Summary:
Proposal to add gauge support for mwstETH-WPUNKS:30 / wstETH and mwstETH-WPUNKS:15 / wstETH on Ethereum.
References/Useful links:
Link to:
- Application: https://app.metastreet.xyz/
- Website: https://www.metastreet.xyz
- Documentation: MetaStreet docs
- Github Page: GitHub
- Dune: Dune Dashboard
- Discord: Discord
- Twitter: https://twitter.com/metastreetxyz
Protocol Description:
MetaStreet v2 aka “The Automatic Tranche Maker” (ATM) is a permissionless lending protocol for on-chain collateral. Pools are organized by automatically tranching capital based on different risk and rate profiles from depositors, which turns into fixed-duration loans for borrowers.
The main goals of The ATM is to improve on three shortcomings of existing lending protocols:
- Oracleless: Remove the dependency on a centralized price oracle for loan to value limits
- Dynamic Interest Rate Model: Replace a fixed, governance-driven interest rate model with a dynamic, deposit driven one
- Permissionless: Allow users to instantiate a lending pool for any collection permissionlessly
Motivation:
This proposal aims to add a veCRV gauge for the Curve mwstETH-WPUNKS:30/wstETH and mwstETH-WPUNKS:15/wstETH pools on Ethereum.
MetaStreet aims to solve one of the emerging issues in fixed-duration lending, which is that the adoption of borrows are significantly limited by the length of the duration, given the holding risk borne by lenders. By aggregating multiple positions into a single duration (1-year long) and representing the high-yielding position on Curve, the goal is that long-dated loans are now possible by making the debt position tradable (at a premium or discount) in the secondary markets.
In the NFT lending space, the industry has reached penetration ceiling given that the majority of holders would never take short-dated loans due to rollover/escrow/default risks. Fixed duration loans work well in this niche given that NFTs are illiquid, low volume (thus bad oracle compatibility), and are nonfungible so they require specified, bilateral terms - this contributes to the industry’s high-yield nature.
In addition, one new objective emerges, which is to create a new asset class: risk-on yield. Currently, the DeFi ecosystem has plenty of natively low-risk yield sources (staking, treasuries). MetaStreet offers a high APR on ETH (>10%) through a different source of yield: duration-based NFT loans. This nascent industry carries an average of 20-30% yield on ETH, but is a very laborious, bilateral process. By simplifying the process into a yield-bearing token (via aggregation, tranching, tokenization), MetaStreet aims to abstract away the complexities to “purity” the yield for simple DeFi integrations.
Metastreet aims to incentivize this pool through various partnerships, advisories and investments.
Specifications:
1 Governance:
MetaStreet operates as a collection of smart contracts that operate without oracles, governance or permissions.
The parameters that the user defines at the point of every deposit are: loan limit, duration, pool interest rate, collaterals (ERC-721/1155 & ERC-20), and deposit amount.
2 Oracles:
MetaStreet’s Automatic Tranche Maker is oracleless & permissionless.
The implied share price of the debt tokens, however, is based on an “Accrued Interest” calculation, which is used in Curve v1 external oracle implementation. This smoothens out the yield across the duration of asynchronous loans to help reduce the risk of last-minute depositors who would take the yield (“snipers”) through an expected & optimistic Net Asset Value calculation (assumes the loans will successfully repay up until it does not).
This was necessary because the originations and loan repayment/yield generation are asynchronous, and thus the price needed to be smoothened across the duration of the deposit, especially for longer durations. The Accrued Interest is used to generate an oracle which these Curve pools utilize (Curve v1 external oracle stableswap pool) to help with theta management, given the expected high yield and lower volume on these tokens.
The lower amplification selection in the pool was specifically selected to allow for depegging given this potential event, while allowing for concentrated liquidity in the “optimistic” rate.
3 Audits:
MetaStreet Audits
MetaStreet Bug Bounty
4 Centralization vectors:
MetaStreet currently runs a bot that originates loans from other NFT lending platforms into the MetaStreet Automatic Tranche Maker. Otherwise, everything else is permissionless, decentralized, and requires no governance.
While the contracts are currently upgradeable, there are near future plans to make them fully immutable and decentralized.
5 Market History:
mwstETH-WPUNKS are positions within MetaStreet’s Automatic Tranche Maker. Specifically, they represent user-defined risk profiles of fixed-duration debt against Wrapped CryptoPunks, denominated in wstETH. Unlike most designs in DeFi, MetaStreet’s loans are unliquidatable and can only be defaulted upon at maturity. In other words, they are fixed term, fixed rate.
The pools created below are for 1-year long terms. The positions will continuously offer fixed-term liquidity against Wrapped Cryptopunks up to the loan limit(s) specified (15 wstETH, 30 wstETH) until there is no more liquidity supply left. MetaStreet’s Automatic Tranche Maker algorithmically outputs different interest rates based on various tranches, depending on how risky they are. As a result, higher risk (higher loan limit) tranches bear first loss in a loss-given-default scenario, but they also generate higher yield.
These tokens are similar to the share price system of wstETH, but they are at a higher risk of default, which would modify the cash holdings and therefore share price of the assets negatively (<1.000 after loan maturity losses). For their risk, however, the native yields are also able to net significantly higher sums than many other opportunities in the DeFi space (eg mostly riskless money markets).
mwstETH-WPUNKS-30/wstETH
Link to pool: https://etherscan.io/address/0x89d4ed54cae922264b9c82cfc38e3952f5fe88dd
Link to gauge: https://etherscan.io/address/0x8bd12be662a5b5C7E4822522CcE6C9B26E3B171F
mwstETH-WPUNKS-15/wstETH
Link to pool: https://etherscan.io/address/0x60f9a9eba835e1f148c5fdaf8851c5880ac6dab2
Link to gauge: https://etherscan.io/address/0x89cb140f8ff35633d44224400604173d9482b114
Value:
These pools serve as an anchor to the CryptoPunk community, the largest & one of the longest NFT collections in history.
MetaStreet DAO has deployed ~$500,000 at the time of this writing into the pools, and is actively working with partners to help bootstrap more incentives into the pools.
The mwstETH-WPUNKS pools are intended to be a key venue where holders can earn yield, speculators can bet on the repayment of the loans, and yield farmers can enter/exit their positions. These loans carry more risk (but also more yield) as the collateral auction upon loan repayment may affect the value of the shares.
Our goal is to bring double-digit yields to the DeFi community, unlock new users into the Curve community, bridge NFT users with the DeFi community, and create a new asset class that will be dependent on Curve as economic infrastructure. This will serve to increase TVL, volume, and new users on Curve.
Vote:
mwstETH-WPUNKS-30/wstETH
https://dao.curve.fi/vote/ownership/509
mwstETH-WPUNKS-15/wstETH