AMA, Part 2: April 2022.
This is Part 2 of our latest Telegram AMA. Thanks for submitting your questions!
Questions start here:
What happens if no one is willing to liquidate a position?
Although this is unlikely (liquidating is money up for grabs), we may even temporarily act as a liquidator of last resort. We can also adjust Liquidator Rewards as required to attract liquidators. A constant monitoring of the system should give us a feel for this.
Do we have actors that are willing to become liquidators on the platform at the moment?
As said above, the most important things to drive liquidators towards the platform are factors such as awareness and.economic incentives. We are currently writing the liquidator instructions document to use in such promotions.
How frequently will be updated the info about the maximum 4hrs price fall (to adjust LVR) and available liquidity (to adjust Maximum borrowing capacity)? Constantly?
We might run it weekly, fortnightly, or monthly. Market shifts may also influence how constantly we update it.
What will happen to the current loans after the LVR is changed for an asset? Will it only affect new loans?
If we increase LVR, we can just do that anytime — because no one will suddenly fall below the LVR liquidation threshold with such changes. But for the planned decrease in LVR, we will give the market a fair warning and then apply it after, say, a week or two. We are also thinking about a setup to notify users directly.
Do we have a loose idea of the “key goals” Paul Mak would like to achieve within the 1st 100 days of launch?
Mechanically, the success of the Fringe ecosystem relies on the harmonic mediation of incentives. Cardinally, demand dictates the yield, which drives supply. In that vein, the first few months will center around borrowers. The more borrowers depositing collateral into our smart contracts, the higher the yield, which in turn drives deeper liquidity.
Can we get updated tokenomics as well as an update of what’s happened to the Rewards Pools?
The Ascendex rewards program is still operating, but the Fringe Rewards pool was discontinued. This is because the said pool was first and foremost an incentive program to further encourage liquidity beyond platform initiatives. Despite the platform delay, we decided to maintain the pool and repurpose it as a reward for you all. Essentially a $1m+ token of appreciation for your continued support. The third-party rewards program is planned for reinstatement following $USB deployment. However, the mechanics may change as well as the redemption conditions.
As for tokenomics, we don’t intend to print any modifications until the successful audit of our DAO codebase. In the meantime, we would advise you to reference articles 2 and 6 of our WP: https://fringe.fi/static/media/FringeFinanceWhitepaperFinal.02fea883.pdf
Since we are keeping the same tokenomics, how are we handling the fixed distribution considering the platform has been delayed? 50% staking was cut short, but then again, I believe we are at month 18 and some change. Is there a plan for all this?
We have been using a lot of the rewards fund to accommodate resilient community members, so the pool has been drained a little. This is a moot point, though. We expect the DAO to be implemented before any major resource allocation is made, so the decision will most probably lay with you.
Does Fringe have any contracts signed with Chainlink, IoTeX, Elrond, etc, that guarantee TVL deployment on Fringe?
With those named companies, the answer is no. As a matter of business conduct, we cannot and will not discuss the conditions of any contracts due to confidentiality clauses, and there is no point speculating on what that means either.
Have you actually talked about institutional usage with these institutions or signed any contracts?
It’s been a long time, and we can appreciate the vantage point of any investor in our network. Therefore we completely understand why most of these questions imply a sense of urgency. However, there is something to be made clear:
“Institutions” or large lenders aren’t rushing through the doors trying to throw billions at new DeFi protocols. It’s just not how it works. Our original management team has a trusted network in finance, banking, and yes, potential liquidity providers who we have spoken with, but it's going to take us time. The first step is to prove a reasonable rate of return, then demonstrate that the return is scalable. I.e. that Fringe can absorb large sums of capital and still retain its competitive yield. Finally, it’s imperative we can demonstrate funds are safe. Ideally as safe as a federally insured depository.
It’s just been incredible to see so many critical hacks and how much money has been stolen from our crypto ecosystem. This is one constant that frankly scares no-coiners away. There is so much doubt cast on our little industry, and illustrating the virtues and promoting the opportunities in DeFi gets progressively harder as we witness more hypocrisies from DeFi operators.
There are just so many examples — we say “don’t trust banks” one day, then lose $100m the next. At least in a bank, you are federally insured up to a certain degree. We talk about decentralization tenets, yet barely any protocols practice it or even have it as a roadmap item. It’s the illusion of decentralization for most. We talk about funds being safu but we see an exploit every week and its no wonder, because we see a new protocol deployed every week — rarely do we see an audit or even a whitepaper these days. Basic software deployment processes are ignored because “DeFi”. It's frustrating.
TLDR: Yes, we talk often. Both positive and negative. No, we don’t have contracts yet, but we will, and there is genuine interest. Everyone is chasing yield, but we have a long way to go as an industry. Rather than manipulating APYs to drive short-term liquidity and pump the price of $FRIN to the moon, Fringe has a very pragmatic, very achievable roadmap to long-term success. We aim to generate a competitive return, maintain that return at scale, and secure the capital and the network.
Before, Paul Mak didn’t want to provide flash loans. If I’m not mistaken, I believe it’s back on the table. What has changed since last time?
There are no flash loans in the Fringe roadmap right now. It's too far on the ‘exotic implementation’ spectrum. They are still a novel contract request that almost exclusively caters to an esoteric niche of DeFi arbitrageurs. It's not just the small user demographic either: Fringe products are closely integrated and things like our collateral pools, liquidation triggers, and interest rates have mechanic dependencies so protocol risk is something we need to consider carefully and protect vigorously.
From Mak’s meetings with institutional investors, is there any guidance as to what percentage yields they’d need to see to deploy capital on the platform? Other more established platforms offer 4–5%. Do the 2 audits work as a “green light” for institutional investors?
In Paul Mak’s words:
“I can only speak for myself and the discussions I’ve had with my associates. Personally, I would accept a higher interest rate against my non Bitcoin portfolio if the LVR was reasonable and the liquidation threshold was meticulously documented or clearly expressed in the UI. My friends who have exposure to the space, share the same opinion. I am hoping we see that same sentiment realized in Fringe. A slightly higher rate of return to accommodate the characteristics or risk class of collateral and appetite of its depositors.
As for the 2 audits. No. Again I refer to the same roadmap.
1. Demonstrate a competitive rate of return.
2. Substantiate those same return percentages at scale.
3. Validate the security of those funds.
Then it is a value proposition impossible to ignore.”
Why did you sell tokens OTC to Ascendex? Isn’t that detrimental to existing holders?
We settled a humble OTC request from one of our earliest supporting partners. What they do with their tokens is their business.
How’s the hunt for a CEO going?
Initially, the hunt for a new CEO was thought of as a way to compensate for our CEO’s dislike for media exposure. However, this role has been filled quite nicely by our CTO, who has also expanded the team surrounding him. This search has been relegated and is not quite as important nowadays. As we near the PLP’s launch, along with working towards the completion of the initial Fringe components, pushing to DAO will then follow. It wouldn’t make sense to engage a CEO on such a short-term basis. We will continue to look to expand the team as needed and are always looking for talent, particularly if they believe and align with Fringe Finance.
How big is the Fringe team exactly?
We have a dynamic core team comprised of six people, who are assisted by several contractors as well as a PR firm and, of course, the development firm. There is also a second remote development team that is currently focusing on Staking and the USB platform, overseen by Brian.
Why are the UI screenshots on the Fringe.fi website COMPLETELY different from those shared on Twitter? This is surprising, and not in a good way!
These UI example screens were placed prior to our finalizing the look and feel of the PLP. We are currently working on a website update that will reflect these changes.
Even the multi-billion-dollar L1s have difficulty maintaining dollar pegs. BEANS was obliterated today from a flash loan attack. Why not just use DAI, USDC, USDT, and instead create your own stablecoin? Wouldn’t it be easier and safer?
Beanstalk was recently compromised due to a governance vote-renting attack which involved an attacker taking out a flash loan in order to buy sufficient BEAN tokens on Uniswap to vote for and cause their malicious governance proposal to pass. The governance proposal was disguised as a BIP to “support Ukraine” but in actuality, sent $180m of deposited user assets to the attacker’s address and $250k to a Ukraine war fund.
Most importantly, this attack had nothing specifically to do with Beanstalk being a “Layer-1” stablecoin platform. It could have easily occurred were Beanstalk to be a Layer-2 stablecoin, as the attacker simply sent all deposited assets to their address. They would have been able to do so regardless of it being either way, also.
Fringe Finance has implemented its contract update mechanisms in both the PLP and USB platforms to be significantly more resistant to malicious governance proposals resulting in a loss of user funds. This is due to several differences:
- Fringe Finance’s platform uses a much longer delay period than Beanstalk’s 24-hour delay period, allowing for the community to more thoroughly investigate and react to any proposed changes. This would have allowed users to withdraw their funds in time from the platform, before the attack could have succeeded.
- Fringe Finance’s platform implements the delay period *after* the proposal has received a majority vote in favor, rather than before. This is a deceptively simple yet significant difference, as it means that the community can pay very close attention to any changes that have entered the review period, as they know for sure that these changes will be enacted after the period ends.
In contrast to this, Beanstalk implemented their delay period before the proposal was voted on, allowing for it to be ignored due to the community assuming it would likely fail to be approved by a majority. If they had known that it was definitely going to be enacted, they would have been able to withdraw their funds before the attacker could steal them.
While the above points apply both to coin-voting and multi-sig governance models, once we have established a coin-voting DAO, we will be implementing various additional measures to prevent the malicious coin-rental attacks such as that which was used against Beanstalk.
Fringe will also eventually minimize the role of governance to prevent governors (be they coin holders or multi-sig admins) from having the ability to arbitrarily modify any smart contract code. We will rather ensure that only particular parameters are able to be modified within predefined ranges. This will prevent scenarios such as what Beanstalk Finance recently experienced.
About Fringe Finance
Fringe Finance is a decentralized money market designed to unlock the capital spread in crypto assets regardless of their capitalization and supported network. With a next-generation DeFi lending & borrowing ecosystem, Fringe aims to unlock the dormant capital from traditional financial markets and all-tier cryptocurrencies.