Fluid Launch Proposal

Summary

This proposal outlines initial lending tokens, vaults, limits, rewards and all the initial setups required to finalize and launch the Fluid protocol.

Proposal

The Instadapp team has been developing the Fluid protocol for close to 1.5 years. Fluid is a collection of contracts that constitute the Fluid protocol. At its core, Fluid is a liquidity layer that aims to solve liquidity fragmentation in existing protocols. Fluid advances liquidations mechanisms, featuring trust minimized oracle setup and the ability to offer high LTVs while reducing the debt and risk in the protocol. Fluid is governed by the INST tokenholders like all other Instadapp products. The Fluid protocol is administered by the INST tokenholders, and all revenue will be directed towards the INST DAO Treasury.

Learn more about Fluid here.

Below are the configs as suggested by the team on the Lending Protocol, Vault Protocol & Liquidity Layer:

Lending Protocol

  1. Listing of USDC, USDT, & ETH on the Lending protocol. Withdrawal Limits are explained below in the Liquidity Layer section.
  2. Set team multisig as deployer. The deployer has access to deploy new fTokens from the factory contract. (Note: deployed fTokens are not usable unless Liquidity Layer sets the allowance for it which only governance will have access to).

Interest bearing tokens of Lending protocol are denominated as fTokens i.e. USDC on Lending protocol is fUSDC.

Vault Protocol

Fluids 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 5 vaults are proposed for launch. Once these markets are live the team will continue to propose additional vaults and assets.

1) ETH Collateral & USDC debt:

  • Collateral Factor: 85%
  • Liquidation Threshold: 90%
  • Max Liquidation Limit: 95%
  • Liquidation Penalty: 1%
  • Withdrawal Gap: 5%

2) ETH Collateral & USDT debt:

  • Collateral Factor: 85%
  • Liquidation Threshold: 90%
  • Max Liquidation Limit: 95%
  • Liquidation Penalty: 2%
  • Withdrawal Gap: 5%

3) wstETH Collateral & USDC debt:

  • Collateral Factor: 80%
  • Liquidation Threshold: 86%
  • Max Liquidation Limit: 92.5%
  • Liquidation Penalty: 2.5%
  • Withdrawal Gap: 5%

4) wstETH Collateral & USDT debt:

  • Collateral Factor: 80%
  • Liquidation Threshold: 86%
  • Max Liquidation Limit: 92.5%
  • Liquidation Penalty: 3%
  • Withdrawal Gap: 5%

5) wstETH Collateral & ETH debt:

  • Collateral Factor: 91%
  • Liquidation Threshold: 95%
  • Max Liquidation Limit: 98%
  • Liquidation Penalty: 0.1%
  • 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 cheaper cost. Team will monitor the liquidations and suggest increasing the limits and decreasing the liquidation penalty accordingly.

As well after onboarding the initial assets above, we will look into proposing additional assets WBTC and sDAI over next few weeks after launching with the assets above.

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 & secured growth of Fluid, the limits will be as follows: Divided into different 3 to 4 checkpoints at TVL grows. The expansion happens every second 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 - -
Checkpoint 1 $7.5m to $20m - 25%
Checkpoint 2 $20m to $30m - 20%
Checkpoint 3 $30m to $40m - 15%
Checkpoint 4 $40m to $50m 10%

Vault Limits

Type Withdraw Limits Borrow Limits Expansion %
Base (Starting Value) $7.5m Base: $7.5m - Max: $200m -
Checkpoint 1 $7.5m to $20m $7.5m to $20m 25%
Checkpoint 2 $20m to $30m $20m to $30m 20%
Checkpoint 3 $30m to $40m $30m to $40m 15%
Checkpoint 4 - $40m to $50m 10%

Fluid Rewards

To further promote the launch of Fluid and to maximize exposure to the principal markets.
We propose to reward the following pools and markets for first three months:

Rewarded Pool Reward Reward Duration
fUSDC 250k USDC + 250k INST 3 months
fUSDT 250k USDT + 250k INST 3 months
ETH/USDC Vault ~220 ETH ($500k worth of ETH) 3 months
ETH/USDT Vault ~220 ETH ($500k worth of ETH) 3 months

Rewards Setup:

Team will be setting up the rewards on launch. The total rewards proposed are: 250k USDC, 250k USDT, 500k INST and $1m worth of ETH (~440 ETH)

  • Team currently holds 738,654.43 INST on the team’s polygon multisig. We will bridge the total to mainnet, reserving 500k INST for rewards. The remaining mainnet INST will be transferred to governance.
  • Governance holds ~$335k in stables which will be transferred to the team’s multisig.
  • Governance will transfer 550 ETH (230 ETH & 320 stETH) to the team’s multisig. From this 440 ETH will be reserved for the rewards, some will be swapped to cover the remaining stables and remaining will be transferred back to the governance.

Final Steps

An on-chain vote via Atlas is required from governance to transfer and set up the rewards proposed above.

The team also proposes we update the timelock contracts reducing the execution time for governance proposals from 7 days to 4 days.

You can find the post for this on-chain vote below:
IGP#7 - Update Timelock Contracts and Transfer Fluid Rewards

Community Acceptance of Fluid Configs for Launch

To finalize the configs and initial parameters described in this proposal we will have a snapshot vote.

Once passed, this finalizes the launch of Fluid. The Instadapp Team will set the configs and transfer the ownership of Fluid to DAO prior to launch. Future governance changes to Fluid will be completed on-chain via Atlas.

Conclusion

This proposal when passed will enable the function and use of the Fluid protocol on Mainnet. 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 and the ETH/USDC and ETH/USDT vaults.


Proposal on Snapshot

Status: Passed :white_check_mark:

Snapshot - Accept Fluid configs and Launch Protocol

Proposal on Atlas

Status: Passed :white_check_mark:

IGP#7 - Timelock Contract Upgrade and Fluid Rewards Preparation

5 Likes

We are quite excited about the upcoming launch! But just curious

  1. Is it audited? Or is it being audited?

  2. How does the community ensure parameters and etc are not being abused via malicious voting?

  1. It’s audited by Statemind in a long detailed 2 months audit of ~$400k. Also, on security side the protocol has crossed +1000 test cases with more cases we are constantly adding every week.
  2. What do you mean here?
2 Likes

Hi, in terms of question 2, I meant as in how do you ensure the risk parameters are set correctly

The key factors on deciding the current factors were:

  1. Limits of existing protocols.
  2. Liquidation mechanism.
  3. Oracles.

Expanding on 1, Compound’s Liquidation Threshold is at 90%. The reason for that is optimized liquidation mechanism of Compound and restriction of assets. 90% LT can only be used against USDC borrowing. Fluid’s liquidation mechanism is the most optimized in the entire industry and assets are restricted due to vault mechanism where you can only use 90% LT against USDC or USDT.

Expanding on 2, Why is liquidation in Fluid 100x better? - Fluid

Expanding on 3, check out the oracle section in the blogpost - Introducing Fluid!

3 Likes

Both proposals for Fluid are now open! Please take a moment to vote! :ballot_box: