Summary
It is proposed to implement PDLP (Protocol-Direct-Liquidity-Provision) and introduce protocol owned liquidity to lending protocols integrated with USX and EUX.
It is also proposed to implement POO (Protocol-Owned Operator) and leverage treasury liquidity to further boost supply and demand.
Support or objection to this proposal shall apply to dForce protocols across Ethereum, BSC, Arbitrum, Optimism, as well as future deployment of dForce protocols on other blockchains and layers.
Background
The early generation of DeFi pioneered new and meaningful attempts in bootstrapping TVL and liquidity through liquidity mining. However, the downside of liquidity mining is also apparent – in order to retain liquidity, protocols had to issue a large amount of their tokens as rewards continuously, which created inflation pressure and consequently downward price performance.
In an early post, we shared our ideas with dForce community on how we can combat liquidity shortage of USX and EUX leveraging PDLP and reduce reliance on rented liquidity leveraging POO. We believe this demonstrates an exciting opportunity for dForce to achieve sustained growth in the long run.
Exploring PDLP
Similar to the D3M model MakerDAO deployed with Aave, PDLP (Protocol-Direct-Liquidity-Provision) is an alternative approach to supplement USX and EUX liquidity in secondary venues.
In a nutshell, for whitelisted protocols deployed with PDLP, USX and EUX can be minted against collaterals of representation of supplied assets (aka interest token, i.e., aToken of Aave) and directly deposit back to whitelisted protocols to.
Simply put, USX and EUX’s over-collateralization will remain intact with guaranteed liquidity to whitelisted protocols.
PDLP can also be used to supply liquidity to whitelisted protocols with pegged mechanism, i.e., to supply USX to USX bridges across Ethereum and BSC, acting as protocol-controlled bridging liquidity.
Exploring POO
POO (Protocol-Owned Operator) is the improved version of PCV, where dForce leverages PCV and acts as its own counterparty and super user to ensure supply and demand are in equilibrium with optimized efficiency, including (but not restricted to):
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Mint (borrow) USX or EUX against collateralized treasury assets;
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Provide liquidity to liquidity pools on DEXes for dForce-backed assets;
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Borrow other assets directly from dForce Lending;
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Provide liquidity to selected DeFi protocols to earn a return (i.e., stake PoS assets to earn staking reward).
Benefits to dForce Community and DF token holders
This proposal, once accepted, will unlock an exciting opportunity for dForce to generate more revenue, control more assets and liquidity, and create a clear value proposition for DF holders:
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A lower cost to retain liquidity (removes the need to maintain a high APY on rented liquidity);
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Earn LP fees for protocol-owned trading pairs on DEXes;
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Facilitate more protocol-controlled liquidity and assets;
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Generate more revenue for treasury;
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Reduce inflation pressure with the protocol owning most of liquidity on secondary markets.
Proposal
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dForce protocols to implement PDLP and POO across Ethereum, Arbitrum, Optimism, BSC (also applicable to future deployment of dForce protocols on other blockchains and layers).
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Whitelist dForce Lending , Liqee Lending and dForce bridges to bring more USX and EUX liquidity to both venues (accepting their yield tokens as collateral to mint USX).
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