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Inverse Finance seizes tokens, ships code: Launches stablecoin lending protocol

02/28/2021

One among DeFi’s strangest experiments continues to push the envelope in each governance and structure.

Shortly after culling its neighborhood of inactive members, considered one of decentralized finance’s (DeFi) strangest experiments is launching a brand new stablecoin lending product.

On Wednesday Inverse Finance revealed the Anchor Protocol, a cash market constructed round DOLA, a protocol-native artificial stablecoin. Based mostly on “a modified fork of Compound,” in a weblog submit Inverse Finance founder Nour Haridy compares Anchor to Synthetix, which points credit score within the type of artificial belongings again by overleveraged collateral, and Compound, which points credit score within the type of crypto asset loans additionally backed by overleveraged collateral.

In the end, Haridy sees these fashions as offering the identical utility.

“Lending and artificial protocols each provide the identical service: credit score. Anchor brings the hole between them by combining them right into a unified borrowing protocol.”

Anchor goals to perform this with a novel structure that at all times treats the DOLA token as “$1 collateral that can be utilized to borrow different belongings no matter DOLA’s market circumstances or peg.” Customers deposit collateral, mint DOLA, after which can use DOLA to take out loans in different crypto belongings or just earn yield on DOLA. 

“For over-collateralized debtors and leveraged merchants, we provide them a one cease store the place they will share their collaterals throughout their artificial and token borrowing positions, permitting increased capital effectivity and better leverage,” says Haridy.

Haridy envisions Anchor will use DOLA for protocol-to-protocol lending much like Cream’s Iron Financial institution, for undercollateralized lending (lengthy a prize in DeFi), and for the protocol to “lend itself” credit score to pursue yield farming alternatives.

No lifeless weight

Maybe extra attention-grabbing than Inverse’s growth on the protocol layer are the strikes they made earlier within the week on the governance layer. 

In what could also be a DeFi governance first, On Saturday Feb. 20, Inverse neighborhood members put forth two governance proposals to grab INV — Inverse’s at present non-transferrable governance token — from inactive neighborhood members. On Thursday Feb. 25, the proposals handed, and never everybody was pleased with the end result.

Haridy says that the timing was intentional — proper as Anchor, a protocol that may generate income for the DAO, prepares to launch, the neighborhood sheds freeloaders. 

“We would have liked to weed out our lifeless weight to reclaim some tokens for re-distribution to new lively members quickly. We additionally created an INV grants committee with the facility to reward contributors and add new members to the DAO. Moreover, when free riders are eliminated, lively members develop into extra incentivized to contribute as a result of they get a bigger piece of the pie.”

Whereas the unprecedented transfer could appear harsh, it’s additionally merely making use of to governance the sort of aggressive fashion that put Inverse Finance on the map within the first place. By forcing token holders to take part below the specter of seized tokens, it’s helped with the event of Anchor as properly. 

“It is a collaborative effort amongst many DAO members ranging from ideation to growth to inside opinions and testing,” says Haridy.

The following step for Inverse will likely be getting Anchor off the bottom, and making ready for a world during which INV turns into tradable. Haridy says there’s a rising consensus locally for tradability. This may imply that the DAO would surrender the facility to grab tokens, which may alter Inverse’s neighborhood panorama.

Haridy, nonetheless, appears unfazed by the looming shifts, already making ready the subsequent innovation.

“It will considerably change the present incentives and will scale back participation. Happily, there’s some work on a brand new various governance mannequin that’s been occurring internally to deal with this downside.”