In light of the recent proposal by Zeus, which you can see here, we at Vendor Finance wanted to offer an alternative route that we believe would better benefit the Olympus community. Non-liquidatable loans are a great new iteration on loans in DeFi and we at Vendor have successfully deployed a working model, with many improvements in the pipeline. For those unfamiliar, Vendor is a protocol inspired by Ruler that offers non liquidatable, fixed rate loans on any asset. When we were designing the protocol we did it with Olympus in mind as we think it is a perfect match. We initially approached the Olympus Incubator and we were at the stage of contract signing when the deal fell through for a reason unknown to us. We still have some artifacts in our contracts that point to the fact that we not only fit well with Olympus but are fully ready to offer our services!
Why do we think using Vendor would be a better route?
Time in production:
Vendor contracts have been running in production for over 4 months with more than $1,000,000 in TVL without any outside emissions.
Vendor contracts were audited by a company that was proposed by the Olympus team itself. Our Omniscia report can be seen in our docs and we are soon to schedule an engagement with a different firm as well. Audit: https://omniscia.io/reports/vendor-finance-specialized-upgradeability-implementation/
Before contacting Olympus DAO we conducted a market simulation on several tokens including gOHM given the model we suggest. We wanted to do all the due diligence and ensure a serious and calculated approach.
Borrower posting collateral might not be the best route to take:
While Cooler Loans offer a route where the borrowers post collateral first and then lenders fill them, we believe a reverse approach might work better specifically in Olympus' case. After looking at the contracts of Cooler Loans we see that this is an order book where the lender has to actively fill the requests posted by the prospective borrowers. While there is a clearing house contract that will ensure that the treasury funds are not lent on inappropriate terms, that is an operational overhead, an inefficiency and an additional trust point as someone will have to manage it (whether that is a human or a keeper). With Vendor all lender funds are deployed into a contract owned by the lender, known to all, that can lend funds immediately without any clearing process on DAO-created terms. You can see that at work on our Arbitrum deployment. We also want to mention that the inverse Vendor pools are currently in the works but Olympus DAO can immediately utilize our current model.
Vendor has already worked with other DAO treasuries successfully:
We have been working with UMAMI Finance to polish this concept and we are familiar with many edge-cases that are not immediately obvious. Umami DAO has been lending with Vendor out of their treasury and has made a consistent 40% APR. Currently they are lending $100k and taking a measured approach to lending. So far they have been satisfied with the service and we greatly value them as our partner. Please see their treasury report to learn more: https://blog.umami.finance/umami-finance-treasury-update-december-2022/
Budget planning will be easier with Vendor:
Since in the framework of Cooler Loans there is no limitation on what terms the borrowers are trying to borrow, and the lender manually approves the incoming proposals it is harder to predict the future revenue stream since clearing house will approve a range of rates. All Vendor borrowers would be left with DAO decided terms which helps with planning the budget for the Olympus treasury.
Oracles are actually needed:
With Cooler loans “no oracle dependency” is not a completely correct statement. Someone would still need to monitor that existing loans are not lent under collateralized. If the pool allows under collateralized lending in any form, the entire pool can be drained by borrowing the lent asset and swapping for the collateral asset, which can be used to borrow more, until the entire pool is drained with no risk. That is another trust assumption not mentioned in the proposal. For tokens with an on-chain oracle, Vendor Finance automatically disables lending when the lent funds exceed the collateral being deposited. Notably, we support the gOHM native oracle currently, as we had the initial intent to partner with Olympus.
We do realize that the Cooler Loans allow the delegation process of all deposited collateral to one address specified by the Cooler creator. While we do not support that currently, we would be happy to add that into the contract if requested by the DAO.
Right now Vendor charges 10% of interest earned by the lender or 3% of defaulted collateral. Our firm intent is to minimize the risk for lenders and make money when our lenders make money. We also are capable of offering discounts on those fees via the means of NFT “licenses” for specific use cases. In fact, we are willing to offer a 100% discount of the normal 3% defaulted collateral fee, which will reduce the risk from the Olympus DAO treasury in a loan default scenario.
Our proposal is to approve a small amount of $100,000 - $500,000 to be lent on Vendor Finance against gOHM on governance approved terms. We have built our product with Olympus users in mind and we believe that our work will prove to be useful.
If this proposal is passed we would need 5 days or less (starting from the successful passing of the proposal) to deploy and test the fresh mainnet deployment and UI integration. We would also be happy to offer consultations and any help drafting a proposal deciding on which terms such loans would have to be issued.
Vendor Finance Site: https://vendor.finance
Vendor Finance Docs: https://docs.vendor.finance/overview/what-is-vendor-finance
Vendor Audit: https://omniscia.io/reports/vendor-finance-specialized-upgradeability-implementation/