Anzen seed round & partnership

Governance Proposals Token Swap / Seed funding
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Introduction

Anzen is a decentralized private credit protection protocol with a focus on generating sustainable yields from real world, cash-flowing assets. The Anzen protocol will not invest directly in Tradfi assets, which is subject to KYC and other regulations, but will rather provide protection against defaults on high quality assets – all the while collecting premium payments on a monthly basis. Ultimately, Anzen will become a perpetually scaling reserve pool where the protocol generates sustainable yields indefinitely.

A credit investment platform backed by Coinbase Ventures has signed on to be Anzen’s strategic launch partner and inaugural customer. This team has an extensive background in private credit and will provide rigorously underwritten assets that Anzen will provide credit protection for. The first note will go onto the platform in May, with the first premium payments being sent to Anzen Treasury in June. The name of this launch partner will be publicized in an official press release shortly.

Proposal

Anzen invites FRAX to participate in the Anzen seed round as a protocol DAO. This is an oversubscribed round with a strong investor syndicate including Mechanism Capital, a Frax/FXS ecosystem advocate. FXS holders benefit as a direct result since ANZ tokens would go toward the protocol balance sheet just like prior investments such as OHM and CVX. ANZ tokens when locked provides governing rights via veANZ to influence the distribution of income from the Anzen protocol. Additionally, as part of this proposal Anzen will open a FRAX single sided pool for users to earn yield by staking FRAX.

Investment Terms

$500,000 allocation for FRAX Protocol

$0.035/ANZ

$35M Fully Diluted Value

Investment paid for in AMO Profits (approximately 12 hours of protocol profit)

2 year lock, then 3 Year Vest with quarterly cliffs

More Info

Website: anzen.finance

Twitter: https://twitter.com/AnzenFinance

Discord: Anzen Finance

Docs: docs.anzen.finance

Actions

For: Invest in Anzen & attain the full $500k allocation

Against: Do nothing

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I think this partnership is the perfect example of the “DeFi Mullet” Thesis (Symbiotic TradFi/DeFi collaboration). I’d love to see Frax participate in this round as a DAO. Would love to hear what others think.

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Hi All, I’m an early contributor of Anzen.

TLDR; Having a FRAX pool on Anzen will provide a sink or use case for Frax, with the aim of driving more Frax minting, and corresponding burning of FXS to its target collateral rate. Owning ANZ tokens will provide the Frax protocol governance rights on Anzen’s decentralized insurance reserve pool and payout amounts.

There are 3 sources of yield for FRAX single-sided depositors on Anzen in exchange for providing default protection for private credit notes:

  1. Exogenous Yield that comes outside of Defi: monthly premiums coming from tradfi. This is estimated to be at least 10% APR that goes into the treasury/POL; the % payout ratio to the Frax pool is decided by veANZ governance, initially this payout ratio could be anywhere from 50%-80% to provide incentives to early stakers.
  2. Endogenous Yield (yield that comes from Defi): Deposited FRAX can be farmed and redeployed to earn yield on staked FRAX-USDC v3 LP or on convex/curve, or lent out on AAVE, or a combination of the above.
  3. ANZ governance token yield farming. Variable APR based on ANZ token price.

The 3 combined yield source would provide incentives to attract FRAX usage on the Anzen platform. An increasing Frax reserve pool would increase the amount of premiums the protocol would receive in its treasury, driving up its APR, attracting more Frax depositors. If demand of Frax goes up, more Frax has to be minted, and therefore more FXS would have to be burned.

Finally, since the % premium payout ratio is also decided by veANZ holders through a governance process that models closely after the Frax governance process, owning veANZ tokens will provide incentive alignment and control over this important governance decision.

A Frax x Anzen partnership would enable further use case of Frax and expand its ecosystem and reach further outside of Defi.

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please define these assets , thanks

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Here is a representative list of asset types that Anzen will cover:

https://docs.anzen.finance/overview/private-credit/anzen-coverage/private-securitizations/asset-classes

Note that regardless of asset type, any covered asset must conform to Anzen eligibility criteria. These criteria are in place to minimize default risk and provide legal safeguards for lenders to keep their principal safe.

At the outset, Anzen will cover “blended notes”, which are each a basket of assets instead of single assets. This will increase the protocol’s risk diversification as the probability of all notes defaulting at the same time is minimal. Each note within this basket must individually conform to eligibility criteria as well.

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Hi everyone, if there are no more questions, we will move this proposal to Snapshot

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not sure we really need to be funding a centralized payday loan company.

it may or may not make money , but i dont really want to be involved in exploiting the most needy or taking on the risk of loaning funds to the companies that the banks reject.

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Wanted to address the questions and concerns raised in the Telegram chat:

Is Anzen lending out capital directly?

No. Anzen is not a lender.

Anzen is a reserve pool that provides default protection for portfolios of private credit assets. These assets are structured to achieve 0 LGD (loss given default), meaning that Anzen would only pay out capital in rare cases where the recovery of collateral is insufficient to pay back loan principal. The built up reserve payments and yield farming activities (akin to FRAX AMO) are designed to cover this payout and minimize principal loss.

For Defi users, Anzen is essentially a reserve pool controlled by ANZ holders with real yields coming from the TradFi world. ANZ is backed by its protocol owned liquidity (POL), and will continue to generate yield from a TradFi to Defi income stream that is paid into the protocol reserve on-chain as stablecoin (USDC initially, but one can envision this form of payment be upgraded to FRAX in the future which further increase the utility of FRAX).

What is the rationale behind the token distribution?

There is an intentionally small allocation to public sale (2%) as those tokens are not subject to lockup, and we do not want to promote price speculation. Therefore the primary way to obtain protocol governance tokens is not by buying on the open market but rather staking capital to earn yields with the protocol. 40% of the entire supply is allocated for emission to the staking pools to the users who deposit FRAX or USDC.

The investor and team lockup is extremely long compared to other protocols: locked for 5 years total (2 year cliff, 3 year vest). This promotes long term alignment as we grow the protocol. Frax protocol will be a part of the investor group to access a sizable holding of ANZ and make a meaningful difference in ANZ governance.

Why crypto? What is the benefit for FRAX?

The Anzen x Frax partnership is focused on creating a sink for FRAX beyond the current dominant use case that is currently playing out in defi/curve wars. In order for FRAX to grow to $100B-$1 Trillion in circulation, we believe novel use cases would have to exist and be acted upon. Rather than having the Frax protocol directly interface with Tradfi, Anzen provides a bridge and sink that connects to TradFi and opens up a new way for users to utilize FRAX in a purely crypto-native manner. veANZ token holders get to decide which stable coin pool to incentivize (gauge weights voting) and owning veANZ early on would provide more incentives for FRAX pools. The deposited FRAX on Anzen could also be re-hypothecated back into FRAX LP pools to farm FXS and max lock for veFXS or distribute FXS back to its depositors.

This is a new frontier on capturing yield from TradFi and we would like the Frax protocol to be in a good position for that new wave. In the future, Anzen would also be able to service under-collateralized or un-collateralized lenders/borrowers natively in crypto/defi as well, but solving the TradFi puzzle first is what will unlock a multi-trillion dollar market for FRAX. Building this project on-chain enables better visibility as well as ability to scale the reserve pool with a global defi user base and have a transparent governance structure to manage this treasury and it gives all users (large or small) a chance to be involved in receiving these yields that normally wouldn’t be accessible to small depositors.

Are non-bank lenders bad?

Non-bank lending is a trillion dollar market dominated by the likes of very high profile credit funds - Ares, Blackstone, Goldman, Apollo - with respect to direct lending to mid market companies. While a large swath of the market is tied up on this end, much of the rest is made up of a variety of non-bank lenders that are backed by VCs as their technology-driven underwriting approaches have mitigated a variety of risks lending to unbanked and underbanked populations. Many of these platforms achieve default rates commensurate with conservative bank lending standards despite lending to these populations. The likes of Affirm, Kabbage and Klarna have proved that data-driven underwriting can serve this universe of borrowers profitably, responsibly and at scale. Small businesses can’t obtain bank loans for a variety of reasons - less than three years of financials, owners not willing to provide personal guarantee, unbankable sectors, insufficient profitability, insufficient collateral, and the list goes on. These Fintech lenders have cracked the code for niche borrower markets and have become the primary source of capital for a vast segment of the global economy. These are not “bad” companies.

Anzen Finance x Frax partnership will be the first of many steps to enable high quality businesses that cannot get bank loans to acquire capital from Fintech lenders to grow their businesses.

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the question was, do you make money from payday loans?

it seems the answer is …

you protect the people that offer payday loans.

and thats ok, it just not something i want to be involved with.

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This is an inaccurate characterization - the asset classes in the Gitbook are examples of assets that these portfolios could be exposed to and do not indicate that we are covering them now or in the future. In general, the protocol is able to protect all types of private credit portfolios that meet eligibility criteria.

If this is a sticking point for protocol users who are earning yield on Anzen (or Frax as a protocol investor), they can vote to turn down assets that have this exposure. This sentiment is similar to Tradfi investors who do not want to earn returns from industries like alcohol, cannabis, or gambling. We have thought about ESG concerns and are open to discussing with our users - there are constructive ways to address these issues with the community without writing off the entire protocol.