Discussion: Collateral List for IP deployment on Optimism

General Discussions
#1

OP Collateral List: Notion – The all-in-one workspace for your notes, tasks, wikis, and databases.

With gas at 100+ gwei and bedrock upgrade hopefully ~1 month away, I created a collateral list via Notion for when IP is ready for deployment onto Optimism.

If there’s interest, I can create one for Arbitrum too and maybe even import everything to Google Sheets + Web3 sheet so the data is always up to date. But in the meantime, let me know if there’s any collateral I missed or if there’s additional data fields to add. The list is ordered by market cap of the outstanding token value on Optimism.

The data columns are:

  1. Token Name
  2. Token Contract Address
  3. Native Y/N? (whether the token is native to Optimism)
  4. LP Y/N? (whether the token is a LP token)
  5. Collateral Y/N? (whether the token should be included in the initial IP deployment
  6. Holders (number of holders on Optimism)
  7. MC OP (Marketcap of outstanding tokens issued on Optimism)
  8. FDV (FDV of value on all chains)
  9. V3 Liquidity (liqudity link to V3 OP)
  10. Notable Exchange
  11. Lending (lending protocols where the collateral is a supply-side asset)
  12. Protocol - Supply (supply value of token by protocol + supply APY)
  13. Comments

There are 4 tabs at the top:

  • Master List contains the entire list of collateral

  • First Deployment contains the list of collateral where the column “Collateral Y/N” is YES. This is the list of collateral I think should be added to the initial IP deployment to Optimism

  • Regular Collat contains the list of collateral where the “LP Y/N” is NO. This is the list of vanilla collateral (ETH, LSD, Gov tokens etc)

  • Regular Collat contains the list of collateral where the “LP Y/N” is Yes. This is the list of LP collateral

My Thoughts:

OP, WETH, wstETH, WBTC are the four collateral that should be included in the initial IP deployment.

Additional consideration can be made for:

  • SNX - should be an easy add and has good liqudity on Optimism. Though, not sure if there will be any real demand to borrow against
  • rETH - Good liquidity on Optimism and not available to be borrowed against anywhere. Though, I wasn’t able to find a Chainlink oracle
  • stETH - Not available on Optimism yet but maybe will change with the Bedrock upgrade fix

More exotic collateral we can keep an eye on are $VELO and $Kwenta but those are still really small markets compared to ETH.

In terms of LP tokens, Beethoven is a fork of Balancer, so Beethoven WETH/rETH and Beethoven wstETH/ETH can be good options. And obviously V3 whenever that is ready.

Feel free to leave any suggestions or comments, so we can get the discussion on L2 deployments rolling!

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#2

WBTC doesn’t have much liquidity so I don’t see that there will be much use. wstETH is minimal outside of what is deposited on Velodrome as well.

There is another issue here in that Velodrome captures a fair amount of liquidity on, and is seeking to become premiere DEX on Optimism. There LP suppliers basically lock their LP tokens to earn $VELO rewards so I don’t see that they would or could be used for borrowing.

Interesting thought was if there was a way to borrow against veNFTs I think that could be very useful but I have no clue how that could work practically given the structure of the veNFT contracts.

I have some concerns about SNX generally but not against adding it if the cap is reasonable.

$VELO probably should be considered with moderate LTV (say 50-60%), and liquidation fee of like 10-15% and small cap) because I don’t think there is any place to borrow against those there. $SONNE could be considered as well given really conservative LTV and small cap. Issue on $VELO and $SONNE is given limited liquidity is market price manipulation.

One key issue will be whether to stick with USDC as the stable to draw liquidity against or to try to partner with another stable.

Honestly I keep thinking in my head it would be nice if IP could use multiple stables to back the USDi vs. just one. Not clear to me how such could be accomplished but I think it would be useful from a liquidity perspective.

When it comes to LP tokens like from Beethoven not clear to me those are going to have significant liquidity and oracles are going to be a pain.

Uniswap v3 liquidity looks to be lowest hanging LP fruit imo and something when implemented in IP on L1 and on Optimism I probably would use. So far I have not touched Arbitrum chain at all and don’t have any personal plans to deploy liquidity there at this time.

1 Like
#3

As for SNX - I agree most will not borrow against it. There is no reason to borrow against SNX when you can mint sUSD using it. The better move is to approve sUSD as supply collateral, so that people don’t have to choose between SNX and IP, they can stake their SNX then stake their sUSD and earn double fees.

In regards to onboarding LP tokens, recall that amphora is building out a fork of IP on Optimism built with sUSD that allows one to borrow sUSD against curve LPs and convex LPs. This is all the more reason to add sUSD to the approved collateral. As for Curve LPs, there is substantial wstETH/ETH liquidity on optimism, and it would already appear that amphora is preparing to meet that demand. We will see how crvUSD affects things.

Although I do not want to ignore amphora, I think that approving velodrome LPs for borrowing is a great idea. The best thing about optimism is that the veDEX space has already consolidated around velodrome. And although veVELO cannot really be used as collateral until there is a good liquid wrapper, VELO LP tokens are a prime candidate, especially if their constituent tokens are themselves approved collateral, ie USDC/WETH. Most Velo LPs receive VELO emissions from gauges, and like all ve(3,3) dexes, LP tokens have to be staked in order to be eligible for rewards. This presents a dilemma for the LP token borrower, because they must forego VELO emissions if they are to deposit LP tokens into IP. Naturally it would seem that IP should create a specialized vault that allows it to stake collateral tokens into the VELO gauge so that users can still earn VELO emissions while borrowing against VELO LPs. There are some services that allow something like this - a prime example is Tarot - they allow LP tokens to be used for collateral for borrowing, but because each LP token has siloed supply/borrow markets, the products do not have good liquidity and see little use. Many use Tarot just as an autocompounder for VELO emissions, so as a minimum, any LP token deployment needs to accommodate for VELO emissions - it either needs to auto-compound them, or the LP token depositor needs to receive added value because of them. For example, we could install an “auto payback” feature that sells earned VELO and pays down an LP borrower’s debt, or we could just do a weekly emission of protocol-owned VELO pro-rata to LP token depositors.

Rather than distribute the farmed VELO directly, IP could also choose to retain it and lock it for veVELO, which could then be used by IP to direct VELO emissions toward its preferred pools (possibly, USDi/WETH, IPT/ETH). Indeed this could be a way of converting protocol-owned IPT to VELO. IPT emissions could be reflected to LP token borrowers to compensate them for their lost VELO emissions, giving IP more control over velodrome liquidity in the process. OP incentives could also be used in this way to incentivize velodrome LPs to deposit their tokens. It would definitely be simpler to just redistribute farmed VELO, but I am intrigued by the possibilities that could open up were IP to control a large amount of veVELO. For example. better USDi/WETH liquidity would make IP more attractive as a source of borrowing for leverage loopers. Alternatively, IP could use its veVELO to incentivize IPT/USDC liquidity in a roundabout way of returning value to IPT stakeholders.

Anyway you slice it, Velodrome is the prize of Optimism, and we should structure our OP deployment around that fact. The OP grant and remaining IPT rewards should be used to help IP gain dominance in velodrome LP lending.

Velodrome LP tokens and sUSD are the biggest priorities on Optimism, imo.

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#4

In the case of SNX from my point of view I would see it more positive if somehow a pair with sUSD is incentivized.

Issuing debt in IP could be better than its own sUSD which is equivalent to 500% of its c-ratio, considering that it could be more capital efficient our protocol, coupled with a velodrome incentive for a sUSD-USDi group could be a good idea.

#5

Currently, there is a limited amount of WBTC liquidity available. However, I anticipate a significant increase in WBTC bridging once Layer 2 solutions gain momentum. WBTC is also the the least volatile assets among those present on Layer 2 networks.

After the implementation of BPT and V3, the upcoming strategy involves introducing a multi-collateral PSM. This will enable the inclusion of other stablecoins such as DAI and TUSD for inflows into the PSM. USDC is also the most liquid option on Optimism so makes sense to start there for now.

There have been discussions suggesting the exclusion of IPT rewards for borrowing against stable collateral like Chai or cUSDC. As a result, sUSD may be included in the mix as well. sUSD can potentially be added to the PSM but that would be a different thread. In previous discussions on this matter, one of the key considerations was the actual redeemability of the stablecoin for real USD.

On their testnet, the currently accepted collaterals appear to be ETH and LINK, which are relatively straightforward to implement. It will indeed be fascinating to observe the progress of the oracle work for Amphora, particularly regarding borrowing stablecoins against volatile LP positions. This particular area of development consumed significant resources for the GFX team. If sUSD were to be included as a collateral option in the PSM for Interest Protocol, boith projects would essentially offer similar functionalities.

**Upon closer examination, looks like Amophora is launching on mainnet (where the majority of curve and convex liquid is duh) and doing a weird bridging system to incentivize sUSD deposits from Optimism.

Do you know any projects working on a liquid wrapper for velo lps positions?

#6

Well everyone has an opinion. Given state of other wrapped tokens it is entirely unclear to me whether there will be a single option that captures most of the liquidity or like 20 of them. Plain and simple fact is that ‘so far’ the wrapped coins haven’t really taken off. You have to look at mentality and reasoning of holding BTC, a lot of folks there have no interest in dropping their BTC into another custody contract to get another representation of it elsewhere.

We will see over time what happens. My own analysis of the state of crypto is that liquidity fragmentation via protocol forks, and expansion of networks is real and getting worse.

Going to have to describe what that means in detail. PSM has a historic meaning “DAI PEG STABILITY MODULE” via Maker so unless the Maker PSM contracts are going to be duplicated for IP in both functionality and in management (i.e. debt ceiling, tin/tout and operate only on USDi-Stable) I honestly am not clear what you mean.

If the Maker PSM structure is the way IP is going to grow USDi liquidity I think a clear and solid reasoning on why every other stable gets a different liquidity status over the primary liquidity (USDC) defining rates over IP making stable deposits (i.e. like how IP uses CHAI as collateral to generate USDi) needs to happen.

I keep hearing about this multi-stable liquidity solution for IP but have not seen one word presenting how this will be achieved. Also the Maker PSM was a solution to trying to improve the DAI-USD price PEG but as we saw has created a number of other issues (both good and bad) for Maker.

Going to support excluding these from rewards and recharacterizing how IP portions out IPT rewards generally that uses key liquidity and trading metrics to determine the level of rewards being paid out. In the loosest sense and IMO - rewards should come from a portion of the interest revenue, ideally to those that are paying the interest. Anything else should look like 1 time air-drops based on a retroactive view on protocol activity and with a goal of bringing in more people or better partners into the protocol. But the above is my own personal view.

That is def doable with vast majority of other stables. I think IPDAO really needs to think about LTVs, and liquidation fees.

Can we call it IPScamForA?