This is to start discussions around a guarded launch of Tribe Turbo product and the rollout of the first jointly developed product by Tribe DAO. We hope to get active participation from both communities, as well as our close partner DAO teams.
Given this is a new offering, we should consider a guarded launch totaling between $25-50M FEI per participating DAO based on whitelisted criteria. Based on current numbers, $25-50M FEI represents ~3% - 6% of PCV and is a relatively low risk to the protocol.
Not an explicit requirement, but Tribe Turbo provides most value to existing Verified Fuse owners. We hope that the launch group participants already have their own Fuse Pool, or will consider starting their own Fuse Pool with collateral types they want to support.
Tribe Turbo Whitelist Criteria:
Overall Project/Market Conditions
Token must be listed and have a live USD price feed with Chainlink (Oracle)
Legitimacy of the project/ protocol
Total MarketCap > $100 million
Average daily on-chain liquidity over 30 days > $10,000,000
Volatility - daily 30 days price variance over the last 60 days < 8%
Token contract must be verified on Etherscan.
Token contract has received an audit from a known security auditor
The project should have a publicly visible test environment
Administrative privileges over the protocol should not be owned by an EOA, any multisig must have known members.
If token supply is not fixed, conditions under which supply can increase needs to be made aware of and low risk
No restrictions on transferring or trading such as holding the tokens for a number of blocks before you can transfer them, fees/taxes on transfers etc
Token transfers shouldn’t be pausable or subject to a whitelist
Token ownership should be widely distributed with no address (whale) owning more than 30%
This is certainly a loaded question and there needs to be a robust discussion on the criteria for whitelisting tokens for Turbo. We will likely need very nuanced parameters to ensure Turbo remains safe and profitable for the Tribe DAO. For example in Lieu of:
The amount of whitelisted collateral should likely be a function of the on-chain liquidity.
Additionally, there needs to be an extensive discussion surrounding limitations on aggregate Fei minting from Turbo. Minting into Fuse is an excellent use case but will inevitably eat some of the PCV when the Fei is borrowed and sold. While there is certainly a lucrative revenue share for the Tribe here, precautions need to be taken when it comes to excessive minting into strategies that could eat the PCV. I understand that this is already a great concern for the Fei team these limitations are undergoing a deep analysis but wanted to bring this topic to the community’s attention as we continue these discussions.
Overall I’m extremely bullish on Turbo and would love for as many DAOs as possible to whitelist their respective tokens. This is truly a product with unparalleled capabilities that enables numerous winners all at once and I want to make sure it is done safely and done right the first time around.
So I am not sure I understand the criteria here on a few important points.
why does total marketcap need to be above 100 million? This seems like mostly a vanity metric and less for safety, what really matters is liquidity conditions. I thought the whole idea of turbo was to allow long tail DAO assets to be able to generate liquidity and a 100 m marketcap may exclude a lot of newer projects, seems like maybe this threshold should be lower and/or there should be some way to get an exception to this if other conditions are met?
-what does “on chain liquidity” over 30 days mean exactly? Is this volume or liquidity in a dex pool? I notice FOX is listed in the spreadsheet as only having around 2 mil which is not accurate for either metric by a long shot, but perhaps I am mis understanding what this means and how it is applied. It seems like what should actually matter is the depth of liquidity on DEXEs and the CEX exchange support as that is what actually supplies liquidity for liquidations etc.
not sure I understand why the volatility matters here that much other than as a high level warning metric?
project should have a “publicly visible test environment” what exactly does this mean?
I think an obvious exception to the last part (about no address owning more than 30%) should be the DAO treasury which often will hold more than 30% in healthy DAOs.
Overall very excited for turbo and I know the ShapeShift DAO really wants to be one of the first launch tokens if at all possible (and we of course already have our own fuse pool to deploy fei to) - hopefully we can work within these parameters to set the right metrics and meet the tribe communities goals.
IMO, something like this may suffice as a temporary solution to jumpstart the program MVP, but in the long run the problem with hard-wired constants like 100m Mcap is that they don’t take into account both internal protocol dynamics and market conditions: general volatility and big crypto cycles. What if the industry goes into another crypto winter? Or a particular protocol faces some technical problems or breach of security? Like recent Compound bug fallout. Ethereum had its own “The DAO” debacle.
A better approach is to have a model computing these parameters along with protocol’s risk profile from market conditions, consumer sentiment and overall protocol’s standing.
yea I think this is one of the biggest concerns from a financial perspective. unlike normal use fei this turbo fei is being collateralized using assets not owned by fei protocol. a proper balance must be struck to ensure that the benefits from turbo do not get outweighed by stunted pcv growth. I think starting with conservative parameters, monitoring the effects, and then slowly ramping up will be wise here
youre right that liquidity conditions and other metrics are much more important than marketcap. i think $100M is just a way to start out conservative. and perhaps the liquidity conditions should instead be specified in relation to the amount of FEI being used in turbo rather than a preset amount i.e. turbo fei borrowed cannot exceed 20% of collateral asset’s total on chain liquidity
project code is in an open source repo where anyone can run the tests
this is a good point. it does get a bit complex determining when this is ok or not though. like for example if a multisig has a backdoor to dao funds, or if a governance attack would become profitable using turbo by buying some of the other dao’s gov token
my personal feeling is that these frameworks are good for the broad strokes and starting the conversation but yea there are always going to be edge cases within the framework that will require further further discussion and deliberation
Volatility, liquidity and market cap are all market risks which are very relevant to lending protocols as they affect the collateral assets. If the value of collateral drops and reaches the liquidation level, the protocol starts liquidating and the market needs to hold sufficient volume for those liquidations. Therefore, one of the proxies for liquidation risk we considered is average volume over dif times. It’s not perfect as the depth of liquidity on DEXs may be a better measure, but it gives an estimate of how much of the collateral can be recovered during a forced sell, and what would be the price impact. As we all know, forced selling with low volume tends to lower the price through slippage affecting the value recovered.
Historical Volatility is also very critical, as highly volatile tokens would have a higher chance of hitting the liquidation threshold. The way we computed the 30 days price variance is in line with industry standards used by Gauntlet.
MarketCap is the least important criteria, but can protect us during a severe and prolong market correction. If you think about, a 20 mil market cap today would become very illiquid during a severe market crash, and Turbo won’t be able to recover any collateral.
Again, those frameworks are in the initial stage and all details still need to be wired out.
It seems most agree that marketcap is the least important criteria, my suggestion would be to either lower that if it is going to be considered a hard limit (maybe to 50 mil) or alternatively have some sort of exemption process for assets with a marketcap lower than 100 mil but which meet sufficient liquidity conditions (via either DEX pools and/or CEXs).
Right now I think FOX for example has more than sufficient liquidity (enough that we have a healthy and operating chainlink oracle is one such sign), but right now would be excluded based on the marketcap provision because of the recent macro market downturn. I don’t think that is the intent for what is at this point a widely liquid token, so lowering marketcap or exemption for liquidity would both make sense to me.
As a temporary solution for now in the absence of proper modelling, how about criteria like:
topX (e.g.: top50) on DeFi Pulse (TVL-based – kinda proxy for the protocol’s real life standing among DeFi users) OR
(rolling mean over X (30?) days) MCap dominance (vs vanilla MCap) = Z (0.05%?) of the total DeFi OR
(rolling mean over Y days) 24h trading volume dominance (share of the total DeFi volume) for the protocol’s token = V (0.01%?)
I think MCap dominance is a really good metric as compared to vanilla MCap as it perfectly accounts for market downturn, while still ensuring we have a MCap related factor in the system. We should use MCap dominance, as having a market cap related factor is still important for choosing safe and liquid participants.
I would like to get clarification about a single aspect of Tribe Turbo; Does it mean that the DAO would essentially be lending out FEI at 0% interest rates to the Turbo Safes in question using only their native token as collateral?
I have raised this issue briefly in my other post about target interest rates. Though it is unlikely to have much of material impact on the protocol at launch. IF the program would increase its scope significantly, I am wondering if we should discuss whether a non 0% interest rate should be used instead.
That’s a good point. We will eventually need a positive interest rate, since otherwise it would be easy for borrowers to game the system and pay near zero rates unless Tribe maintains complete control over the deployment of borrowed Fei.
Regarding requirements on borrowers, I think we can be pretty lenient because these are necessary, not sufficient, conditions. Even if a DAO meets all the requirements, there will need to be an additional process for the governance to make the decision to onboard them. The requirements are simply lower bounds on creditworthiness, below which we won’t even bother to consider lending.
Not sure I understand why more than a 0% interest rate is needed? Isn’t the whole idea that because the fei has to be redeployed to a whitelisted rari pool that the tribe gets revenue from the protocol that way? That seems like one of the main draws to turbo to me, if you up the interest rate above 0% at the onset is starts to lose a lot of its fundamental and messaging appeal.
Well it depends on how much control Tribe has over deployments. But even with Fuse pools, if the borrowing DAO is the admin of the pool, they can lower pool’s interest rate, lend out to a subsidiary entity, and then redeploy from the subsidiary. It’s hard to share revenue because it’s hard to observe the revenue.
Seems like that is easily controlled by which fuse pools are whitelisted for turbo deployments.
While interest rate can be lowered, the % cut fuse gets remains the same even if the absolute number goes down (and a lower % rate should just lead to more borrowing volume in theory).
In general I think the design space for the turbo at 0% interest needs to be deployed and experimented with before any thoughts about adding an interest rate. The moment that happens you lose one of the most compelling selling points for DAOs to use turbo.
I agree that volatility is importante because Tribe will hold the DAOs` token as collateral. If it is volatile, more chance of not recovering in case of losses.
In relation to liquidity and volatility, I think it could be used the average during last month and the last 3 months.
I did not understand this.
Regarding marketcap, I think the minimum could be $50,000,000. And the LTV will be adjusted accordingly, less marketcap, lower LTV as this could impact the minimum liquidity needed.
Just to check, the idea would be $25M-50% per DAO? If Turbo has 3 DAOs participating on it, it could be almost 20% of PCV. I would prefer to start much smaller. We are navigating in turbulent market conditions, more conservative better.
I would like to understand more the rational for revenue split? I am trying to analyze from a risk taking perspective. Tribe risk is the DAOs’ token used as collateral (market risk and changes in token supply). DAOs’ risk is the accepted collaterals in the fuse pool. DAO lose first and Tribe just lose in case the DAO lost first. It seems to me that DAOs is taking more risk than Tribe.
I would support a larger revenue split for the DAO, maybe a 50/50 with a minimum for TRIBE of 5% or something that cover the DAO risk taken by TRIBE. We have the opportunity cost of 4.6% with stETH.
If the revenue split is too low for the DAO it could have the incentive to offer a low interest rate as it would not make much difference for DAO revenue.
This lending model is called indirect lending in development bank universe. It is usual to do this with commercial banks for a fixed fee and they lend to clients for the interest rate they choose.
How is the process for Tribe to remove the Fei from Turbo? There is a fixed term for the credit? It can only be removed with the DAO agreement?
Is there any condition for the Interest rate model of the fuse pool? What happens if the interest rate equilibrium is below Tribe opportunity cost?