[REVIEW] [GF: Phase 1 Proposal] Isomorph Loans

Project Name: Isomorph Loans https://isomorph.loans

Author Name: Kree (On discord as kree#6291)

Number of OP tokens requested: 360k OP

Which Voting Cycle are you applying for?: Grant phase 1

Grant category: DeFi

I s this proposal applicable to a specific committee? Yes DeFi Committee

L2 recipient address: 0xb1FcA41C466309eCea88eC0Bd4A56F879B816281 (Isomorph multi-sig)

Relevant Usage Metrics: : (TVL, transactions, volume, unique addresses, etc.) N/A new project

Project Description:

Isomorph is an Optimism-native lending protocol. Loans mint a new stablecoin called isoUSD. We target collaterals which generate interest in order to make the demand for the loans self sustaining. Currently we support Lyra Liquidity Pool tokens, Velodrome pool tokens and Synthetix synths with plans to expand to other Optimism based projects.

IsoUSD will be exchangable for USDC on Velodrome, making use of their bribes & voting system to allow us to incentivize liquidity in this pool at a sustainable rate.

Is/Will this project be open source? Yes the repo is already public and licensed under MIT at our Isomorph github repo.

Optimism native? Yes.

Date of deployment/expected deployment on Optimism:

We are scheduled for an audit beginning November 23rd. Based on the outcome/changes needed we expect to launch before the end of year to Optimism mainnet.

Ecosystem Value Proposition:

Projects launching on Optimism must compete with Ethereum mainnet and other chains when it comes to the return they make users. If they cannot match or exceed the returns earnt on other chains then users will not supply capital. This has the knock on effect of then making the projects less competitive or viable for their role (i.e. with less options liquidity Lyra could not provide the depth they desire or trades on Velodrome would incur more slippage).

By providing loans against income generating protocol assets Isomorph increases the capital efficiency of supported projects, enabling them to multiply the usable capital on their platforms. It also provides users with more options as they are not restricted to one protocol allowing them to reduce risk of total wipe out from smart contract bugs and reduce volatility in their returns.

In doing so Optimism’s ecosystem will become more competitive on multiple different fronts, options, swaps and liquidity providing.

Isomorph could also join the OP Quest program to further incentivize protocol engagement, with our integration with other projects we could then have goals which included interacting with 2 or 3 leading Optimism projects.

Has your project previously applied for an OP grant? No.

Did the project apply for or receive OP tokens through the Foundation Partner Fund?: No.

Optimism alignment

Proposal for token distribution

Audit costs would be $75,000 a 1/4th deposit on this amount has already been paid from one of the developer’s personal funds to our auditor Sherlock and the remaining sum would need to be paid also.

Insurance and Bug Bounty: $70,000 alongside the audit we have been in talks with Sherlock about insuring the protocol against smart contract bugs/hacks. Doing so would protect user funds and enable us to utilize Sherlock’s $1 million bug bounty allocation against which we would cover a $50,000 deductible.

Development team costs of $110,000. Currently both team members, Kree and 0xMerlin have been working for free on this project, this sum should support us to work on this project for a full year going forward.

veVELO/Bribes of $175,000, this sum would enable us to jump start the Velodrome pool we need for this design to work, enabling adequate returns to attract enough capital that loan users can buy or sell isoUSD as they need. $175,000 would buy us roughly 5.8mill VELO which if locked could generate ~172,000 weekly VELO emissions which should allow us to generate a 10% return on a pool with total liquidity of $2.68million. If prefered we can instead use this amount to bribe existing VELO voters to vote for us, meaning we would not need to sell the OP tokens relating to this.

Marketing/Design $15,000 Currently Isomorph has only been spreading by word of mouth, with this sum we can purchase spots on podcasts or sponsor Crypto youtubers to give their users a tutorial of Isomorph to improve outreach. In addition funds can be used improve the design of the website by hiring a graphic artist and a UX/UI specialist to make the site more appealing and user friendly.

How will this distribution incentivize usage and liquidity on Optimism?

The distribution will increase the capital efficiency of other protocols, improving competition with other chain ecosystems.

In addition it will allow users to access income streams while deferring tax payments, again helping improve competition of supported projects on Optimism which in turn will improve usage of Optimism.

Why will the incentivized users and liquidity remain after incentives dry up?

Once loans are opened the system will be generating income, this income can be used to bribe the isoUSD Velodrome pool instead of OP tokens. Or veVELO accrued during incentives round stays there after incentives end. Loan collaterals are interest generating and so have an incentive to borrow against their value to increase their return on capital.

Over what period of time will the tokens be distributed?

1 year

How much will your project match in co-incentives?

As a new project Isomorph has no capital to match incentives yet. However as the income from the project grows we should be able to shift the dynamic towards fees generated by Isomorph and in the future we may issue a token that could also be used to this effect.

Resources:

Our code is public at GitHub - kree-dotcom/isomorph: Isomorph: a layer 2 defi lending protocol

We have a website at https://isomorph.loans where we currently have the project live on the Optimism Goerli testnet for users to try out.

Discord Isomorph

Additional team member info:

0xMerlin: front-end developer https://github.com/Zyanation

Please link to any previous projects the team has meaningfully contributed to:

Kree is also smart contract auditor, company details can be provided in private to Optimism. Also Kree has been involved with the Curve and Synthetix DAOs before having proposed the sLINK/LINK curve pool as well as writing and proposing SIP-107 .

4 Likes

I supported this proposal here. isoUSD allows people to leverage against Synthetix synths and Lyra LP token, which as in times that I’m writing this, there is no platform to do such things yet.

Competitor such as Tarot have limitation as Tarot required pairing to have stablecoin in Velodrome pair and borrow rate are designed around leverage farming VELO emission.

Comparing against Mai Finance, currently Mai offering is only for Beefy vault and OP/ETH. Mai also has cross-chain risk so user can have more choice for borrowing in Optimism.

Finally, more native protocol on Optimism means that incentive spent on will go towards user and cycle forward to the rollup itself. This is good proposal to support!

2 Likes

I agree with all the things @gunboats stated.

Some other things that I find great about this proposal is that the project is:

  • code complete and already on test-net
  • open source front end and contracts
  • exotic collateral types for two other OP native projects (Lyra LPs and Velodrome LPs)
  • all funds requested are forward facing and designed to bring growth to Optimism
  • Interest in integrating with the OP Quests Campaign

Over all I think the total amount of OP requested is appropriate for a code complete, test-net deployed project. I fully support this proposal and look forward to seeing IsoMorph deploy on Optimism Mainnet after the audit has been completed.

Thanks @Kree!

Thanks for the replies!

As Gunboats said our design is different to Tarot, we’re Optimism-native and so fully focused on the protocols that live here and because we have a collateral-backed stablecoin minted for loans we are able to provide lower borrowing rates than Tarot and scale to demand better I think.

As for Mai, this project is more similar but after the initial launch we expect to be able to support all Velodrome USDC/Token pairs where the Token has a Chainlink price feed as well as expanding to WETH/Token pairs and we’re currently in the planning stages to allow the use of smaller tokens which do not have Chainlink feeds such as project governance tokens.

For Millie’s feedback, currently the website front-end is not open source but if this is important we can make it open source :slightly_smiling_face: after release. I think the exotic collaterals we accept is the biggest difference we have to other projects, we have plans to expand this, the design of our code means that adding a new ERC20 collateral requires minimal design changes, mostly for the pricing mechanism only. Non-ERC20s are also supported as the Velodrome collateral design shows, meaning we can be very flexible in the new assets we accept.

1 Like

I second @millie and @gunboats comments. I am fully supportive of this proposal, Isomorph lending on Lyra’s LP tokens will unlock great capital efficiency for our Market Maker Vaults. Kree has proven to be a knowledgeable and talented developer who has been in this space for a long time. Looking forward to integrating with Isomorph across the OP ecosystem.

1 Like

Thanks for the proposal! Wanted to flag that Token House delegates are currently in a Reflection Period, which will be followed by 2 Special Voting Cycles.

This means that the next opportunity for grant proposals to be reviewed will be at the start of Season 3, which is set to begin on January 19th.

We appreciate your patience as we’re taking this time to work through some changes that we hope will improve the proposer experience in Season 3.

1 Like

As an Optimism delegate with voting power above the required threshold I believe this proposal is ready.

My delegate commitment is here.