FIP 42 - FRAX & Themis partnership

Summary;
Themis is the first-ever protocol that provides borrowing & lending for the AMMs market starting with Uni V3 positions. For more information please check out; Website, Twitter, Docs

TL;DR;
Themis allows users who have a liquidity position with Uniswap v3 to collateralize up to 65% of their LP assets.

This means that if you have $10k in LP assets, you could receive up to $6500 in stablecoins like FRAX to do with as you will. Buy Lambo, go long on Shiba Inu, reinvest right back into your LP, who cares?

A good example would be the FRAX/USDC LP pair, users are able to collateralize their LP and borrow up to 65% in supported stables coins like FRAX and other whitelisted assets, which makes the current FRAX/USDC pair at least 165% more capital efficient.

The success factor of any stablecoin derives from 3 things; community, liquidity, and adoption. The Frax community is no doubt one of the most forward thinking communities out there. You guys are building what will become the future of modern central banking. Themis wants to partner with you guys and allow you to increase your liquidity and adoption.

Potential roadblocks/risks for the Frax community;

  1. Smart contract risks of being exploited. – Our smart contract and business logic have been audited by a reputable 3rd party. Also, we will soon be launching a bounty program with Immunefi.

  2. Borrowers default; risk of default. – We will be whitelisting selected V3 LP pairs that fit our risk model of liquidity, reputation, and volatility to ensure the safety of our lenders. Our liquidation kicks in at 80% ensuring that our borrowers are always over collateralized at any given time. There is minimal risk of being liquidated however, a full or partial repayment back to the loan contract can be made at any time to lower this percentage.

Themis is a new protocol that is currently bootstrapping its lending liquidity via Lockdrop & LBA pioneered by the Delphi Digital team and utilized by Astroport which has had huge success bootstrapping >$1b in AMM and >$110m in their LP. We have 64,000,000 which is 8% of our total supply to be given to our stable coin lenders. And, it’s a great way for the AMO to earn not just organic interest but also Themis’ governance tokens without risk of impermanent loss or volatility.

With that said, we’re applying for $10m to kickstart the protocol. All funds will be locked via smart contract for 9 months which will then be deployed onto our lending pools. Deadline is the 16th of Jan due to the lockdrop and funds will be deployed after our LBA is done which is after the 28th of Jan.

We plan to submit a snapshot proposal, but we’d like to hear from the community first. Is this the kind of partnership you’re aiming for to grow FRAX adoption?

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nice partnership ,i love it ! :heartbeat:

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This is promising. Expanding the number of protocols integrating FRAX is a key component to both adoption and community. 9 month lockup because funds are being deployed to lending pools is a smart move. I’d like to know more about the audit and what was in scope.

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just so i got this right , you want FRAX to put up the $10m in FRAX liquidity and to do it before the 16th ?
can you be more clear about how you see this partnership will work going forward.

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is this the plan for the FRAX liquidity ?
will we be able to earn these rewards too ?

Thank you, let’s do this!

Thank you! We were audited by Peckshield, their official report should be out within a day or two. Happy to link it here, when it is ready.

Yes! The reason for the date is because we are conducting a Lockdrop + LBA to bootstrap our liquidity, it will be a great time for Frax governance to earn a substantial amount of TMS gov tokens while earning interest on the capital; This will strongly incentives both protocols, as Frax gov will have voting power and growth alignment with Themis.

Also, we will be selecting Frax USDC Uni V3 LP as one of our first few LP pools to be able to be collateralized, which makes the capital in the pool at least 165% more effective and create better ROI/ reasons for more participants to participate in the LP which will then further grow the Frax ecosystem!

And, yes! If you’ve Frax, you’re able to join our lock drop event on Jan 15, stay tuned for more updates! And, please support us, by voting yes!

i guess this only counts for unlocked LP’s in the pool as 70% of it is locked.

but could attract more investment form people that want short term investments, and i guess it gives you a locked pool to liquidate bad loans in to.

i have already done some digging about the event on the 15th :slight_smile:

also, just so your aware … we normally have a 5 day time frame for this chat thread followed by a 3 day vote, but that will likely take us past the deadline.

i dont think it will be much of a issue to cut it back to a 3 day chat thread if there are no negative comments about the proposal before the vote goes up. but its not up to me. just letting you know

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Thank you for the heads up! Appreciate it!

Interesting protocol, could definitely be a match with Frax.
Some questions:

  • Are you live yet with NFT borrowing/lending?
  • Can you also borrow NFT’s, or can you only use them as collateral?
  • How are the Univ3 ranges restricted?
  • Are there isolated borrowing/lending pools, or is every NFT lumped into one pool like Aave/Compound?
  • Can a lender select the collateral it will accept? Like we only want to lend against Univ3 pairs containing FRAX.

Note: I read you are using Univ3 TWAP Oracles. Those are great, but you have to make sure there is at least some liquidity covering the whole price curve, otherwise they can be tampered with.

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Great questions, Denett!

  • Yes, we are! But only towards Uni V3 NFT (LP) positions.

  • At the moment, you can only collateralize your Uni V3 NFT (LP) positions to borrow assets from our lending pool.

  • There are no range restrictions against Univ3 positions; as the protocol only calculates the underlying intrinsic value of the position - here’s more info about our lending pool - https://docs.themis.exchange/product-information/lending-pool

  • Yes, it is designed as a pool. Only whitelisted Univ3 NFTs are able to be collateralized.

  • Initially, the lending pools will only lend to Uni V3 NFTs with similar assets. For example, Frax will only lend to whitelisted Frax pairs. In the near future, we will allow our community to vote on which additional Uni v3 LPs to be added.

  • Yes, our whitelisting process ensures that we’re only selecting UniV3 LPs with in-depth liquidity to ensure that if a default does happen, we will have enough liquidity to liquidate the positions.

PS: We will be adding V2 LPs, staked LPs, cross-chain borrowing, and lending as part of our road map!

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Maybe I am missing something, but the app is only working for me using the Ropsten Test Network

I read, the docs, and I am wondering why on transfer of the the SP tokens the interest and rewards are collected. Why not just use the cToken/aToken variant we know from Compound/Aave? Contracts can not collect the interest/rewards on transfer. Can they collect them in an other way? The Frax protocol normally does everything from a contract (AMO/multisig).

I also read that you consider to create an AMM between SP tokens and the original token in case the utility is 100%. Normally this is handled by adjusting the interest rate curve, increasing the rate at high utility, so borrowers will return their tokens. Is it possible to adjust the interest rates in such a case?

I am also wondering why you want to use vaults where deposits are locked for a longer period. Economical that does not make sense, because you are paying a high longer duration rate on the deposits, but can only collect a short duration rate from the borrowers. Is this just for bootstrapping and guaranteeing liquidity on startup?

Great questions as always! And, here’s my take on them.

We will launch Themis to the ETH Mainnet on Jan 15 same day as our Lockdrop event. At the moment, we’re on the Ropsten Test network.

You’re correct, the initial phase of liquidity bootstrapping is done through the vault to ensure longevity and predictable liquidity in return for the longer duration, Themis has designed an incentive program that will provide our governance token as a reward. On top of organic yield, this will also create incentives to strengthen our partnership and more upside for the Frax treasury.

The nature of the product is different from Compound/Aave; single crypto asset vs NFT wrapped LP( Dual crypto asset) and that is why our design is different.

Our design is to maximize gas fees per transaction. Every time a transaction happens for our SP token, the wallet holder will collect the previous interest and rewards earned, through the smart contract with our lending pool.

In regards, to increasing the interest curve to get users to repay their loans quicker. Based on our research and calculation, we find that increasing the collateral ratio, that will be a more effective solution to get users to repay their loan to increase our liquidity for withdrawal.

On top of that, utilizing SP-token will dramatically increase the utility of our product where other DeFi protocols/ AMM strategies can be built around it.

PS: Here’s our official audit which is done by Peckshield -

I agree that it will be more effective to get people to return the tokens, but borrowers do not like it, because they can get liquidated if they miss the announcement. Increasing the interest rate is safer for borrowers, can attract new deposits and is automatically reversed after the high borrowing demand is gone. The interest rate is the most important weapon for borrowing/lending protocols.

you need to put this to a vote if you want a result before the deadline … the team will need time after the vote to carry out any actions needed.

seems things have been delayed at THEMIS and this will give you more time to process this proposal.

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Yes, our product launch date has been moved to Jan 20. This will give us enough time to go through the gov process.

maybe you could spend a few hours in the telegram when the vote goes up? many investors dont visit these threads often, but im sure some people will have some questions when they see the amount of money proposed here.