IP Collateral proposal (discussion) - Add a,c,e,so type assets to IP instance(s), aUSDC, etc

IP collateral proposal (discussion).

I was looking today at interest bearing collateral types on Optimism and Ethereum that could pretty safely added to the Optimism IP instances.

Aave a collateral (aETH, aUSDC, aDAI)
Compound c collateral (cETH, cUSDC, cDAI)

Aave a (aETH, aUSDC, aDAI)
Extra e (eOP, eETH, eUSDC, eDAI, etc.)
Sonne so (soOP, soETH, soUSDC, soDAI, etc.)

I will track down the relevant contract addresses and make a formal proposal on one or more of the above if there is interest.

For now I just want to gauge whether others are supportive of a formal governance proposal to add as a collateral type(s) to IP instance on optimism, with following suggested parameters:

aOP 70% LTV 7% penalty cap $100K
aETH 75% LTV 10% penalty cap $100K
aUSDC 98% LTV 0% penalty cap $200K
eOP 68% LTV 8% penalty cap $50K
eETH 70% LTV 10% penalty cap $50K
eUSDC 95% LTV 1% penalty cap $100K
soOP 68% LTV 8% penalty cap $50K
soETH 70% LTV 10% penalty cap $50K
soUSDC 95% LTV 1% penalty cap $100

Reasoning for why the above makes sense and should have a positive impact on IP instances generally.

The biggest reason here is that it is likely the borrowing rates on IP will be normalized relative to other platform rates via aUSDC, eUSDC, soUSDC deposits with people capturing the IP-AAVE, IP-EXTRA, IP-SONNE rate differences to leverage up rate arbitrage between platforms using USDC. They will also be able to lever up on OP or ETH by depositing ‘a,e,so ETH/OP’ and borrowing USDi. In the end USDi returns should move to until USDi borrow rates match the a,e,so deposit returns (minus some risk/rate profit spread) to within a few percent. I can say with certainty that I personally am likely to use any and all of the above if they were offered as an option and I think others would as well.

In the end what we want is USDi return rates to more closely match the rest of the economy and I think allowing these assets is a way to get:

  1. More users.
  2. Higher return rates generally
  3. Rates that will better match AND track those elsewhere in DeFI on the chain of interest.
  4. Growth of IP that better matches that of DeFI generally on chains of interest.

We could tie oracles into the above tokens (using a conversion value(s) for $OP to $aOP, $eOP and $soOP, $ETH to a,e,soETH, etc.). I put conservative caps on these to start just to limit protocol risk. a,e,so USDC only really have bridge, and liquidity risk(s). The bridge risk already exists in the IP instance because the liquidity backing is in USDC. The only issue is ‘issuer contract risk’ (AAVE, EXTRA, SONNE), and liquidity risk on the assets (inability to withdrawal due to high facility usage) which should lead to high rates of return while waiting for liquidity to exit. a,e,so USDC for example is unlikely to have collateral values that drop. In fact these will rise after deposit giving the collateral a higher value. OP and ETH ofc would fluctuate with the underlying prices but the a,e,so OP/ETH itself would convert to more and more OP/ETH so over time also would go up in value.

Given the above I think adding one or more of the above as collateral to the IP instance on Optimism makes sense. We can then think about adding a and c tokens to the IP instance on Ethereum.

Let me know if you support this idea and what assets, and parameters you suggest (if any changes from above).

Thoughts, discussion?

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