Three big updates!
- Interest Protocol sale and token distribution starting August 15th
- Protocol Update: Capped Collateral Tokens
- Governance Update: Optimistic Governance
IPT
Starting August 15th, Interest Protocol Token Sale is back on with a totally new distribution and mechanism. Instead of offering 35% of the protocol tokens over a 7-day period, the new mechanism offers one million (1%) tokens daily at a starting price of $0.25 and a maximum price of $0.50. The sale has a minimum duration of 35 days to sell a total of 35 million tokens (35% of the total supply) but will continue until the allocated supply is exhausted.
Each day, the sale parameters will reset to the base price ($0.25) and tokens offered (1m). Bidders all get the same price regardless of the number of tokens purchased, but the price updates after each sale based on how many tokens have been purchased.
For example, at the beginning of a new day, a bidder could pay $250k (USDC) and receive 1m IPT; however, if the bidder instead paid $50k and received 200k IPT, then the next price would be $0.30. The next price is calculated by (tokens purchased / maximum offered)*(ceiling price - floor price) + floor price. Adjusting the price after a purchase encourages bidders to purchase while the remaining daily supply is high.
While the minimum duration of the sale is 35 days, that assumes maximum constant participation. We’re targeting closer to 2-3 months to complete the sale. By stretching out the sale over an extended period of time, the platform has more time to mature. From the distribution, during the sale, and thereafter the protocol is controlled by IPT holders.
GFX Labs will retain the right to change the maximum number of tokens offered, the duration of each period, the floor price, and the ceiling price. Since the IPT token will be in circulation outside our sale contract, the secondary market might independently develop. To reduce the arbitrage opportunity for MEV bots, we may increase the minimum price to align closer with the secondary market and favor people over bots.
When the sale commences, we will distribute IPT earned by borrowers and Uniswap liquidity providers (as specified in the liquidity program blog post) and continue with weekly distributions via the merkle distribution contract thereafter. IPT holders can propose amendments to the liquidity program through a successful governance proposal.
Capped Collateral Tokens
Interest Protocol prioritizes risk management. In an ideal world, the protocol would support a wide array of collateral assets for users to borrow against. Interest Protocol already has a flexible oracle system to support a wide variety of assets, voting for governance tokens, and a totally new liquidation system.
However, it is well known the greatest risk to a liquidation platform are the collateral assets. Specifically, with niche collateral assets on Aave v2 and Compound v2, those protocols run the risk of a large holder supplying a significant portion of the circulating supply to the protocol. If that position is later liquidated, it would likely put the account underwater and leave the protocol with a loss.
To empower Interest Protocol to support more assets while reducing risk, we’re introducing Capped Collateral Tokens. This new type of collateral functions similarly to the existing type, but limits the total number of tokens used as collateral to the platform.
For example, IPT holders could list dYdX as collateral with a limit of 5 million dYdX tokens, a 65% LTV, and a 10% liquidation penalty. A dYdX token price of $2.50 would put the platform’s maximum exposure at ~$8.1m. dYdX holders would continue to retain their voting power, and as liquidity improves, governance could choose to increase the cap. If protocol governance became concerned about the quality of collateral after its addition to the protocol, that cap could then be adjusted down without immediately liquidating users.
Capped Collateral Tokens enable the protocol to support a wide variety of assets while prudently managing the exposure to any individual asset.
DeFi is best when open collaborations with other protocols are possible. With IP’s governance token voting support and capped token functionality, it is well positioned to support DeFi’s large collection of governance tokens. Projects interested in learning whether Interest Protocol could support their governance tokens should visit the Discord and forum.
GFX Labs has been rigorously testing this new functionality, and will integrate the improvement before we hand off ownership of the protocol to the IPT holders.
Optimistic Governance
Finally, we added optimistic proposals. A whitelisted address, as designated by governance or the whitelist guardian (currently unlisted) can propose without voting power, and doesn’t require affirmative approval by IPT voters. Instead, if votes in opposition to the proposal exceed the optimistic quorum, the proposal will fail.
In addition to the optimistic quorum parameter, we have included a configurable optimistic voting delay. The delay, often referred to as the review period, is the time between a proposal’s creation and voting. Generally, we believe that the review period for optimistic proposals should be longer than the standard review period, but the standard voting period and timelock are sufficient. The proposer, once whitelisted, can make proposals without voting power, and the community doesn’t need to mobilize IPT votes, except in the event of opposition.
Optimistic governance privileges are ideal for frequent proposers who are making uncontroversial proposals. IPT holders who don’t qualify for a regular proposal but are regularly making improvements to the protocol or parameter adjustments would be clear examples. In the event a controversial optimistic proposal is made, 2 million IPT opposing the proposal will successfully reject the proposal.
Optimistic governance is currently implemented in our Governor Charlie contract, and GFX Labs’ governance address is a whitelisted proposer.
Note
GFX Labs is excited and proud of the work we’ve accomplished to date. The delay of the IPT sale gave the team a rare opportunity to work directly on the protocol, but that only occurred because of the delay of the IPT distribution. After the sale, the protocol is entirely driven by IPT holders through the protocol’s governance contracts.
There will be more details in the coming weeks regarding the sale.