Line of Credit Experiment

[kaimi]

Disclaimer: Ideas presented here are strictly my own and constitute a simple temperature check for the community. Apart from a simple experiment described at the end of this pos, no decisions or course of action here

Background

Almost two years ago @tchairman.eth had an idea to build a truly permissionless peer to peer, uncollateralized lending protocol that would eliminate all middle man, managers, underwriters etc. This protocol had been put on the roadmap and was implemented (both smart contracts and ui) and audited. It exists right now, laying low inside our documentation, it is called “Lines of Credit”.

Lines of Credit - TrueFi Docs

The idea was that certain parties are reputable enough for lenders to make their own decision to lend to. During last months I held two conversation with neofi companies that were interested in launching an ALOC, I also tried exploring a “DAO” avenue, seeing if other DAOs would be interested in opening Line of Credit. Here is how the proposal for Purple DAO looked like:

PURPLE BONDS

I also tried posting on NounsDAO forum but received no response.

For all parties that I talked to, asking to be whitelisted by TrueFi governance seemed like too much of a hassle for being a pioneer of such experiment. There also arises a question, how or why TrueFi DAO would whitelist these parties. One of the solution would be launch Lines of Credit in a permissionless manner,.

Core issue

The core issue of launching a protocol like this in the permissionless way is similar to ERC-20 token permissionless nature. Anyone can launch a token, rug people, scam them etc. Same goes for uncollateralized instruments without proper tradfi underwriters.

I believe TrueFi SHOULD NOT launch smth like this alongside our new “Adapt3r Treasury Bill Fund” which is our reputable foray into a world of RWA. Hence if we would like to release permisionless ALOCs (with all the implied risks), it would be important to completely separate two protocols while remaining loyal to TRU holders that funded the protocol implementation.

Experiment

Before we do anything, or decide on anything, I am willing to become a first person to open their own personal Line of Credit onchain (OP Mainnet, very limited in size, seperate website etc) to show off to the world the “production” demo of how the product works. Please do treat this strictly as a product / engineering experiment to open conversations about onchain Lines of Credit.

[StrategoHoldings]

Maybe we could address this issue first if this is a core issue.

@kaimi

For all parties that I talked to, asking to be whitelisted by TrueFi governance seemed like too much of a hassle

What exactly is entailed in being whitelisted by TrueFi and what precisely is too much of a hassle?

Can you outline the Truefi white listing process, along with the feedback you recieved regarding “asking to be whitelisted by TrueFi governance seemed like too much of a hassle”.

I feel this is important data that should be utilised for TrueFi before moving forward with the “Line of Credit Experiment”.

[kaimi]

Looks like we will see a serious, fintech attempt at getting whitelisted to launch Line of Credit on TrueFI this week, let’s see how that one goes.

The problem is - we have walked away from the model where community tries to asses borrowers reputation and credit score when we decided to abandon “Legacy Pools” mechanics.

Our current approach assumes TrueFi whitelists certain managers to be able operate on top of the protocol. The idea here is - it is easier to vet Managers than Borrowers. And they have all the tools, and responsibility to seek recovery in case smth bad happens.

Core issue

I think core issue is not whether it is a hassle or not, the core issue is:

With ALOC, we’re again talking about “whitelisting” end borrowers. The initial perspective was that TrueFI whitelist them ONLY to prevent - spam, malicious attempts and similar - but no one really underwrites the loan. I think that reasoning might be broken and stkTRU holders might be afraid that by whitelisting DAO actually takes too much of a resposibility, being too cautious to whitelist anyone etc, blocking growth of the ALOC protocol. Especially with credible RWA opportunity listed on TrueFI DAO app nowadays.

[StrategoHoldings]

When talking about “whitelisting” end borrowers.

@kaimi

I think that reasoning might be broken and stkTRU holders might be afraid that by whitelisting DAO actually takes too much of a resposibility

I 100% agree with this, and it most certainly takes away from the idea of being a truely “permissionless” protocol.

I also agree that implementation of ALOC would be the best approach when considering these following points;

@kaimi

It is easier to vet Managers than Borrowers. And they have all the tools, and responsibility to seek recovery in case smth bad happens.

@kaimi

Certain parties are reputable enough for lenders to make their own decision to lend to.

This is a great direction

@kaimi

build a truly permissionless peer to peer, uncollateralized lending protocol that would eliminate all middle man, managers, underwriters etc

[StrategoHoldings]

@kaimi

For all parties that I talked to, asking to be whitelisted by TrueFi governance seemed like too much of a hassle for being a pioneer of such experiment.

Could you be more specific, Kaimi, about the chats?

Im sure you would agree, the information should be shared on Truefi Forum rather than staying a private communication.

I believe it would provide some crucial insight into how people view Truefi’s current “whitelisting” process.

[kaimi]

@StrategoHoldings

should be shared on Truefi Forum rather than staying a private communication

Not all the conversations are public, and if smth is DM channel then I am not able to share it directly. Permissionless ALOCs would enable DAOs to establish their Line of Credit without the process of whitelisting. Whitelisting is very manual, it requires public forum communication - like with current Kryptonim requests. The question for DAOs is always who is going to represent / who is able to answer questions - and in many cases figure out the answers. Working groups at DAOs are historically tricky. One can observe what is happening to Gitcoin or Maker.

Having said that whitelisting is not the only obstacle. Here is an example of a public reply that I received from a Purple DAO member. You can clearly see “the overhead” of deploying and running an instrument is being called out as an issue.

Here is a link to the thread:

Warpcast

[StrategoHoldings]

Juding by the likes and comments in comparison to your post. “Members” over at Purple DOA seem to be more interested in nonsensical things

Maybe Purple DOA just isnt the right fit. You’re time is too valuable pushing shit up hill Id say cut your losses with Purple and move on.

[kaimi]

Purple is actually a thriving community and a great DAO Having said that, I did abandon all additional attempts at convincing them . Thanks!

[StrategoHoldings]

They very well may be on certain levels. But they could at least reply in some form or another.

Unprofessional, or like i said, or just not a good fit😉

Either way, keep pushing Kaimi I appreciate your skills and the work you put in. Im more passionate, than i am skilled in the coding/fintech industry.

My skills are creating products with a service and building businesses around them. Even though i have built a multi-million dollar business. I find myself just working on things without the care for making money on it.

Whatever you’re doing in the moment is because of a choice you made just prior to the moments you find yourself in.

“Such is Life!” - Ned Kelly

Ha! Its philosophical Friday here

[kaimi]

Whatever your doing in the moment is because of a choice you made just prior to the moments you find yourself in.
“Such is Life!” - Ned Kelly

Ha! Its philosophical Friday here

Thanks for the great vibes and support @StrategoHoldings, I appreciate it