This proposal was co-authored by the Arbitrum Foundation team
Summary
This proposal seeks community support to deploy Fluid to the Arbitrum L2 and outlines initial lending tokens, vaults, limits, rewards and all the initial setups.
Proposal
The Instadapp team proposes the deployment of Fluid on Arbitrum to kick-start our expansion across L2s.
Below are the configs as suggested by the team on the Lending Protocol, Vault Protocol & Liquidity Layer:
Lending Protocol
- Listing of USDC, USDT, wstETH & ETH on the Lending protocol. Withdrawal Limits are explained below in the Liquidity Layer section.
- Set team multisig as deployer and allow to make changes to the interest rate curves for the initial bootstrapping period to speed up the growth of Fluid on Arbitrum. The deployer has access to deploy new fTokens from the factory contract. There will be a follow-up proposal to transfer ownership to the Governance after the markets are stabilized and cross-chain governance is deployed.
Vault Protocol
Fluid’s vault protocol features some familiar and as well as some new concepts for understanding the vault’s limits and parameters. See the following below:
C.F (Collateral Factor): Limit till which user can borrow.
L.T (Liquidation Threshold): Limit at which the user starts to get liquidated.
L.M.L (Liquidation Max Limit): Limit above which user gets 100% liquidated.
L.P (Liquidation Penalty): Penalty at liquidations. Applied between L.T to L.M.L.
W.G (Withdrawal Gap): Extra gap on Liquidity Layer limits reserved for liquidations.
Liquidation Max Limit or L.M.L which denotes a level at which a position is fully liquidated. While most positions will incur liquidations over time the Liquidation Max Limit prevents the debt from becoming undercollateralized in a sudden downfall.
The following vaults are proposed for launch. Once these markets are live the team will continue to propose additional vaults and assets including Arbitrum native assets.
1) ETH Collateral & USDC debt:
- Collateral Factor: 85%
- Liquidation Threshold: 90%
- Max Liquidation Limit: 93%
- Liquidation Penalty: 1%
- Withdrawal Gap: 5%
2) ETH Collateral & USDT debt:
- Collateral Factor: 85%
- Liquidation Threshold: 90%
- Max Liquidation Limit: 93%
- Liquidation Penalty: 2%
- Withdrawal Gap: 5%
3) wstETH Collateral & USDC debt:
- Collateral Factor: 78%
- Liquidation Threshold: 85%
- Max Liquidation Limit: 90%
- Liquidation Penalty: 2.5%
- Withdrawal Gap: 5%
4) wstETH Collateral & USDT debt:
- Collateral Factor: 78%
- Liquidation Threshold: 85%
- Max Liquidation Limit: 90%
- Liquidation Penalty: 3%
- Withdrawal Gap: 5%
5) weETH Collateral & ETH debt:
- Collateral Factor: 93%
- Liquidation Threshold: 95%
- Max Liquidation Limit: 98%
- Liquidation Penalty: 0.1%
- Withdrawal Gap: 5%
6) weETH Collateral & wstETH debt:
- Collateral Factor: 93%
- Liquidation Threshold: 95%
- Max Liquidation Limit: 98%
- Liquidation Penalty: 0.1%
- Withdrawal Gap: 5%
7) ARB Collateral & USDT debt:
- Collateral Factor: 70%
- Liquidation Threshold: 80%
- Max Liquidation Limit: 85%
- Liquidation Penalty: 10%
- Withdrawal Gap: 5%
8) ARB Collateral & USDC debt:
- Collateral Factor: 70%
- Liquidation Threshold: 80%
- Max Liquidation Limit: 85%
- Liquidation Penalty: 10%
- Withdrawal Gap: 5%
9) ETH Collateral & ARB debt:
- Collateral Factor: 85%
- Liquidation Threshold: 90%
- Max Liquidation Limit: 93%
- Liquidation Penalty: 2%
- Withdrawal Gap: 5%
10) weETH Collateral & USDT debt:
- Collateral Factor: 75%
- Liquidation Threshold: 80%
- Max Liquidation Limit: 85%
- Liquidation Penalty: 6%
- Withdrawal Gap: 5%
11) weETH Collateral & USDC debt:
- Collateral Factor: 75%
- Liquidation Threshold: 80%
- Max Liquidation Limit: 85%
- Liquidation Penalty: 6%
- Withdrawal Gap: 5%
Initial Limits may change over time
Over the next few months, vaults will be live in an open environment and getting listed to different DEX aggregators as liquidity sources increase, so does the chance of liquidations to route through trades at a cheaper cost. The team will monitor the liquidations and suggest increasing the limits and decreasing the liquidation penalty accordingly.
Liquidity Layer
For the initial launch of Fluid, the team multisig will be set as the Guardian. The Guardian can only pause protocols and cannot move or withdraw funds. All protocols to Fluid will be onboarded with class 0. Protocols can then be changed to Class 1 which restricts the Guardian to be able to pause the protocol.
Protocol Limits
To allow seamless & secure growth of Fluid, the limits will be as per the table below. The expansion happens every second and reaches maximum expansion in expansion duration which is set to 12 hours on launch.
Lending Limits
| Type | Withdraw Limits | Borrow Limits | Expansion % |
|---|---|---|---|
| Base (Starting Value) | $7.5m | - | 20% |
Vault Limits
| Type | Withdraw Limits | Borrow Limits | Expansion % |
|---|---|---|---|
| Base (Starting Value) | $7.5m | Base: $7.5m - Max: $200m | 20% |
Fluid Rewards
To further promote the launch of Fluid and to maximise exposure to the principal markets, we propose to reward the following pools and markets for the next 60 days:
| Rewarded Pool | Reward | Reward Duration |
|---|---|---|
| fUSDC | 200k ARB | 60 days |
| fUSDT | 200k ARB | 60 days |
Rewards Setup:
The team will be setting up the rewards on launch. The total rewards proposed are: 400k ARB - 200k from the Instadapp treasury + 200k grant received from the Arbitrum Foundation.
Motivation
Arbitrum is the leading L2, has the most number of DAU and has the highest TVL among L2s.
Deploying Fluid on Arbitrum presents potential benefits for both ecosystems allowing Arbitrum users to access the most efficient lending protocol and Fluid to increase its userbase and overall adoption.
Conclusion
This proposal when passed will enable the function and use of the Fluid protocol on Arbitrum. This proposal sets the initial assets, vaults and market parameters for the protocol. This proposal also includes an early liquidity incentive to the USDC and USDT earn markets.