AIP-363: Unlocking $APE’ potential: Building a credit market with MYSO Finance 

ABSTRACT

Liquidation Loans (ZLLs). ZLLs are a novel DeFi primitive that allow (i) borrowers to borrow without liquidation risk and (ii) lenders to lend in underdeveloped credit markets with higher yield potential.

For DAOs, ZLLs are a powerful new tool to increase the utility of their native token and to enable them to use their reserves in a more productive and strategic way.

We propose the creation of a lending market for $APE, utilizing MYSO’s v2 protocol. This initiative can offer community members access to non-liquidatable loans, thereby enhancing the utility of the $APE token. If there is confidence in the continuous growth of $APE and a desire to offer more incentives to $APE token holders, establishing a non-liquidatable lending market is an effective way to achieve this objective.

BENEFIT TO APECOIN ECOSYSTEM

By using above described convertible Zero-Liquidation Loan product, it is possible to::

• Create credit markets for the $APE token without lengthy governance processes, oracle integrations, etc.
• Lend treasury reserves in a more strategic way that creates value for the overall community.
• Provide a unique borrowing experience to the ApeCoin’s community, without liquidation risk.
• Reduce selling pressure for the $APE token and incentivize long-term holding.
• Fully customize and control the loans one underwrites.
• Signal high conviction on the $APE token and participate in a possible synthetic buyback strategy.

SPECIFICATIONS Using MYSO, it’s possible to offer fully customizable loan options to $APE token holders by simply setting up a lending vault and specifying the loan terms desired for lending.

For example, the grant recipient (i.e. Governance Working Group [GWG], see below) could set up a vault to lend out USDC (or any other token) and accept its native $APE token as collateral. The GWG can create multiple loan offers concurrently and define at which LTVs, tenors, and interest rates they’d feel comfortable lending. Updating/deleting these loan offers is also possible in a matter of minutes.

From a financial risk-reward perspective, the lender bears default risk that a loan may become undercollateralized and not be repaid. This resembles a deep in-the-money covered call strategy with a low delta. It’s worthwhile to mention that the risk premium is set by the GwG and can be hedged outside and independently of MYSO, if needed.

MYSO’s protocol fee starts at 0.1% and scales linearly to +0.4% for a loan with a duration of 1 year. To illustrate, the protocol fee for a loan with a 90 day tenor would therefore be at 0.2% of the collateral amount. Worthwhile to highlight that MYSO’s protocol fee is currently set at 0.00%.

MYSO v1 was deployed on Ethereum in January 2023. MYSO v2 was deployed on Mantle end of August 2023, on Ethereum end of September 2023 and on Arbitrum mid of October 2023. As of today, MYSO has a $1.25m TVL.

Other organizations that have successfully implemented MYSO’s lending protocol include:

• Olympus DAO ($500k pilot project for a gOHM/DAI lending market)
• Mantle (created a lending market for $MNT), Rocketpool (we launched the first RPL/rETH credit market for their community)
• Pendle (seeded a lending market for PT-sDAI Token), IndexCoop (to seed a lending market dsETH)

OVERALL COST

$750,000 USD

In order to enable meaningful borrowing capacity, MYSO would recommend seeding $750k. It’s important to note that the GWG retains full control over their lender vault, as well as the credit markets and loans they underwrite. The GWG also has the flexibility to withdraw their funds at any time, excluding the portion currently being lent out, or add more funds to their lender vault if they wish to do so.

PROPOSAL

Link to the full proposal: https://forum.apecoin.com/t/aip-363-unlocking-ape-potential-building-a-credit-market-with-myso-finance/19712

The AIP implementation is administered by the Ape Foundation. Implementation may be immaterially or materially altered to optimise for security, usability, to protect APE holders, and otherwise to effect the intent of the AIP. Any material deviations from an AIP, as initially approved, will be disclosed to the APE holder community.