Hey ya’ll! Interesting proposal.
If FEI wishes to expand and become adopted through defi, I wholeheartedly agree with the sentiment that liquid lending markets are key.
However, I disagree with the notion that the FEI protocol (especially a group of outsiders) should be maintaining a fork of Compound (or any lending market) on their own.
For context, i’m a leading contributor at Rari Capital and have helped develop and maintain the Fuse open interest rate protocol since inception. Fuse allows anyone to spin up their own isolated lending markets (like Compound or AAVE) and in only 2 months since release it has grown to see as much as $65m supplied across all pools.
Maintaining a fork of the Compound protocol is risky even if the code itself requires little modification.
You need to monitor the system and promptly take action if something suspicious arises or market conditions change, gather a network of robust liquidators, build out administration dashboards to allow governance or the team to modify protocol parameters, build out a robust UI for users to interact with the protocol and continuously adjust to provide the best experience, etc.
The creator of this thread has proposed that an external team (without a known track-record) fork and reaudit the Compound codebase themselves. The creator justifies this fork instead of utilizing an existing protocol like Fuse (which allows anyone to easily create a fork of Compound and has been audited multiple times by reputable firms like Quantstamp) as they believe that other protocols have too much “external risk”.
As a pre-emptive response to doubling down on Rari Capital’s existing Fei/Tribe Fuse Pool (which at it’s peak attracted nearly $15m of capital) the thread creator says that Rari Capital has a “complex” tranche system and “pools all of their stablecoins together”.
This is false and misleading for multiple reasons:
- Fuse is an entirely isolated system from the rest of Rari Capital’s offerings.
- Rari Capital’s yield aggregator pools deposit into Fuse but Fuse pools do not deposit or interact with any of Rari Capital’s other products.
- Each Fuse pool is an entirely isolated instance of Compound and in no way does it “pool all of the stablecoins together”
- You don’t have to trust me, trust our open open-source code! compound-protocol/contracts at fuse-v1.1.0 · Rari-Capital/compound-protocol · GitHub
The thread creator also says that Rari has suffered from “a lack of liquidity” (which I would argue is untrue, $15m of total supplied at the peak along with nearly $3m borrowed is not insignificant in the slightest).
If you take a look through the FEI discord you will find many users and moderators sharing slideshows and infographics they’ve made with newcomers to allow them to take out complex staking positions (like single sided tribe staking). Fuse has already shown strong product-market-fit with the Fei community and gained their trust.
Even if you disagree that Fuse has already proven it’s value to the Fei community, I don’t see how creating a brand new isolated Compound fork would solve a “lack of liquidity”. By itself a new market would only further fragment liquidity and hurt Fei users. Sending $25m of PCV to this brand new market could help in theory, but these funds could be much better spent if they were put in a battle-tested protocol already trusted by the Fei community.
Sending this PCV to Fuse would allow the existing market to continue to thrive and expand, and combined with a marketing/rewards campaign by the Fei community this would continue to foster a symbiotic relationship between the Rari Capital and Fei community.
Doubling down on Fuse instead of a custom fork has numerous advantages:
- The FEI DAO can take full advantage of the support and vigilant operational practices the Rari Capital core team have brought with Fuse.
- The FEI DAO does not need to worry about managing liquidators or finding the right protocol knobs to turn in the event of an emergency. Rari Capital contributors have the deepest knowledge of the Compound protocol besides the original Compound team themselves!
- The FEI DAO does not need to spend hundreds of thousands of dollars forking and doing an internal audit for a new lending market.
- Liquidity is not fragmented between multiple lending markets
- The FEI community benefits from the shared interest and borrowing demand the Rari Capital community generates from using Fuse every day.
- A beautiful, open source, and battle-tested UI has been available from day one, along with high quality developer/integration documentation coming soon.
All of these advantages come with no compromise in admin flexibility. Pool admins have even more flexibility than standard Compound admins. Fuse admins can do everything a standard Compound admin can along with the ability to set whitelists and take fees. The Fuse protocol does currently have a flat 10% protocol fee on all interest earned, but if the FEI DAO was to deposit PCV and further strengthen the Fuse protocol, I think it would be fairly easy to convince the Rari Capital DAO to exempt or lower the fee for the FEI/TRIBE pool in exchange for the usage and TVL it brings to the platform!
I would argue that Fuse and Rari Capital as a whole have proven ourselves as trusted partners to the Fei community, and this is not just based on sentiment. Would recommend taking a look at the last 15 days of activity on the FEI/TRIBE Fuse Pool here: Grafana (this is another pro of using Fuse, you get to piggyback off of the existing monitoring and analytics tools the community and team have made!)
In the last 15 days Fuse Pool 7 was able to survive a massive TRIBE borrow which led to near 100% utilization at one point and has seen over 281 unique deposits already. There are no insolvencies and the pool has already built up nearly $10k of reserves to prepare for any possible liquidation or system failures.
With all the above in mind, I hope the Fei/Tribe community is skeptical of the idea that an external team without a proven track-record or community trust should be paid to fork Compound for FEI/TRIBE when a proven protocol already used by the FEI community exists and could be further supported and strengthened by the FEI DAO.
Happy to answer any questions the community has about Fuse and/or how the FEI DAO can become more involved with managing the leading FEI/TRIBE lending market!
P.S: Even though I’ve been a critical about some of the details of this proposal in my response, I want to say that I think this idea of using PCV to allow the FEI DAO to set and manage interest rates across a lending market is fantastic, and the other Rari Capital contributors and I would be thrilled to help the thread creator(s) build some abstractions on top of Fuse to make this easy for the FEI DAO