Proposal to add DCHF+3CRV pool to the gauge controller

Summary:

Proposal to add the DCHF+3CRV pool to the Gauge Controller to enable users to assign gauge weight and mint CRV.

References/Useful links:

Protocol Description:

The DeFi Franc (DCHF) is an overcollateralized stablecoin pegged to the Swiss Franc. The Swiss Franc (CHF) is historically a very stable fiat currency and usually thrives in times of economic downturn. This makes the DCHF an attractive alternative to USD denominated stablecoins for everyone seeking to preserve wealth and earn “real yield”. The DeFi Franc smart contract system is a friendly fork of Liquity, with certain governance processes for expanding the set of collateral tokens, and is deployed on the Ethereum Mainnet. DCHF can be borrowed by depositing Ether or Wrapped Bitcoin as collateral and enforces a minimal collateral ratio of 110% on each borrow position. At the time of writing this proposal, the system’s global collateral ratio exceeds 220% according to the DCHF dashboard. Similar to Liquity the DeFi Franc utilizes DCHF deposited into a stability pool in order to perform instantaneous liquidations on undercollateralized positions. Moreover, just as LUSD the DCHF is 100% redeemable against the high-quality liquid assets accepted as collateral (currently ETH and WBTC). More information around these mechanisms can be found in the DCHF docs. In its turbulent first months the DeFi Franc weathered the market crash of November 7/8/9 without any problems and with the collateral ratio remaining at a safe level of above 160%.

Motivation:

The DeFi Franc provides CHF denominated borrow and yield opportunities thereby catering to “real yield” seekers, a growing market amidst the high USD (and EUR) inflation. Furthermore, the goal of the DeFi Franc is to grow the European DeFi market by offering non-USD denominated borrow and yield facilities. The European DeFi market remains underserved to date while at the same time Europe hosts a large number of DeFi communities and a strong user base.

In order for the DeFi Franc to deliver on that promise, availability of deep secondary liquidity for the project’s stablecoin is of paramount importance. The team behind the DeFi Franc believes that Curve is the go-to market for stablecoin liquidity and, thus, has taken a number of steps to align long-term with the Curve ecosystem. First, the DCHF/3CRV pool has been set up at protocol launch and its liquidity has grown to about USD 5M at the time of writing this proposal and a peak of about 8M. Currently, LPs in this pool are incentivized with the project’s native fee distribution token Moneta (MON). Second, the project’s treasury is currently in the process of accumulating veCRV voting power in order to participate in Curve governance and allow for a more sustainable pathway to grow DCHF liquidity. And lastly, a number of integrations of the DeFi Franc with other Curve pools or new Curve pairings are underway.

Specifications:

  1. Governance:

The DeFi Franc protocol allows for limited governance interventions. Most notably, governance may make the following updates to the protocol:

  • Add new collateral assets with their own stability pool and price oracle
  • Change a collateral asset’s risk parameters such as minimal collateral ratio
  • Replace a collateral asset’s price oracle

Governance powers explicitly exclude the following:

  • Outright minting of protocol tokens
  • Transferring user funds

The limited governance powers currently reside with the DeFi Franc Guardian DAO which is organized as a multisig similar to Curve’s Emergency DAO. The Guardian DAO employs a 3-out-of-5 threshold and signers are composed of doxxed founders and contributors to the DeFi Franc and other DeFi projects. The multisig can be found on Ethereum Mainnet under this address 0x83737EAe72ba7597b36494D723fbF58cAfee8A69.

  1. Oracles:

The protocol uses Chainlink feeds to fetch prices for the collateral assets and the CHF-USD price. Thus, currently the ETH, BTC, and CHF Chainlink feeds are used. The current implementation of the price oracles and respective sanity checks (lifeness, price validity) are very similar to Liquity’s implementation with the difference, that it uses two Chainlink feeds one for the collateral value in USD and a second converting USD prices to CHF (the DeFi Franc’s peg asset). The implementation can be found here.

  1. Audits:

The DeFi Franc protocol is a friendly fork of the Liquity system. Liquity was audited by Trail of Bits and Coinspect with audit reports available here. In addition, the DeFi Franc protocol has been audited separately by Certik and the audit report can be found here.

  1. Centralization vectors:

The DeFi Franc protocol runs autonomously on the Ethereum Mainnet. No individual has control of DCHF minting powers or user funds. The protocol is a friendly fork of Liquity and in general is susceptible to the same centralization vectors than Liquity. These are very limited however and center around keeper functions for the initiation of risky trove liquidations, which rely on external actors to seize risk-free profits. In order to further strengthen the robustness of the protocol, the DeFi Franc is integrating with the Keep3r Network as a trustless keeper fallback layer.

In addition, other than the Liquity system, the DeFi Franc protocol grants ownership rights to the DeFi Franc Guardian DAO which, however, requires a 3-out-of-5 signer threshold for any change to be enacted (see section Governance for more details). A further centralization vector worthwhile mentioning is that the DeFi Franc protocol currently relies on Chainlink price oracles. While the protocol has no fallback oracle system implemented at the time of writing this proposal, the DeFi Franc Guardian DAO is able to activate such a system in the future or switch to another price oracle in the unlikely case of Chainlink feeds failing.

  1. Market History:

The DeFi Franc has weathered the FTX crisis and market downturn without a notable effect on peg stability during the said period in November. Due to its redemption mechanism the DeFi Franc is extremely robust against downward depeg events. On the other hand, similar to LUSD, due to its mechanics the DeFi Franc is more susceptible to upward depegs due to users buying DCHF off the market in order to repay their debt. It is therefore paramount for the DeFi Franc to gain access to a Curve gauge in order to further grow on-chain liquidity.

8 Likes

support this proposal, also great to see nice liquidity in the pool bootstrapped by the protocol and purchase of CRV to signal participation in governance.

3 Likes

Considering that you’ve just recently launched it can be assumed that there is barely any ongoing governance. Even worse, there seem to be no community channels (no telegram - only one for announcements, no discord, a dead subreddit, no snapshot space, nothing). The legal information is also not available on your homepage (“Coming soon”). Then the m-sig, you say its comprised of doxxed people, but who?

Coming back to the gov. matter:

  1. Governance:

The DeFi Franc protocol allows for limited governance interventions. Most notably, governance may make the following updates to the protocol:

  • Add new collateral assets with their own stability pool and price oracle
  • Change a collateral asset’s risk parameters such as minimal collateral ratio
  • Replace a collateral asset’s price oracle

Given that there is no governance/community, and the fact that there is room to assume a pre-mine (>4 mon of MON staking and DCHF LM’ing / more on that below), the protocol at the current stage is in fact centralized. The possible rug flow here would be listing an illiquid token as collateral and/or set the minimal colleteral ratio to zero, mint DCHF, rug LPs.

Diving deeper into the pseudo-decentralization, the evidence can be found on-chain:

As can be see below, most of the current TVL entered at a very early stage, with a few wallets dominating the TVL


Source: Arkham


Source: Arkham

Furthermore, due to Moneta (MON) tokens being airdropped on Grizzly.fi users, there is also room to assume a founder sybil.

By taking a look at the counterparties interacting with your staking & lp contracts it can be seen that these are mostly, newly seeded, low-tx accounts.


Source: Arkham

From a random sample of 10 such accounts, all those were low-tx accounts on BSC as well, that only interacted with Grizzly.fi on the Binance Smart Chain.

This systematic behavior of “growth-hacking” can also be observed in the propped-up twitter follower count.


Source: followeraudit.com

Though the follower audit indicates only 5% of fake followers, it is known that these “auditing” services are not sophisticated enough to spot advanced follower botting.

Note: “Audited 101 days ago” just a few days after the follower count increased by thousands in a matter of a few days.


Source: Socialblade

Wrapping it up, the lack of governance is a deal-breaker for a gauge, especially given the sketchy evidence presented above.

2 Likes

Hey knows, thanks for taking the time to dig deeper into the DeFi Franc and respond to our proposal. As you noticed too, we are a fairly young project and by posting this proposal here we want to present ourselves to the Curve community and engage in discussions prior to any vote. After all, liquidity is the oil in DeFi’s engine and we too are not interested in jeopardizing this with another Mochi!

Thus, let me respond to your critique by first giving you (and the community) more context on the DeFi Franc:

  • The DeFi Franc was launched out of Grizzly by the Grizzly founders
  • Grizzly offers yearn-like strategies that let users earn yield on LP positions
  • Grizzly was launched on BSC in summer 2022 but recently deployed on Ethereum mainnet too (current TVL is $40M with peak of $200M)
  • The Grizzly team has been doxxed from day one which allowed us to build trust in the community and execute successful launches for both the Grizzly and DeFi Franc

That said, the Grizzly community has a strong footprint in Europe and the demand for non-USD denominated stablecoins and yield has in fact triggered the launch of the DeFi Franc. Hence, naturally the DeFi Franc community is bootstrapped out of the Grizzly community which explains the overlap shown by your analysis. Tbh a lot of the DeFi Franc communication in fact happens on both the Grizzly and DeFi Franc channels as seen e.g. in the Grizzly discord.

Nonetheless, dedicated DeFi Franc TG channels exist and are used on a daily basis to provide support and moderate community discussions. In terms of the DeFi Franc website I am embarrassed to say that I totally agree with your assessment that critical information is missing. We are, in fact, in the process of redesigning the website and so this should be fixed in the next days.

I can’t really speak to the graphics you shared, I don’t know how they were generated and what they represent (e.g. the graph diagram says it shows 1,000 of 33,949 transfers or $97,204 of a total of $7.21M volume which wouldn’t really be representative right?). However, I can outline how the $MON holder base (currently 3,714 holders according to Etherscan) was bootstrapped:

  • 1.5% Rewards paid to participants of the Liquidity Bootstrapping Event
  • 1% was paired with ETH from the Liquidity Bootstrapping Event
  • 40% is set aside for distribution to Stability Pool depositors and LPs of which about 2.4M (2.4%) has been distributed on Curve so far
  • 15% in airdrops to Grizzly and Liquity communities
  • 32.5% is locked in the treasury and released only according to a vesting schedule
  • 10% is distributed to the team with an initial lock of 1 year after which a vesting period of another year starts

You can find more information about this distribution schedule in our docs as well as the respective $MON vesting contracts here.

As mentioned above we are, compared to the Curve community, a rather young project and this proposal marks a major step towards expanding our footprint in the broader stablecoin ecosystem. We couldn’t find a better place to make these steps than with the Curve community which is why we have bootstrapped liquidity in the DCHF-3CRV pool with $MON over the past months and more recently have started accumulating Curve voting power. We see this as the start of a long-term collaboration that will help us make the DeFi Franc an alternative to USD-denominated stablecoins and grow the European DeFi ecosystem.

I hope this information sheds light on some of the important questions that you’ve raised. We definitely have some homework to do and will update everyone on progress. Again, I want to thank you for your efforts in doing due diligence here, something that we are fully supportive of. Happy to continue the convo ofc.

3 Likes

As per the information available, Grizzly is a multilevel marketing crypto scheme which marketed to investors with 3x promise at launch back in August 2022. The idea was simple: Raise money, move substantial amounts to affiliated wallets and use the rest to manipulate liquidity in a Pancakeswap pool so that investors see a 3x higher price on the first day of trading (information directly from Grizzly) - an idea they called a “fair launch”

Source: GrizzlyFi on Twitter

According to Telegram-Logs from GrizzlyFi’s official channel, on or around July 26, 2022 apparently the author andres_sol himself mentioned a “guaranteed 3x at launch” during a community AMA on YouTube, however Grizzly has deleted this video since from their YouTube channel:

The screenshot shows a Telegram post in the official Grizzly Telegram where a member says (translated from German) “it was not very smart from Andres to talk about a guaranteed 3x” - in reference to the AMA.
Source Telegram

This information could not be verified due to GrizzlyFi taking down the videos.
Dead links to the relevant AMAs on YouTube via Grizzly on Twitter.

Further, since the founders pointed out that they are doxxxed as a positive, we shall seize the opportunity look into their background to better understand their capabilities and skillsets; and it shall be pointed out that, as per the author himself, his only relevant experience prior to the Grizzly launch in Aug 2022 was running a “dropshipping business” and engaging in “affiliate marketing”. Source: The author himself in an interview on Youtube with translated cc.

Source: YouTube

Further, the idea of the author that the Grizzly as a protocol ever had $200m TVL (as stated in the post above) is questionable. Fact is, Defillama states GrizzlyFi’s TVL stood at $53.25m at it’s peak and is now $1.9m-$16.7 depending on calculation methodology. A TVL of $200m only would have been possible right at launch during price manipulation, when their own GHNY token would have accounted for over 90% of TVL. This was not mentioned in the post above when pointing out the “peak”.


Source DefiLlama

The voting members have to make the decision if these ethics and selective information tactics correspond with the values of the DAO.

This is by no means should be an ad hominem attack. But since the information mentioned is publicly available to all, it should be discussed as available. It appears the proposal is a German/English information-availability-arbitrage due to most questionable information being available in German only. More details around Grizzly and backgrounds are available if the need arises.

1 Like

I support this proposal. Seems that we gonna have increased liquidity in the pool.

2 Likes

Good morning basis! Our intention behind posting this proposal prior to the actual vote is to allow the community to raise any concerns and discuss these openly. Transparency is a feature of DeFi (not a bug) and we feel that this needs to extend to projects teams and off-chain activity just as much as it does to a protocol’s on-chain footprint. This is why the DeFi Franc founders are doxxed and why we publicly disclosed our relationship to the Grizzly project on this forum. Thus, please take this as an encouragement to report any wrongdoing by the team because, again, we are all here to build and make DeFi stronger in the long term.

At the same time, however, I feel accusations should be rooted in facts and I want to clarify on the points you made. Grizzly.fi is not a “crypto scheme” but has launched as an LP aggregator for Uniswap V2 based DEXs similar to Beefy or Yearn. We have experimented with a referral program to further engage the community but the program was discontinued because it wasn’t used. Regarding the Grizzly.fi launch, we never misrepresented the economics behind the launch but always were fully transparent with the way how GHNY tokens were distributed and how the community could participate. Whenever we realized statements were misunderstood we acted quickly to correct them. After all, we understand that a project, just like DeFi and crypto overall, is only as strong as its community.

That said, you are totally right with regards to the TVL I reported. It would have been more appropriate to use TVL from user deposits only. The point still stands that Grizzly has seen significant demand and we are continuing to provide value to our users.

We continuously review our work in order to continuously improve. Among other things, we have therefore designed the liquidity bootstrapping event for the DeFi Franc, or it’s governance token Moneta (MON) respectively, different making it simpler and hence reducing barriers to participate. Specifically, $1M was collected in ETH to pair with 1M MON tokens on Uniswap as liquidity. In exchange participants of this event received 1.5M MON tokens vested over a 6 month period. The liquidity collected by the community sits in this Uniswap pool and you can read more about the launch mechanism here.

I encourage the community to review these facts and continue the discussion. Thank y’all for your support!

1 Like