What this is about
We’re hard at work on the successor to Volt Protocol v1, called the Ethereum Credit Guild. Those interested can follow along with the work on Github. The main features of the new version are a greatly simplified and immutable codebase, fluid and flexible governance of loan terms, the elimination of trusted oracles, and a change in focus from integration with external yield venues to the direct minting of the native debt asset (which we are now calling simply CREDIT) against various collateral tokens. This is a request for proposals for lending terms which could be whitelisted at system launch.
What is a lending term
When I say a “lending term” or “loan term”, I mean the following data structure:
address collateralToken;
address borrowToken;
uint256 interestRate;
uint256 callFee;
uint256 callPeriod;
uint256 creditLimitRemaining;
Quick run-through of what those last three mean: the call fee is paid to a borrower when the loan is called. The call period is the amount of time a borrower has to repay a called loan before it can be liquidated.
There can be more than one lending term per collateral token. The holders of the governance token, formerly known as VCON and now called GUILD, will vote to allocate a debt ceiling or credit limit among the approved lending terms.
While the protocol will have optimistic mechanisms to onboard and offboard lending terms, I am kicking off public discussion here about the starting set of approved terms. That way, we can take sufficient time to reach consensus regarding the liquidity and yield properties of CREDIT in the early system.
Collateral assets of interest
Off the bat, there are a few important categories for us to consider:
- stablecoins or stablecoin/CREDIT LP positions, which can be used to encourage price stability and efficient arbitrage
- yield bearing stable assets like Ondo tokenized securities
- ETH and staking derivatives
- long tail cryptoassets (ARB, OP, UNI, etc)
Of these, I think that the first is necessary to the healthy and smooth operation of the system, while the second is perhaps the best opportunity for growth and desirable yields at low risk available to us currently. Lending against ETH is relatively competitive, and pricing long tail crypto asset collateral for loans much more difficult than the other categories.
So the first set of lending terms I will propose will look something like this:
Asset: OUSG
Interest rate: 4.25%
Call fee: 0.25%
Call period: 3 days
Asset: ETH
Interest rate: 2.5%
Call fee: 0.50%
Call period: 2 hours
Asset: CREDIT/stDAI LP
Interest rate: 2%
Call fee: 0.05%
Call period: 2 hours
Asset: CREDIT/USDC LP
Interest rate: 2%
Call fee: 0.01%
Call period: 1 hour
How to propose a lending term
For now, just talk about it here, and provide supporting reasoning. There is time for potential borrowers and CREDIT holders to express their preferences regarding rates and liquidity. Once the new protocol launches, there will be onchain mechanisms for GUILD holders to propose and vote for new terms. The hope is to create a much more flexible decentralized governance process where decision making is not forced through a central committee.