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Raise Protocol-Managed Liquidity via Capital-Efficient Loans

Use Cases

1. Alleviate Liquidity Bottlenecks

Many protocols intrinsically have pools lacking in liquidity which can act as bottlenecks to overall protocol growth. For example, leveraged yield farming protocols require sufficient TVL in their lending vaults for users to fully utilize their leveraged yield farming products, and for the protocols to fully achieve their TVL potential. Copra helps protocols secure protocol-managed liquidity that could be used to relieve these specific bottlenecks.

2. Enhance Protocol Income

Copra loans can provide protocols with a way to achieve a sustainable business model. Since the loan interest cost has a fixed ceiling, the excess yield collected when providing liquidity to pools will be returned to protocols at maturity. This means that if the strategies on protocol pools have a higher combined yield than the fixed interest cost, the liquidity loan would provide an additional source of revenue on top of protocol fees, helping the protocol to be sustainably profitable.

3. Elevate Confidence of Other LPs

Protocol-managed liquidity raised via Copra loans can be allocated as initial bootstrap liquidity when launching new pools or deploying to new chains. This way LPs (including retail, whales, and institutions) will gain more confidence in depositing to the protocol, initiating a positive growth flywheel.

4. Reduce Reliance on Token Incentives

Raising protocol-managed liquidity with a Copra loan is an efficient and sustainable way to promote growth. Lenders are more assured by protocol-level lending than direct pool-level lending. This will significantly reduce the need to provide additional token incentives on top of yield, reducing native token dilution.

Value Propositions

1. Fixed Interest Rates

Fixed and pre-determined rates on loan interest provide a predictable cost of liquidity. Any excess yield from performing pool strategies will be returned to borrower protocols and contribute to protocol income.

2. Capital Efficient

Unlike overcollateralized lending where protocols would need to deposit an amount of either native tokens or other tokens that is greater in value than the loan principal, a Copra loan is capital efficient. It only requires a relatively small deposit (typically a single-digit percentage of the loan principal) from the protocol treasury to help buffer up the loan. This is made possible by the liquidity warehouse mechanism.

3. Flexible Liquidity Utilization

The liquidity warehouse whitelists pools that the loan principal can be deployed to. Protocols can re-arrange liquidity freely among those whitelisted pools to maximize loan utility while maintaining the non-custodial nature of the process for lenders.

4. Fixed Lock Duration

Fixed-duration loans provide predictable liquidity, in contrast with 'mercenary capital' or gentlemen's agreements with whales, which often require additional lockup incentives or excessive token rewards to stay engaged. Protocols can tailor their tokenomics towards behaviors more beneficial to the protocol fundamentals.

5. Plug and Play

Onboarding does not require making changes to the protocol code or additional development work.

6. Fully Trustless On-Chain

With fully smart-contract-based mechanisms and no off-chain elements (no legal agreement, etc.), Copra loans are suitable for projects with on-chain governance. Moreover, all parties can rest assured that the terms of the deals are enforced in a trustless manner.
Last modified 1mo ago