Summary
This proposal seeks community support to introduce cbBTC lending and vaults within the Fluid Protocol. The initiative aims to expand product offerings on Fluid to enhance the protocol’s competitiveness and market positioning.
Proposal
The Instadapp team proposes to add cbBTC to the liquidity layer and add the following vaults:
On Ethereum
- cbBTC<>ETH
- cbBTC<>USDT
- cbBTC<>USDC
- ETH<>cbBTC
- wstETH<>cbBTC
- weETH<>cbBTC
On Base
- cbBTC<>ETH
- cbBTC<>USDC
- ETH<>cbBTC
- wstETH<>cbBTC
- weETH<>cbBTC
Recap of Fluid Vault Parameters
Fluid’s vault protocol features some familiar 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 the 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.
Ethereum:
cbBTC/ETH Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 88%
- Liquidation Threshold (L.T.): 91%
- Max Liquidation Limit (L.M.L.): 94%
- Liquidation Penalty (L.P.): 2%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
cbBTC/USDT Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 80%
- Liquidation Threshold (L.T.): 85%
- Max Liquidation Limit (L.M.L.): 90%
- Liquidation Penalty (L.P.): 4%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
cbBTC/USDC Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 80%
- Liquidation Threshold (L.T.): 85%
- Max Liquidation Limit (L.M.L.): 90%
- Liquidation Penalty (L.P.): 3%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
ETH<>cbBTC Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 88%
- Liquidation Threshold (L.T.): 91%
- Max Liquidation Limit (L.M.L.): 94%
- Liquidation Penalty (L.P.): 2%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
wstETH<>cbBTC Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 88%
- Liquidation Threshold (L.T.): 90%
- Max Liquidation Limit (L.M.L.): 93%
- Liquidation Penalty (L.P.): 2%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
weETH<>cbBTC Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 80%
- Liquidation Threshold (L.T.): 85%
- Max Liquidation Limit (L.M.L.): 90%
- Liquidation Penalty (L.P.): 5%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
Base:
cbBTC/ETH Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 86%
- Liquidation Threshold (L.T.): 90%
- Max Liquidation Limit (L.M.L.): 94%
- Liquidation Penalty (L.P.): 3%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
cbBTC/USDC Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 80%
- Liquidation Threshold (L.T.): 85%
- Max Liquidation Limit (L.M.L.): 90%
- Liquidation Penalty (L.P.): 4%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
ETH<>cbBTC Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 86%
- Liquidation Threshold (L.T.): 90%
- Max Liquidation Limit (L.M.L.): 94%
- Liquidation Penalty (L.P.): 3%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
wstETH<>cbBTC Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 85%
- Liquidation Threshold (L.T.): 88%
- Max Liquidation Limit (L.M.L.): 93%
- Liquidation Penalty (L.P.): 2%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
weETH<>cbBTC Vault Parameters:
The proposed vault will feature the following initial parameters:
- Collateral Factor (C.F.): 80%
- Liquidation Threshold (L.T.): 85%
- Max Liquidation Limit (L.M.L.): 90%
- Liquidation Penalty (L.P.): 5%
- Withdrawal Gap (W.G.): 5%
Supply Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 25%
- Expand Duration: 12 hours
- Base Withdrawal Limit: $5M
Borrow Configuration
- Class: 0 (Guardian enabled)
- Mode: 1 (with interest)
- Expand Percent: 20%
- Expand Duration: 12 hours
- Base Debt Ceiling: $7.5M
Note: Deployment of the vaults on Base does not require an on-chain vote and will be deployed as soon as sufficient DEX liquidity is available to process liquidations.
Rewards Setup
To further promote cbBTC markets on Fluid, we propose to distribute $50k cbBTC rewards to the cbBTC<> USDC and cbBTC<>USDT vaults per month, $25k each. Incentives performance will be reviewed in the end of the 1 month period and will be prolonged if needed.
| Rewarded Pool | Reward | Reward Duration |
|---|---|---|
| cbBTC/USDC Vault | ~0.4 cbBTC ($25k worth of cbBTC) | 1 month |
| cbBTC/USDT Vault | ~0.4 cbBTC ($25k worth of cbBTC) | 1 month |
Liquidity Layer
Proposed cbBTC Rate Curve
- Utilization 0%: 0% Rate
- Utilization 80%: 5% Rate
- Utilization 100%: 100% Rate
Proposed Token Config for cbBTC:
- Threshold: 0.3%
- Fee: 10%
- MaxUtilization: 100%
Summary of Changes to Fluid:
- Add cbBTC to the liquidity Layer on Ethereum
- Add cbBTC to the liquidity Layer on Base
List the following vaults:
On Ethereum:
- cbBTC<>ETH
- cbBTC<>USDT
- cbBTC<>USDC
- ETH<>cbBTC
- wstETH<>cbBTC
- weETH<>cbBTC
On Base:
- cbBTC<>ETH
- cbBTC<>USDC
- ETH<>cbBTC
- wstETH<>cbBTC
- weETH<>cbBTC
Motivation
cbBTC is a BTC wrapper issued on Ethereum and Base chains by the Coinbase team. Coinbase is a trusted centralized entity that has a presence in DeFi with cbETH. cbBTC will be redeemable 1:1 against BTC on Coinbase which ensures that users can always arbitrage the asset in case of its depeg on the secondary market.
Integration of cbBTC on Fluid will allow users to diversify from wBTC while Fluid will be also able to attract more users from centralized venues.
Risks
cbBTC is a new asset that is yet to show its resilience in DeFi, however Coinbase assets such as cbETH and especially USDC are the main components of DeFi and are being used as collateral across all major lending platforms.
Within the first hours after deployment of cbBTC onchain, it already has more than $50M in DEX liquidity which, combined with the 1:1 redemptions, make it a safe asset to be used as collateral.
The team will monitor cbBTC liquidity and performance and suggest changes if required.
Result
The successful addition of the cbBTC to the liquidity layer and cbBTC vaults to the Vault protocol with the aforementioned parameters an on-chain vote is required from governance to finalize and approve this proposal.
This proposal also transfers $50k from the DAO Treasury to the team Multisig to incentivize cbBTC markets on Fluid.