[CIP] Implementing a Curve Lending LAM

Proposals
#1

Introduction

Overview of Curve Lending

Curve Lending is a decentralized, non-custodial lending and borrowing platform built on the Ethereum blockchain. Leveraging the infrastructure of Curve Finance, it primarily utilizes the crvUSD stablecoin system and the LLAMMA (Lending-Liquidating AMM) algorithm. The platform supports permissionless lending pools for various asset pairs, initially using crvUSD as the main collateral or borrowed token.

Supported Markets

As of July 2024, Curve Lending supports tokens such as CRV, WETH, tBTC, and wstETH, with plans to expand to other assets. New markets can be added permissionlessly, offering users greater flexibility and opportunities within the ecosystem.

Innovative Features and Mechanisms

Curve Lending introduces several innovative features to address the challenges of existing DeFi platforms:

  • Permissionless Lending Pools: Users can create lending pools without requiring approval, promoting a decentralized and inclusive environment.
  • LLAMMA Mechanism: Enhances efficiency and user experience by providing a more resilient borrowing and lending framework.
  • Soft Liquidation Approach: Minimizes potential losses from market fluctuations, granting borrowers more flexibility and control.
  • Modular and Extensible Architecture: Ensures the platform remains adaptable and scalable.
  • Robust Access Control and Curve DAO Oversight: Maintains security, transparency, and governance.

Incorporating a New Liquidity Allocation Module

Enhancing Conic Finance with LAM

Incorporating a new Liquidity Allocation Module (LAM) into Conic Finance’s omnipools will significantly improve the platform’s ability to strategically direct liquidity across new products. As the foundational components of Conic, LAMs contain the logic for optimizing liquidity distribution, improving yield generation, and ensuring efficient capital utilization.

Benefits of Implementing the Curve Lending LAM

Implementing a Curve Lending LAM within Conic Finance’s omnipools offers several benefits:

  • Enhanced Capital Efficiency: Directs liquidity to Curve Lending, boosting capital efficiency and yield opportunities.
  • Diversified and Optimized Returns: Provides Conic users with diversified and optimized returns by leveraging Curve Lending’s robust infrastructure and innovative features, such as the LLAMMA mechanism.
  • Increased Liquidity for Curve Lending: Expands liquidity on Curve Lending, contributing to its growth and stability.
  • Strengthened DeFi Ecosystem: Fosters a more interconnected and efficient DeFi ecosystem, benefiting both platforms and their users.

Conclusion

Implementing a Curve Lending LAM into Conic Finance will not only enhance performance and adaptability but also attract users seeking optimized returns and improved liquidity management. This strategic integration will strengthen both platforms, contributing to a more robust and dynamic DeFi ecosystem.

#2

I know the team has reviewed this topic as it has been a strong conversation topic. Limitations in rebalancing and withdrawals were a concern. I’d like to hear if they have any follow through on the topic once again.

#3

Some suggestions:

Monitoring and Threshold-Based Withdrawals

  • Threshold Mechanism: Implement a monitoring mechanism that tracks the utilization rate of the lending pools. Once a certain threshold is reached (e.g., 90% utilization), the system could automatically trigger withdrawals to maintain liquidity.

  • Cap Allocations Per Pool: Implement a maximum cap for the amount of liquidity that can be allocated to a single pool. This prevents Conic from dominating any one pool and the overall liquidity.

  • Liquidity Buffer: Design the LAM to maintain a liquidity buffer within the pool. A portion of the funds could be reserved and not lent out, ensuring that there are always some funds available for withdrawals, similar to what Asymmetry Finance is doing. This would obviously lower the return but could be an option to consider.

  • User Alerts: Integrate a notification system that alerts users when utilization rates are high, allowing them to make informed decisions about their funds.

Dynamic Rebalancing Mechanism

  • Utilization-Based Rebalancing: Design the LAM to automatically rebalance funds based on the utilization rates of the pools. If a pool’s utilization is too high, the system reallocates funds to other pools with lower utilization.

By implementing a diversified allocation strategy and dynamic rebalancing mechanisms, Conic’s LAM can prevent any single pool from dominating the liquidity in Curve’s Lend platform and ensure that withdrawals remain possible even during periods of high utilization. Obviously, during Black Swan events no process will be 100% failsafe.