Membrane is a native decentralized stablecoin protocol built to scale without sacrificing decentralization that mints the Collateralized Debt Token aka CDT. We (I) launched the Range Bounded CL LP Vault dubbed “The Membrane” on November 11th that holds a static range in the CDT/USDC LP & receives 80% of protocol revenue. This vault incentivizes stability while providing a likekind yield venue for CDT.
Neuro-Guards are a new productized version of Membrane’s Range Bound CL LP using intents to compound and protect from collateral liquidation. These allow collateral depositors to interest-rate arb the loan costs with the Range Bound Vault’s yield & because the yield comes directly from revenue, any quality collateral will never experience negative yields. The Guards intend to make this yield arb a passive strategy that is incentivized to compound with 1% of the available yield.
Initiating the strategy will need to sign 2 msgs to deposit collateral and set intents. The App sets up the strat using one collateral at a time but Membrane’s collateral bundles can be used to condense everything into one position. The current chosen LTV is 80% of the position’s max borrow LTV which depends on the collateral used.
Rewards:
Deepen liquidity for an Osmosis native protocol whose yield will attract more capital, most notably BTC (current BTC yield is 13%) & stablecoins (USDC: 30%, CDT: 50%)
Tighten CDT peg which enables a separate USDC yield opportunity with a historic APR of 45%. Membrane is an apex asset attractor disguised as a stablecoin protocol.
Earn Membrane revenue without having to invest in a new asset.
Risks:
Loss of funds from contract malfunctions that cause liquidations to not pull from the vault and instead sell the collateral.
Negative yield by having a high percent of total CDT supply in the Vault & the chosen collateral cost being notably above the average cost.
General Smart contract risks
Contract is currently owned by me but can be given to Membrane governance to reduce risks. I (the founder) have a max of 20% personal vp from vesting tokens & then dynamic vp from delegated stake.
Note: This is premature and more of a feeler for the future than anything. The product usage needs to be battle tested first.
Hmmm, in case Osmosis decided to start using new methods we always started with small amounts to see how it works.
Any advice on this?
Furthermore the relative centrality of voting power would worry me. Even when the contract is owned by Membrane governance there is simply a to large stake owned by you imo. 20% + delegated stake gives a huge impact on governance (simply because we also always know that never 100% of VP votes…)
I generally support bootstrapping a protocol on Osmosis while obtaining yield on Community Pool funds, however, I have some reservations about this, which you already mentioned in the Risks category:
Loss of funds from contract malfunctions that cause liquidations to not pull from the vault and instead sell the collateral.
Are there any existing liquidation events that have shown this to work correctly?
Is there anything auditable here? Either previous audits or open source code?
Contract is currently owned by me but can be given to Membrane governance to reduce risks. I (the founder) have a max of 20% personal vp from vesting tokens & then dynamic vp from delegated stake.
I understand the need for a contract to be owned by the development team here, particularly in the early stages of deployment. However, the community pool should be fairly risk-averse dependant on the asset type.
Compared with other deployments: Margined contracts are under the control of their team, but they have received a grant previously and so are traceable. Similarly, Levana and Astroport have received deposits, and the teams are well known. While Trix is an active Osmosis ecosystem contributor, we should have a situation where an individual doesn’t control the contract or is identifiable.
Membrane quorum is about 40%, which is probably enough for the former option for a limited-size deployment.
Thirdly, this proposal doesn’t ask for a particular asset or quantity.
Regarding assets, I think this could be a good use for anything without an alternative higher revenue source. Potentially OSMO or USDC here.
Regarding quantity, CDT is still relatively small, with only around 50k backing liquidity on Osmosis. I suggest that this be matched at most for any initial deployment.
wrt: liquidations, there hasn’t been any so far which is why we should wait for the flow to be more tested.
I would 100% agree that contract ownership should be moved to the protocol before any deployments, I just wanted to state the current state of affairs.
Have these vaults been audited? I am sorry but ever since Membrane launched there has been constant problems with smart contract bugs - some even requiring network upgrades to rectify. I participated in the original membrane lockdrop, have a ton of respect for Trixx as a builder with the best intentions… but I mean come on if this is how the low bar is for deploying contracts can we just go ahead and flip the permissionless switch already?
I don’t think CP funds should be allocated to these contracts & think the fact they can even be deployed on mainnet is an example of how the current version of “permissioned” cosmwasm is “enforced” by osmosis is ridiculous and should be overhauled or (imo ideally) abandoned completely.
Nope which is why I’m specifically noting this as a feeler more than anything. Edit: I realize I didn’t add any “feeler” words in the main post so I will add some. I mentioned it in the accompanying tweet.
I’d argue that our bugs are just super public because of the governance setup so every single issue is broadcasted to the world but to act like our contracts are the only ones with bugs is a little disingenuous. The network upgrade solution was also never needed.
I am pretty sure we have uploaded smart contracts and the likes of it without auditing in the past. There are even people pro permissionless smart-contracts, which removes the hurdle for audits completely… So I am with you on this one.
I don’t have experience with Membrane as an user tbh, so can’t judge from that perspective.
The point made by @JohnnyWyles regarding the potential ask and the ratio from current liquidity vs newly obtained liquidity from the Osmosis CP is also an interesting one to know. Can you elaborate on that one?
Total TVL is only 22.4k & a potential ask couldn’t be more than 20% of TVL. At ~4k, its probably not even worth the execution time (prop, multisig, etc) which is why i’m not detailing any asks yet, still too early.
Moreso looking for feedback on the opportunity as a whole & if the community thinks it’d be a useful use of capital in the future.
Expected timeframe (both for when Membrane is ready for it and an expected timeframe for trial), risk management, requirements to be met, amount to be deposited, etc.