The Consortium – A Growth Initiative
A growth initiative to weaponize the remaining bad debt as an investment opportunity for a DeFi protocol to co-own a shared stablecoin infrastructure.
TL;DR:
- What?
Turn Inverse Finance’s bad debt into an investment opportunity by letting core DeFi protocols co-own and grow the DOLA stablecoin ecosystem. - How?
Protocols lock DOLA stablecoins, earn rewards, and receive INV tokens (governance equity), aligning everyone’s incentives around DOLA’s success. - Why?
Most DeFi protocols lock huge amounts of USDC/USDT but get no rewards or equity. The Consortium changes that by rewarding supply locking and giving equity exposure in a decentralized stablecoin issuer. - Benefits for Members:
- Earn yield on locked DOLA supply
- Gain INV equity shares
- Influence and grow a shared stablecoin network
- Turn “bad debt” into valuable equity investments
- Benefits for Inverse Finance:
- Reduce or repay bad debt
- Drive organic DOLA demand and adoption
- Boost reputation and credibility in DeFi
- Build a powerful, decentralized stablecoin network effect
- Potential Members:
GMX, Gains Network, Euler, Gearbox, Linea, TrustWallet, and others. - Next Steps:
Seeking feedback and interest to shape the proposal. Leadership and resources needed for successful execution.
Overview
Weaponize the bad debt by offering its amount as investment opportunities to core DeFi actors, who gain direct equity exposure to inverse stablecoin growth, complemented by DOLA supply lock rewards. These crypto entities, becoming part of The Consortium, would thus be fully aligned with DOLA’s growth and benefit from the supply they lock for Inverse as well as its overall success as a stablecoin. The Consortium is a collective of core DeFi entities aligned with and benefiting from DOLA’s success. Inverse gains full or partial repayment of remaining bad debt and native DeFi integration, which boosts sustainable DOLA demand and generates more revenue for the DAO.
The Opportunity for DeFi Entities
Currently, most DeFi protocols, CEXs, or any crypto distributors are not rewarded for the stablecoin supply they lock. They mostly use USDC or USDT because these are the most liquid and perceived to be the safest options. As a result, they create organic new demand for those stablecoins without being compensated for it. Take GMX, for example: there is roughly $80M USDC locked in their liquidity pool (GM pools) on Ethereum alone. At a risk-free rate of 5% (somewhat exaggerated), this represents $4M a year in missed revenue that the protocol could earn on that capital. This is essentially free money handed to Circle with nothing in return.
Some major distributors do have deals in place to get properly rewarded. For example, Coinbase has an agreement with Circle (USDC issuer), which pays it a rate for every USDC custodied on the Coinbase platform. But this is the exception, not the norm, and it mainly applies to companies, not DeFi protocols. Ideally, DeFi protocols (and any distributors) should be rewarded similarly based on the amount of stablecoin demand they generate. The M0 Foundation has made moves in this direction with its M stablecoin, which can be configured to pay a yield on the supply held in your protocol.
However, Inverse Finance has an opportunity to go even further. Even when protocols are compensated for the stablecoin supply they support, very few crypto entities directly benefit from the equity growth behind major stablecoins. An exception again is Coinbase, which owns approximately 3.5% of Circle’s equity, meaning it directly benefits from the overall growth of USDC. That’s why Coinbase pushes USDC so heavily on its platform and the Base L2. But for other crypto entities, there is currently no straightforward way to access such deals and gain exposure to the growth of a stablecoin they help distribute.
INV is in a unique position to offer that opportunity. It is the only decentralized stablecoin issuer with a growing stablecoin and a valuation low enough to offer meaningful ownership and exposure to crypto distributors. The current valuation makes it possible for a protocol to acquire a significant share of the Inverse Finance DAO, giving them both some level of control and financial exposure to a stablecoin they help distribute.
Ultimately, The Consortium would be a collective of crypto entities (DeFi protocols, DAOs, CeDeFi distributors, etc.) incentivized to promote the distribution and integration of the DOLA stablecoin, both through a reward rate on the supply they lock and through equity exposure via INV ownership. This enables members to benefit directly from the growth in DOLA usage, instead of giving away the value they create for free to Tether or Circle.
The bad debt would be weaponized as an investment opportunity for prospective Consortium members. Up to $6M worth of INV would be issued for large investments from these members, and the funds received would directly serve to repay the bad debt. This would immediately make their investment more valuable, as they would then own part of a fully collateralized stablecoin that is also being integrated into a growing network of distributors.
Let’s take a concrete example of a potential member of The Consortium to understand the mutual benefits:
Gains Network is an OG perpetual protocol of relatively small size currently, but it still earns decent revenue and is under heavy development. It has liquidity provider vaults that can hold either ETH or stablecoins. The two stablecoin vaults, USDC and DAI, together hold more than $11M in locked supply. Gains doesn’t earn anything on that supply, nor on the stablecoins deposited by traders as margin.
By joining The Consortium, Gains Network could set up a DOLA gVault and earn a specific rate on the supply it locks there. The same applies to trader margin options, which could be offered in DOLA and earn that rate. The rate offered would be less than what Inverse earns on each DOLA to keep the model viable. Essentially, instead of giving money away for free to USDC or USDT, those funds would flow to Inverse and the members of The Consortium.
Another potential feature could be having the governance token of The Consortium underwritten by DOLA. This would help increase long-term demand for DOLA organically, thereby increasing the value of INV and the allocations of Consortium members.
There is a strong network effect in the Consortium’s dynamics. Each new member strengthens the stablecoin network and increases the value of the INV allocation held by every other member. Additionally, the more DOLA gets used, the more it earns and the better the rate it can potentially offer on locked supply.
Getting the first participants is the hardest part. Once a few have joined, subsequent prospective candidates will be more inclined to join the momentum and own a share of a decentralized, shared stablecoin.
Here is a non-exhaustive list of potential members of The Consortium:
- Spectra Finance
- Gains Network
- GMX
- Euler Finance
- Gearbox
- Fluid
- Steakhouse Financial
- L2s (e.g., Linea)
- Kiln Finance
- Wallet operators (e.g., TrustWallet)
The opportunity for Inverse Finance
Having DOLA utilized organically throughout DeFi is the ultimate goal for Inverse Finance. It allows the protocol to generate revenue on that supply that isn’t directly receiving the saving rate, and can either accrue more profit to the DAO or increase the saving rate above what other capital allocators can pay, thus incentivizing growth. At some point, the liquidity and network effects become so significant that they reach escape velocity, ensuring a dominant position for the most liquid and trusted stablecoin. This is the ultimate objective for a stablecoin issuer, and it is extremely hard to achieve.
In Inverse Finance’s case, this is especially difficult given the fractured reputation due to previous exploits and the remaining bad debt, which creates a risk premium. The Consortium initiative both creates incentivized partners that generate organic DOLA demand and help reduce, or in the best case, entirely remove the remaining bad debt and its negative implications. Having multiple DeFi entities backing Inverse Finance would also send a positive and strong signal for the DOLA stablecoin, increasing its mindshare and facilitating further adoption.
While definitely hard to achieve, this is a high-reward opportunity that could position DOLA and Inverse Finance uniquely within DeFi, becoming the shared stablecoin infrastructure of the core DeFi ecosystem. Having numerous crypto entities aligned with DOLA’s success and prioritizing its usage could ultimately create a large and powerful network effect.
Inverse Finance is in a unique position to offer this enticing investment to prospective Consortium members. INV has a very low valuation for a protocol with such good fundamentals and a well-recognized and growing stablecoin. No other stablecoin issuer of this size and fundamentals could offer such enticing equity investment terms to potential DeFi distributors. So it is a unique opportunity proposition that we can easily sell to them. While it may seem like selling cheap, having multiple crypto entities backing Inverse would greatly increase its chance of becoming a major stablecoin and thus its long-term valuation. The whole is more than the sum of its parts.
Summary
To summarize, if successful, the Consortium initiative would enable Inverse Finance to repay some or all of its remaining bad debt, establish new demand channels for DOLA through aligned DeFi partners, and significantly boost the visibility and adoption of both the stablecoin and the governance token. Additionally, it would strengthen Inverse’s market positioning, enhance its credibility in the ecosystem, and serve as a powerful marketing and reputation-building milestone.
This is undeniably an ambitious business development initiative that will require extensive discussions and strategic pitching to potential DeFi partners. It’s expected to be an iterative process, evolving through ongoing conversations and real-time feedback from the ecosystem.
The goal of this early discussion around the Consortium is to gather initial feedback and assess stakeholder interest, so the proposal can be shaped in alignment with Inverse Finance’s long-term vision and success.
In my view, this type of initiative could give DOLA a genuine opportunity to become a widely adopted, core stablecoin in the DeFi space, while also helping define the broader direction and future of both DOLA and Inverse Finance.
I’m personally highly motivated to lead this growth initiative with support from the team. However, giving it the necessary attention and resources to ensure a real chance of success would require appropriate compensation—something that can be addressed separately, once there is clear interest and commitment from the stakeholders.