Hello TrueFi community! This is Raf the CEO of TrustToken. I wanted to let you know about plans that we have to restart TVL and TVO (Total Value Outstanding) growth.
Background: as you can see via the excellent dashboard that @tylerw has set up, our TVL and TVO are both lower than they were 6-8 months ago:
This is somewhat due to market conditions, but we think there are some simple changes we can make to help address this. The key issue, I believe, is that the utilization on our Flagship Portfolios (USDC Pool, USDT Pool, etc.) has been (and still is) somewhat low. Historically, these Portfolios have had significant amounts of stablecoin on hand earning 0%, currently, this number is $195mm.
In addition to directly lowering TVO and real APYs for lenders, I believe this high rate of un-utilized funds signals to lenders that we are unable to deploy the capital, leading them to, naturally, move it elsewhere.
Direction we are proposing moving in: we believe that an important step to solving this is to allow the Flagship Portfolios to start lending more aggressively (these are ultimately DAO/protocol-managed pools) and to launch separate TAM pools that can run a more conservative lending strategy. (For context, TAM is what we call the Asset Manager we are developing).
To be clear, we’re not proposing that the Flagship Portfolios do anything too crazy- just increasing the size of loans to existing borrowers, while also lending more to TradFi or Fintech borrowers to help deploy all or most unused capital. I believe diversifying by lending more to TradFi/Fintech borrowers could actually reduce overall Portfolio risk while increasing utilization and therefore real yield for lenders, but of course, deploying significantly more capital will always come with additional risks.
To put a fine point on it, I’m proposing that the Flagship Portfolios promptly start targeting 85% utilization, a utilization rate they have rarely hit in the last 10 months.
- This would involve increasing loans sizes somewhat to existing borrowers, as well as potentially deploying some capital with TradFi/Fintech firms interested in borrowing more from TrueFi (e.g. Jump Trading)
- It would still involve maintaining some liquid stablecoins (~5-15%) in the pools to support quick redemptions
Once we raise and can maintain high utilization rates, we can focus on increasing TVL (capital coming in) through strong APYs, marketing, TRU incentives, and other means.
Where is this going long term?
Over time, we think it’s important to have a mix of Portfolios for different audiences:
Audience for the Flagship Portfolios = “DeFi money”, cares about high liquidity, high yields, willing to take higher risk
Audience for the TAM Portfolios = More conservative money, willing to accept lower liquidity, wants a strong underwriting process
And long term, once the TAM Portfolios and others are launched, we see the Flagship Portfolios exclusively investing in other Portfolios, rather than making direct loans to borrowers. Think of this as those Portfolios going one level meta.
To conclude, I see the TVL and TVO issues as quite significant and as likely being important inputs in TRU token price. I believe this is a protocol update that can significant help those key metrics and I would be interested to hear folks’ thoughts. Here is a poll to gather high level input:
- This generally sounds reasonable, let’s start lending from the Flagship Portfolios somewhat more aggressively in order to deploy unused capital
- This sounds like the wrong direction for the protocol [please leave comment below]
Thanks very much!