Apologies for the delay, I have been out sick recently. My name is Allen and I’m part of the team at Beta Finance. Thank you @Matthew_Graham for initiating this partnership proposal between Index Coop and Beta Finance to list DPI, MVI, BED & ETH2x-FLI.
We’re eager to move forward with this partnership, and I’m here to confirm and provide more clarification on the process and timelines based on the specifications mentioned previously:
- Why Beta Finance?
- Joint liquidity mining incentives + timeline
- Listing process for DPI, MVI, BED & ETH2x-FLI tokens
Why Beta Finance?
Beta Finance is focused on bringing greater capital efficiency to the long tail of assets that exist on Ethereum right now, and giving traders the ability to hedge their positions by short selling. Many tokens are unable to be listed on money market protocols due to their riskiness and volatility, while Beta Finance enables anyone to list a token immediately and automatically through its permissionless listing feature.
We are excited that Index Coop is interested in listing their index tokens, DPI, MVI, BED & ETH2x-FLI, on Beta Finance. These index tokens will not be whitelisted as collateral as a risk precaution, but will be re-evaluated when we look towards listing new collateral. This is an opportunity for Beta Finance to help enable holders of these tokens to find greater capital efficiency by enabling them to earn additional yield on their holdings, but also to give investors the ability to hedge their holdings.
Through this partnership, we will fast track DPI and the permissionlessly created markets to be shown directly on the main “Markets” page of our DApp.
Our protocol has been audited by OpenZeppelin, PeckShield, and Trail of Bits, and the protocol is not susceptible to the recent exploits that have affected other lending protocols.
Joint liquidity mining incentives
We both aim to achieve a $20MM TVL across the four tokens onto Beta Finance, and our team is excited to distribute joint liquidity mining incentives with Index Coop, and we see the $105,770 proposed from Index’s side as a reasonable amount to contribute.
As mentioned by @edkim earlier, to streamline the process of distributing rewards we agree that the best way would be for Index to convert the principal amount offered, $105,770, to BETA tokens and send those tokens over to our wallet for distribution. There is currently a BETA/ETH pool available on Uniswap V3 where Index is able to convert to the BETA tokens, or tokens are purchasable through Binance.
From previous pool growth, we can see that pools initially start at a target amount and scale over time. So, we would like to set an initial target pool size of $5M for the first 2 weeks, and adjust from there based on the capital with the ideal of having $20M in TVL across the pools.
For the starting reward distribution, instead of hypothetical numbers for the expected TVL for lending and borrowing of Index tokens, we examined existing data for the pools on Beta Finance and compare that with the Index tokens to be listed.
We base the framework off of:
- Examining the proportion of deposits in Beta as a fraction of Uniswap TVL
- Examining the proportion of deposits in Beta as a fraction of the token’s circulating MCAP
- Examining the proportional borrowing activity on Beta Finance right now
From the above spreadsheet, we estimate that the total TVL on Beta Finance will be ~$5MM USD initially, broken down as roughly:
- DPI - $3.25MM deposits and $1.28MM borrowed
- MVI - $425K deposits and $167K borrowed
- BED - $230K deposits and $90K borrowed
- ETH2x-FLI - $1MM deposits and $425K borrowed
We make 3 main assumptions to arrive at these numbers for the starting expected deposit TVL of ~$5MM:
- Deposits in Beta Finance will be roughly ~10% of the TVL number on Uniswap (from examining NFD)
- To account for marketing and existing token LP incentives, we apply a 1.5X multiplier to the lending deposits across all pools, followed by a 0.25X multiplier for just ETH2x-FLI due to high APR, >30%, from Uniswap V3 LP.
- We assume markets will borrow at ~34%, based on the median borrow on Beta across altcoin pools.
Thus, we’ll start with the above targets mentioned and distribute $BETA tokens at targets of 10% APR and 20% APR. This will be a total of 18,000 $BETA distributed across the Index pools for the first two weeks, with adjustments to the reward distribution made every two weeks based off of capital inflow.
With Index’s contribution for targeting the $20M valuation, it’s expected the incentives contributed by Index are 1-4% to the joint program, since we target $5M initially with growth to $20M, and Index markets will be eligible for the BETA incentivizes we use for our verified markets, where we currently target 10% for lenders and 20% for borrowers on altcoins.
Listing process for DPI, MVI, BED & ETH2x-FLI tokens
Since Chainlink and Band Protocol oracles exist for DPI, Beta Finance will directly list DPI using these oracles. For MVI, BED, and ETH2x-FLI since Chainlink and Band Protocol oracles do not exist for these tokens, they will be listed permissionlessly.
We request that Index Coop initialize the MVI, BED, and ETH2x-FLI markets by following the steps in the DApp. A pre-requisite for listing is that a WETH pair for the token must exist, which all three assets satisfy. There will then be 3 steps to list the token permissionlessly:
- Enter the address of the token into the “Search” bar on Beta Finance and click “Create Asset”
- Initialize the cardinality of the token’s pool to 150, representing a ~30 minute TWAT for the token.
- Wait ~30 minutes for the slots to initialize for the TWAT, and initialize the market.
Once this is completed, the Beta Finance team will onboard these assets onto our main page.