn’t that much higher… :man_shrugging:

I’ve also looked into their site and they do list an audit, but from a firm I’ve honestly never heard of. Some deeper investigations there might be warranted.

1 Like

I’ve voted NO cause I don’t really understand what we aim to achieve with this kind of program.
Do we want to give more utility to the POOL token? Or is the goal to generate interest on idle USDC in the treasury?

1 Like

Out of my curiosity; who will be deciding the interest rates. if the same shall be payable in POOL or USDC or it is PWN?

Depending on the size and marketing of the program, it can also help to decrease potential selling pressure from key players of the protocol. For this factor to be true, we would probably need six digits in USDC liquidity and ensure token holders know of this alternative.

Overall I like the idea. Just to verify - would we use PoolTogether tickets in this setup? That way, the USDC would stay in PoolTogether at least until a loan is taken out.

I’m torn between Ethereum and Polygon. It gets hard to track what you can do with your POOL on each network. We could probably follow the pattern of a test run on Polygon and eventually extending to Ethereum if we see fit.

3 Likes

I’d love to see it on mainnet at some point since it’s POOL’s home

And because you already bridged all your Tokens back to Mainnet ^^
Just kidding ^^ Yeah, testing on Polygon and then moving to Mainnet if succesfull sounds good! :slight_smile:

1 Like

I would not support this proposal.

Although I would love for people to be able to use their POOL as collateral, I don’t think it is something the protocol should be directly funding. The free market can take care of it (i.e borrowing platforms can add it or people can independently fund POOL as collateral for loans).

1 Like

GM! My name is Dimple, head of Growth at PWN.

Answering some of the questions that have come up in the recent days here:

  1. @Lonser here is a link to our audit reports PWNAudit.pdf - Google Drive

  2. @Lonser the whitepaper was written in Jan 2021 and the protocol launched at ETH Prague so around 6 months ago. You can check out our recent partnership announcement with Aavegotchi and Gotchi Vault here: https://twitter.com/GotchiVault/status/1593963556147535873

  3. @Ncookie we’re live on both Ethereum and Polygon :slight_smile:

  4. Vitruvius The interest will be payable in the same token as the loan itself. It’s all payable before the maturity date however a borrower can also repay earlier however the full interest would need to be paid as well. Do for example if USDC is what the treasury will be lending out, then the interest will also be paid in USDC

  5. Leighton thanks for the feedback. The proposal is two fold really, on one hand the DAO would be helping in reducing sell pressure as @Lonser mentioned already but its also a way to generate yield and increase the perpetuity of the treasury.

Happy to answer any other questions,
Dimple