S1 PWG Retrospective
Goals
The stated goal of season 1 was:
“The northstar of season 1 at Inverse Finance is to reduce bad debt. This can both be done by making current operations more efficient, making our current offerings more desirable for customers, or making new products that increase revenues for the DAO. The Product Working Group is well positioned to positively impact all of these.”
Primarily, the PWG was to aid with that by delivering on projects and expanding the functionality and utility of FiRM. A key obstacle to us achieving this goal in S1 was the limited borrow capacity of FiRM, both restricting the size of markets, the amount of markets it made sense to deploy, and expansions to layer 2’s.
Overall bad DOLA debt has been reduced by a little over $1MM over the period of season 1, a number which we believe can be improved for season 2.
Responsibilities:
The following responsibilities were set for the PWG in the season 1 proposal:
- Hosting and maintaining https://www.inverse.finance/
- Offering best in class transparency dashboards for applicable Inverse products.
- Integrate with third-parties technology solutions
- Develop and implement new types of escrows for FiRM unlocking new collaterals
- Expansion of new Feds to ensure the efficiency and availability of DOLA liquidity.
- Continuously improving our product development process both in terms of transparency, security and productivity.
- Assure product security by:
- Stress testing internal systems and checks
- Continuous built out of testing suites
- Continuous engagement with high-quality 3rd party code quality & security consultants
We believe that all of these responsibilities have been met, though that improvements can be made to several of these areas, which is something that will be discussed in our season 2 proposal.
Product
FiRM
Markets added:
- WBTC
- wstETH
We’re also in the final stages of development for the following markets:
- sFrax
- styETH
- Curve LP token convex markets
Accelerated Leverage Engine & additional helper functionality:
The accelerated leverage engine has been a major deliverable, and have made the levering up or scaling out of positions on FiRM one of the smoothest in the industry.
While the ALE is the most complex helper contract we’ve developed for FiRM in season 1, we also added helper functions for single transaction DBR compounding with the sINV claim helper, and have a helper contract in the final stages of development for automatically depositing and withdrawing into ERC-4626 vaults when using those as collateral in FiRM.
Cross Chain FiRM & FiRM v2
While design work on design and specifications of cross chain FiRM and FiRM v2 have happened, the development has been frozen as resources were put into projects that could stimulate DOLA demand rather than borrow demand, as our markets have been at borrow capacity for most of season 1.
xy=k DBR auctions
A project not planned ahead of Season 1, but part of our push to reach our northstar goal of reducing bad debt have been the launch so called xy=k DBR auctions, which uses a novel auction design and continuous DBR emissions to pay back down debt, capitalization on the strong borrow demand and high DBR prices to reduce bad DOLA debt.
DOLA
Feds
The PWG continues its role in liquidity operations with the launch of several new feds:
- Convex FraxPyUSD fed
- VeloFedV2 & VeloFedV3
- AeroFedV2
sDOLA
Another project that wasn’t planned ahead of season 1, but which was a response to generate DOLA demand to unlock additional borrow capacity. Its function is similar to the xy=k auctions, using the same auction model, but instead of using proceeds to pay back bad DOLA debt, they’re used to auto-compound DOLA depositors. This creates yield for DOLA stakers, paid out in DBR, which in term generates additional borrow capacity as demand for DOLA increases. As long as users need to burn more DBR to borrow DOLA, than they receive from staking it, this nets out to increased DBR emissions for xINV stakers.
Success metrics
The first success metric of the S1 proposal was:
“No major security incidents or major bug bounty payouts.”
And we’re proud to say that no critical loss of funds for the DAO or our users occurred, nor were any critical issues found by 3rd party bugbounty hunters.
To strengthen our security posture at Inverse, the RWG & PWG moved our bugbounty program to immunefi and increased the bugbounty on all contracts, which have been a mixed success. 51 reports have been received from bugbounty hunters, but only one medium severity issue was deemed to be an impactful issue warranting a payout, with the vast majority of submissions being either of very low quality or spam. While we’re happy that our contracts receive scrutiny, and delighted that no high or critical severity issues were found, responding to so many submissions have been a drain on developer resources. Contributors are currently exploring means to lessen the burden of reviewing low quality submissions.
Efforts have also been put into testing, both in terms of coverage and sophistication, which have resulted in Inverse Finance receiving a bump from 53% to 87% score on defisafety, landing among the top protocols in the space.
The second success metric of the S1 proposal was:
“Adoption of new functionality.”
With revenue and TVL growth being the primary KPI. TVL have largely been stagnant, with revenue growing significantly, as seen per the chart below:
The protocol has struggled with raising DOLA demand enough to unlock significant borrow capacity during S1, though the borrowers have been willing to pay a significant interest rate, increasing the revenue earned by FiRM dramatically.
The lack of borrow capacity resulted in a pause of efforts to take FiRM cross chain alongside adding new markets, as deploying new markets have little effect if there’s no DOLA available to borrow.
Part of the solution to this problem has been the introduction of sDOLA, where DOLA stakers are paid DBR to take their DOLA out of circulation, increasing demand for DOLA and thereby the protocol’s capacity to lend. The improving markets alongside the increased DOLA demand have finally started to increase our borrow demand, and we’re excited to start introducing new markets to FiRM again.