**[POLL ADDED]** - Index Coop FUSE Pool on Rari Capital

Owners: @Mringz / @BigSky7 / @oneski22 / @reganbozman [Discord: @Mringz | Index, @TrotNixonLine, @BigSky,]

Channel: Business Development

Hypothesis:

We have an opportunity to increase extrinsic productivity for DPI, MVI, FLIETH, FLIBTC and INDEX by creating a community governed Fuse Pool on Rari capital. The Fuse pool collateral management will be governed by INDEX holders with decisions executed through a multisig controlled by members of the product team.

The FUSE pool will enable users to:

  1. Earn interest on Index Coop products and our governance token
  2. Enable users to create leveraged exposure (CDP’s) on our products and governance token

Context:

Rari Capital is a multi-purpose DeFi platform that enables users to unlock enhanced productivity for their crypto assets through three of their products namely Earn, Fuse and Tranches. The protocol is governed via a DAO structure which is represented by the RGT governance token. As of this post Rari Capital platform has attracted over $100 million in TVL.

Fuse is a lending and borrowing protocol based on Compound protocol. It enables DeFi protocols, projects and DAO’s to create and manage their own lending and borrowing markets.

For Index Coop this pool offer the following benefits:

  1. Increase the extrinsic productivity across our product line including our governance token
  2. Enable us to develop new products using the FUSE lending and borrowing protocol
  3. Enhance governance utility for INDEX
  4. Build a unforkable relationship with a reputable DeFi protocol

*Rari Capital yield aggregator Earn will divert liquidity in the form of ETH, DAI & USDC based on the APY’s of the pool.

We propose that we seed liquidity for the pool with assets in treasury:

Assets Value
INDEX $500,000
DPI $100,000
MVI $50,000
FLIETH $50,000

We will engage with the Treasury Working Group (TWG) to decide on the best method to seed liquidity for the pool.

The Fuse pool will be created with the following specifications parameters:

Upgradeable: Yes
Close Factor: 50%
Liquidation Incentive: 30%
Platform Fee: 10%

Collateral Collateral Factor Reserve Factor
INDEX 50% *15%
DPI 50% *15%
MVI 50% *15%
2xETHFLI 50% *15%
*2xBTCFLI *50% *15%
USDC 10% 75%
DAI 15% 75%
ETH 20% 75%

The above parameters were recommended by the Rari Capital Team.

Management of the fuse pool will be initially handled by Samuel Shadrach who leads fuse pool management for Rari Capital team. The process will gradually be handed off to members of Index Coop.

Risks:

Smart Contract Risk:

Rari Capital Smart contracts have been audited by Quantstamp.

Liquidation Risk:

We will be working closely with the Rari Capital team to ensure that the pool parameters are responsibility set to reduce risk of liquidations.

Technical Requirements:

Index Coop - Create and manage TWAP or chainlink pricing oracles for FLIETH, FLIBTC and MVI

Rari Capital - Will create the Fuse pool based on the above parameters

Marketing Requirements:

  • Social media announcement to create awareness of the pool through both parties’ media channels
  • Article and twitter thread about the use cases of the pool

Rari Capital marketing channels:

Twitter: 20.3K Followers
Youtube: 308 Subscribers
Discord: 7,152 Members
Medium: 311 Followers

Analytics Requirements:

KPIs:

  • Pool liquidity
  • Average utilization rate

Targets:

  • $10 million liquidity
  • Average utilization rate of 50% across the pool

Future avenues of development:

  • Rari Capital as a methodologist for structured products
  • Incentivising borrowing and lending demand with INDEX
  • Treasury investment account can earn yield from a lending & borrowing pool controlled by Index Coop

Way forward:

  1. Create an IIP for treasure to fund seed liquidity for the pool
  2. Set up a multisig to control the parameters of the pool
  3. Create a snapshot on Rari Capital DAO to create the pool

I will create a poll for whether or not we should seed the liquidity for the pool with the treasury after initial feedback.

The original Index Coop Fuse pool proposal can be found here: Add Index Coop Fuse Pool - Rari Governance Forums

Please note the proposal has changed based on the below recommendations from the Rari Team, changes shown with a (*)

  • Launch pool with seed liquidity from treasury
  • Launch pool without seed liquidity from treasury
  • Do not launch the pool

0 voters

10 Likes

Love this idea, will be important that we seed liquidity (perhaps even incentivize borrowing) to make sure the pools always remain liquid.

3 Likes

Very good mringz and everyone involved. I know Rari capital for quite some time by name. But never had a deeper look into their products.
Like some of you know well, I am not a fin tech guy, so won’t comment any specific here.
But the idea in general, I do like a lot.

1 Like

Hi all!

This is a really exciting proposal, I am looking forward to the future of this collaboration. Few things I will just chime in on:

  1. The seeding of liquidity from the yield aggregator will be based on APY offered to suppliers. In order for the yield aggregator to come into this pool, it will require higher APY than other pools. The coop needs to consider what it can do to effectively create borrow demand (could be via creating an FLI like product on top of the pool)
  2. The reserve factors are extremely high. Also the CF for 2xETHFLI seems high. I will share this with Samuel and defer to his knowledge regarding final pool parameters.
  3. Management of the pool should be done by your DAO, Samuel will be here to advise y’all throughout the creation of the pool on all variables though. Additionally, it later says that we will create the pool but your governance proposal in our forum should just be for whitelisting your address to build a pool. You all will be the ones to do the final pool deployment, ideally under your DAO.
  4. I would be aiming for a much larger % of average utilization across the pool. Interest rates will be nothing at low rates, that would mean there will be little liquidity inside.

Let me know how else I can be helpful here! Again, really looking forward to this.

8 Likes

Great idea in IMO. I am a discord member of RARI. From what I observed, the community is hardworking and smart (They are backed by Crypto OGs as far as i know).
My concern is the SC risks. Is it possible to audit it again before deploying the capital? What we are planning to deploy is huge and RARI is quite new in the space. Just my thoughts, I am not a dev.

3 Likes

I want to echo Jai’s sentiment here - I am really excited about the possibilities for the Coop partnering with Rari Capital and the create of a Fuse pool. However, before I would feel comfortable moving forward on anything, I think there are some questions that need answered and some confidence that needs to be built - I think this is illustrated in Jai’s responses:

How are we thinking we will create borrow demand? Will there be borrow demand for our products considering there aren’t many extrinsic productivity options with Coop products at the moment? Could we actually build a FLI product on top of a Fuse pool - what would that require and could we actually achieve it? What needs to happen to see the utilization % we are targeting?

I am also sensing there is an education/knowledge gap surrounding Fuse that may be limiting us as a community. I may just be missing something, but I have spent some time trying to find good documentation on how Fuse works so I could add more here, but I can’t find much? @jaibhavnani can you point to where we can level up on our understanding of Fuse?

2 Likes

Just a heads up: Apparently Rari got rekt a few moments ago, I’m too dumb to figure out if this has any impact on the current proposal, so I’ll let the smart people chime in.

1 Like

hack was specific to Alpha Homora integration, other pools aren’t affected