TrueFi V2: Improved Staking, Liquid Exit, On-Chain Governance
In the three months since TrueFi’s launch, we have seen the protocol quickly rise as the leading contender in on-chain uncollateralized lending. Version 1 (V1) of TrueFi has brought on respected borrowers like Alameda Research, Poloniex and Wintermute Trading, and in aggregate has processed $57.5 million of unsecured loans with no defaults.
In this same time period, the protocol is on track to pass on $525,715 in returns to lenders and millions of TRU to platform participants and liquidity providers. At time of writing, TrueFi stands in the top 30 protocols by Total Value Locked and is in the top 10 for lending protocols, as tracked by DeFi Pulse.
TrueFi’s goal is to become the ultimate market-driven, automated credit rating and lending system. To that end, the proposed 2021 TrueFi Roadmap lays out a 4-phase plan for building a robust credit model, servicing on-chain lines of credit, and diversifying both the available assets and open pools. It also explores opportunities in protocol-to-protocol lending, tradable loan tokens, and more.
TrueFi’s next milestone, summarily called V2, goes live on approximately February 19th, 2021, pending audit. V2 will include three major protocol changes: an improved TRU staking model designed to improve TRU utilization and participation yield; an on-platform service for exiting the lending pool with the lowest possible slippage, called liquid exit; and the launch of full on-chain governance.
These developments are covered in depth below:
Improved TRU Staking Model
The new TrueFi staking model improves utilization and value accrual for TRU holders. It accomplishes this by changing three existing mechanics of TRU staking: it simplifies the role of staking in the existing loan approval process, rewards stakers with 100% of the loan origination fee on top of increased TRU rewards, and it allows for simultaneous participation in staking and governance.
Changes to loan approval process:
While TRU stakers were previously able to stake on each individual loan as it came in, this required both attention and gas fees. V2 allows stakers to stake on the overall protocol rather than on individual loans. Just as with the rewards for successful loans, penalties for loans that default (capped at a 10% slashing fee, but could be adjusted with governance) will also be slashed evenly across the stakers.
This update should grow the total amount of TRU active in TrueFi by reducing the cost and complexity of participation, while also allowing faster processing of loan requests.
Changes to TRU staking rewards:
At present, TRU stakers are rewarded with TRU on a per-loan basis at the end of the loan term. In V2, participating stakers are rewarded in both TRU and tfTUSD tokens (formerly called TFI-LP). Finally, with the launch of stkTRU, staking your TRU on the platform will no longer prohibit participation in governance.
TRU Rewards: V2 allocates a fixed number of TRU to stakers each day. Each participating staker receives a share of the daily TRU disbursement, proportional to their makeup of the total staking pool, on a continuous basis (similar to existing TRU farms). The daily allocation is subject to community input, with a TrueFi forum proposal for a rate of 100,000 TRU per day currently under discussion.
tfTUSD Rewards: TrueFi is designed to capture a small fee of 0.25% on each loan originated, paid by borrowers. V2 allocates 100% of this fee to TRU stakers in the form of tfTUSD rewards, which are paid out to stakers 50% at the beginning of the loan, and 50% at the end of its term. The size and formula for this fee, as well as how it is spent, are the subject of ongoing community discussion.
Empowering governance with stkTRU: At present, the design of TRU forces holders to decide between participating as a TrueFi staker, providing DEX liquidity, or engaging in TrueFi governance. With the launch of V2, stakers of TRU will now receive stkTRU in return. stkTRU will allow TRU stakers to simultaneously participate in TrueFi governance, including approving or rejecting new loan applications.
Together, these changes should make it easier and more rewarding to participate as a TRU staker. TrueFi will transition to V2 staking around February 19th, which will be reflected in the platform UI. TRU staked on existing loans will not be affected and may be unstaked at the end of the loan term, though this TRU remains subject to V1 rewards.
Introducing Liquid Exit
At present, V1 offers the ability to exit the TUSD Lending Pool ahead of the pool’s loans being realized in one of two ways: through the tfTUSD/TUSD Uniswap pool, which may come with substantial slippage; or by exiting directly into the underlying assets held by the pool, which will disburse a blend of loan tokens, TUSD, and CRV.
In V1, TrueFi users have sometimes had to choose between delaying liquidity until a loan matures, incurring high slippage to exit early, or dealing with the inconvenience of receiving multiple assets on their way out of the pool in exchange for the TUSD with which they entered.
Liquid exit addresses a key community request: the ability to exit their TrueFi loan positions directly into TUSD with minimal slippage.
A new way to exit the Lending Pool into TUSD with low slippage:
In V2, liquid exit offers a low-slippage way of exiting small to medium TrueFi Lending Pool positions (relative to the overall size of the pool) into TUSD: the same, highly liquid asset with which lenders entered the pool.
Liquid exit works by allowing the Lending Pool to act as a liquidity provider for tfTUSD tokens directly in exchange for TUSD, paid out from the available balance of liquid funds in the pool. For this service, liquid exit charges users an exit fee that’s inversely proportional to the amount of available TUSD in the pool and relative to the size of the redemption. This fee is earned by the pool for the benefit of existing tfTUSD holders, rather than by DEX market market makers.
In practice, when there is a large amount of TUSD in the pool, the liquid exit fee is low. When the TUSD liquidity is low, the fee is high. If there is no TUSD in the lending pool and no TUSD deployed in Curve, or the pool would need to liquidate its Curve position with a loss greater than 10 basis points, liquid exit will not take the transaction.
Liquid exit is available for use on Etherscan right now, and on approximately February 19th, will be added to the TrueFi UI as a new tfTUSD withdrawal option, eventually replacing the Uniswap exit option.
The Launch of On-Chain Governance
V2 of TrueFi formally launches on-chain governance. While an idea is still expected to begin in Discord and forum polling before becoming a formal proposal, on-chain governance changes the current governance process in a few material ways.
On-Chain Voting: While some decisions may need only a forum discussion or a Snapshot vote, most protocol changes will now demand an on-chain proposal and will require TRU & stkTRU holders to participate in voting in order to be implemented. This new step will usually come after at least a forum poll.
Submitting proposals: TRU and stkTRU holders (“TRU holders”) can now create TrueFi Improvement Proposals (TIPs) so long as they hold at least 100,000 in the wallet associated with the motion. The minimum TRU requirement is subject to change via governance. Once adequate discussion has been had on an idea, a proposal can be submitted on the Vote page of TrueFi, which is also home to all proposals being actively considered.
Voting on proposals: Once a proposal has been submitted, TRU holders can use their tokens to vote in favor for or against the proposal during a standard voting period of 3 days. If the proposal receives a quorum, it can be implemented after the timelock period.
Achieving quorum: On the launch of V2, a proposal is considered successfully passed if it achieves a minimum of 10 million “Yes” votes (ie TRU or stkTRU staked in favor), AND if the number of “Yes” votes is greater than 50% of the total votes.
Vote delegation: V2 governance allows delegation, or the option to assign another wallet the voting power associated with one’s own held TRU or stkTRU balance. TRU holders can choose to delegate their votes to more active or better informed participants, to another of their own wallets, or even lobby other TRU holders to represent them as a “superdelegate.” A wallet may not delegate its voting power in parts: all voting power in one’s wallet is transferred to the delegate, from the current block onwards, until the sender delegates again, or transfers their TRU out of the wallet.
Most importantly, it’s important to know that governance can be used to change governance: TRU stakers can use the governance system as described below to alter the workings of the system itself, making all elements of the proposed governance functionality open to change to better serve TrueFi and its community.
Additional Improvements: TrueFi Mobile Optimization
In addition to core protocol improvements, TrueFi is continuously undergoing subtle but important changes to the app interface and user experience. One of the most substantial updates already available publicly is full mobile optimization of TrueFi for smartphone browsers and mobile cryptocurrency wallets.
In Closing
As we’re all learning, building and using TrueFi, the protocol is growing rapidly and evolving constantly, with the unwavering goal of being the definitive uncollateralized lending protocol. As such, it’s impossible to capture all of the developments happening in every part of the protocol and community, but we are excited for two major developments distinct from progress against our product milestones:
Sushiswap Farm Migration: TRU holders have voted for a deeper integration with Sushiswap through a migration of the existing TRU/ETH farm, which should be able to take advantage of Sushiswap’s Onsen SUSHI rewards on top of a generous TRU incentive, as well as develop a deeper connection between our DeFi communities. This migration is expected to go live in early March.
TrustToken Treasury Planning: TrustToken, Inc.’s TRU holdings have been the subject of a lot of thoughtful public and private discussion, with their ultimate utility being to grow the usage and community of TrueFi. An early proposal which considers a number of community forum discussions is being prepared, and should be made public just prior the V2 launch.
Beyond V2: Get Involved in What’s Coming
While we’re excited for what V2 has to bring, we believe the best is yet to come. Our TrueFi 2021 Roadmap remains the best place to prepare for the next generations of TrueFi — but if you’d like to get involved in creating it, please follow TrueFi on Twitter and join the growing global TrueFi community on Discord.
If you’d like to dive deeper, there’s no replacement to trying the product at TrueFi.io — with lending TUSD to the TrueFi Pool serving as the simplest way to both try out unsecured lending and also farm TRU to use in staking and governance.
You can also trade TRU on major centralized and decentralized exchanges, like Binance and Uniswap, then put your TRU to work by staking on loans, earning TRU and tfTUSD rewards.
In the end, DeFi projects grow on the trusted recommendation of one friend to another. If you’d really like to help TrueFi succeed, the best thing you can do to help is tell a friend about what TrueFi is and what excites you about it. We’d love to welcome them to the community and build the future of finance together.
