Abstract
In the bear market it might not make sense for DAO treasury to sell off their ETH, the alternative would be to get a stablecoin line of credit from the community, to be used when needed and repaid when needed.
TrueFI DAO has built an infrastructure for DAOs to be able to get Lines of Credit from their communities.
Disclaimer: This idea is NOT LOOKING FOR FUNDING from NounsDAO.
Overview
Lines of Credit by TrueFi DAOs are fully on-chain, non-custodial mechanism for creation of reputation based credit lines. TrueFi DAO is looking for a decentralized, on-chain, credible partner to whitelist for a deployment of this product.
Below you can find detailed description on how the protocol works.
Docs: Lines of Credit - TrueFi Docs
Technical Details: https://docs.truefi.io/faq/truefi-protocol/automated-lines-of-credit/lines-of-credit-technical-details
Details
Collateral requirements
There is no collateral requirements. This product is solely based on on-chain reputation of the NounsDAO and its community. Lenders are aware of this and are making an informed choice. NounsDAO, when defining the “yield curve” takes this into consideration.
How this would work?
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On positive feedback from the community, TrueFi DAO votes on a proposal to whitelist NounsDAO address as an eligible line of credit deployer.
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NounsDAO votes to deploy (e.g.) 3 year term line of credit on TrueFi Protocol, defining own yield curve of choice.
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NounsDAO is NOT paying for being able to have this Line of Credit, and not paying any interests until the separate vote to trigger borrow happens
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NounsDAO votes to borrow an amount from the pool of funds deposited by LPs. Interests are being paid only from the amount borrowed at any time.
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NounsDAO votes to repay an amount back into the pools at any time.
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After 3 years Nouns DAO promises to repay all the outstanding principles and interests - borrowing and depositing into the Line of Credit are disabled.
Example parameters
Line of Credit owner: NounsDAO
Lenders: Nouns Community, broad crypto community
Max size: $10M
Amount that NounsDAO would be planning to borrow: $8M
Borrow APY at 80% utilization set by NounsDAO: 10%
Lender APY at 80% utlization: 8%
Line of Credit LP token: tf-Nouns, yield bearing transferable erc-20 that can be traded on the secondary market. You could think about this tokens as tradable Nouns debt.
FAQ
What is the cost to deploy the line of credit?
Just the cost of gas.
Will there be any liabilities / costs for Nouns based on the fact that LPs deposited the funds into the pool?
No. Interest accrual is being turned only on the funds explicitly borrowed by NounsDAO
What is the fee model of TrueFi protocol?
TrueFI protocol charges 50bps(0.5%) annualized on Line of Credit TVL (accrued block by block).
Would not LP leave - if their capital is very slowly eroding when NounsDAO is not borrowing?
Yes. This product makes sense only when NounsDAO intends to borrow. This should be planned and announced so lenders can join with their capital
Was this protocol audited?
Yes. Audit Results