[TFIP-12] TrueFi Trinity: A new vision and roadmap

Introducing Trinity

Today, we introduce Trinity V1, a protocol that has been months in the works.

Trinity is a lending protocol built to increase capital efficiency on RWAs issued onchain.

The protocol makes RWAs more composable across DeFi by introducing $TRI, a highly liquid dollar-based token that can be transferred and traded on secondary markets.

Trinity enables users to borrow against RWAs and other yield-bearing assets, minting $TRI against deposited collateral.

tfBILL, the tokenized T-bill product on TrueFi, will serve as the first collateral asset backing $TRI.

tfBILL holders can use Trinity to create leveraged positions, potentially earning a net yield of up to 15% on tokenized T-bills.

In the future, Trinity could onboard additional yield-bearing assets as collateral. Such assets could originate from TrueFi and beyond, including:

  • Additional TrueFi pools (crypto-native credit, asset-backed loans, EM credit, etc.)
  • RWAs from other protocols: Ethena sUSDe, etc.
  • Crypto-native assets: MakerDAO sDAI, etc.

$TRI is a transferable token that can be traded on secondary markets and easily integrated into other DeFi protocols.

DeFi participants may choose to use $TRI because holders can earn real yield by staking TRI. Staked TRI (sTRI) earns a portion of fees paid by borrowers to the protocol, with sTRI yields expected to be near or above T-bill rates.

Early access: Live on testnet

Trinity is live on testnet today at https://trinity-app.vercel.app/ but has not yet been audited.

To learn more, read the docs at https://docs.trinityprotocol.xyz/.

How Trinity Works (Example use case)

  • Alice is a large, sophisticated investor who wants to earn a leveraged yield on her idle stables

    1. Alice onboards to tfBILL.
    2. She deposits 500k USDC and mints $500k tfBILL on TrueFi (~5.3% yield).
    3. She then deposits $500k tfBILL into Trinity, and can now borrow up to [92%] LTV.
    4. She mints 450k TRI and pays 4% interest to Trinity on borrowed TRI.
    5. She swaps 450k TRI <> 450k USDC on Uniswap.
    6. She uses 450k USDC to mint $450k tfBILL, then repeats steps 2-4 above to increase leverage.
    7. Outcome: After several turns, Alice can generate >15% net yield (see details) on tfBILL.
  • Diego wants to earn yield on his idle stables, via 1-2 simple transactions

    1. Diego swaps 500 USDC for 500 TRI on Uniswap
    2. Diego stakes 500 TRI into the sTRI vault
    3. Outcome: Now, Diego earns ~5.7%* on sTRI
  • sTRI yield is dynamic and depends on interest rates and the percentage of TRI supply in the staking vault. Assuming borrowers pay 4% and 70% of TRI is staked, sTRI could pay 5.7% (source).

Trinity = A new part of the TrueFi Ecosystem

Trinity strengthens the value proposition to both lenders and borrowers on TrueFi.

For lenders:

Trinity makes it easy for TrueFi lenders to enhance yield or hedge risk by borrowing against tokenized assets.

For managers/borrowers:

Trinity makes TrueFi the best platform for attracting capital. Because lenders can easily acquire leverage and hedge risk through Trinity, they can deploy more capital into TrueFi deals than they would on other platforms.

To begin, Trinity will have minimal governance requirements, as outlined here.

Why we built Trinity

Over the past few quarters, we have chronicled the pace and adoption of real-world assets across the industry. You can find these on our YouTube channel, in the “market updates” playlist.

In the process, we’ve had 3 major takeaways:

  1. Broad transferability and fungibility are prerequisites for the success of real-world assets
  2. Supply growth is fueled by a small subset of power users and/or large-scale partnerships
  3. Lenders want simple UX

Historically, the only private credit in crypto that achieved broad market appeal has been lending to crypto firms. In our view, lending to trading firms has been successful because it’s the only type of private credit that meets the core needs of DeFi lenders:

  1. Easy to understand
  2. Short-duration
  3. High real yields (>10%)
  4. Transferability

The data supports this. The peak of onchain RWAs was in April 2022 when Maple and TrueFi each had hundreds of millions in loans outstanding to trading firms.

Two years later, the market for onchain credit has now returned to only ⅓ of that.

In our position today as contributors to TrueFi, we have to think of the “bets” we want to take. We want to make a large bet for TrueFi that can capitalize on this opportunity through Trinity.

Go-to-Market

We propose launching Trinity on Base: Coinbase’s L2 network.

Why? Finding a home for Trinity is one of the key considerations we have worked through.

  • Today on ETH L1, gas costs have made daily onchain vault updates cost prohibitive for Adapt3r. Building Trinity and underlying vaults on an L2 can reduce user costs, improving the UX significantly for both lenders and vault managers.
  • The most conservative initial rollout for Trinity would involve barring US users.
  • By building on the Base L2, Trinity can access an audience of ~150k verified addresses. Trinity can use Coinbase Verifications to enable transfers of TRI only between (a) non-US verified users, and/or (b) whitelisted institutions
  • Another reason we like building on Base is that we think the Optimism Superchain ecosystem is one of the most exciting ecosystems in crypto today.
  • In the future, we could expand to other Superchains (Fractal, OP Mainnet, etc.) as we find more use cases.

As the call to action for this post, we request $100,000 USD worth of TRU (with a 20% buffer) to pay for an audit of Trinity with ChainSecurity. We will finalize the amount of TRU at the time of proposal with funds sent to [TBA]. Excess funds will be returned directly to the treasury. We can also provide an invoice to the foundation as an additional check on spending.

Next steps

  1. Testnet deployment (COMPLETE): live today at https://trinity-app.vercel.app/
  2. Audit: Trinity needs to be audited. This post requests funds for a ChainSecurity audit
  3. Enhancements: Based on feedback from early users and testers, we expect to improve the Trinity UX and UI.
  4. Staged deployment: Onboard early users and roll out Trinity by gradually increasing the $TRI cap, as proposed below.
  5. Clarify legal and regulatory implications with the foundation board
  6. Onboard market makers and early partners

Voting:

  1. Approve spend of 120,000 USD worth of TRU to pay for an audit of Trinity with ChainSecurity
  2. Reject audit spend for Trinity
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Sharing some coverage from

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@WallfacerLabs - extremely extremely exciting. I think for a while we have needed a new vision for where the protocol is going in this new market. This is a fantastic vision and I am very excited to see it move forward.

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Really exciting to see activity at TrueFi again. Product like Trinity was clearly needed and the release is well-timed. Just curious if Wallfacer can explain the connection between TrueFi and Trinity beyond the TF pool being the pilot token for the new protocol? Is there a technical reliance on each other or anything that $TRU holders can point to that directly benefits TrueFi? Obviously, the value of Wallfacer being behind both protocols goes without saying! Apologies if I missed something in the post above.

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Is the following possible and would it make sense to add into $TRI use cases.

From leveraged position, user swaps $TRI for $TRU and stakes $TRU for 4% yield :arrows_counterclockwise:

And add this $TRI to $TRU swapping feature directly into Trinity app…

Once a user mints $TRI they can use it as they please!

But I don’t think any early version of Trinity will use $TRU as collateral. While technically possible, managing risk around volatile assets (like TRU) is much more difficult than for relatively stable assets like T-bills or yield-bearing funds. Endogenous collateral would also make the protocol riskier.

For initial phase of rollout, I expect the target audience for Trinity to be users who want to borrow against T-bills to deploy into other stable yield-bearing assets.

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Or potentially come back through as a lender through TrueFi Capital Markets ?

Please correct me if I’m misreading, trying to synthesize my understanding: $TRI allows lenders to mint RWA-backed stables for use across DeFi, which can also be staked for yield on Trinity in the form of sTRI?

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:100:

Correct. Only detail is I wouldn’t classify $TRI as a stablecoin. While it’s a token pegged to $1, it should be expected to deviate more often than USDC/DAI/USDT/etc. (That being said, the system is designed to provide minters incentive to bring price back towards $1.00 whenever $TRI price dips significantly.)

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Thanks for the confirmation; sounds like an important component of the TrueFi ecosystem.

I, for one, am bullish $TRI :rocket:

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As I see it, Trinity has potential to drive more value to TrueFi assets accepted as collateral on Trinity, similar to how Flux has done for Ondo. We believe that Trinity’s design works better for asset issuers from a compliance standpoint vs. other competing products.

Additionally, TrueFi and Trinity should be linked from a governance perspective. I think there are options as to “how” this is implemented. One possibility is that Trinity governance is passed to $TRU onchain governance. Another option would be for Trinity to become something like a SubDAO aligned with TrueFi (see Maker SubDAOs for inspiration). I can write my own thoughts on pros/cons for each path but would like to hear others weigh in here.

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Looking forward, are there any strategic intentions for Truefi’s Portfolio Managers to potentially utilise $TRI in Trinity V1 or V2 in any particular way that @WallfacerLabs may have in mind. In terms of establishing a robust and well-maintained liquidity loop within the TrueFi Protocol?

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My very personal opinion is that Trinity might require separate governance and gov token. It is very clear to me that TrueFi community and $TRU holders should be prioritized / included in the new token distribution in this case.

Kaimi, suggesting airdrop of new token to existing $TRU holders?

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This is a possible scenario @RDharia.

As you know, with new tokens come new challenges - not least of which are legal, financial, marketing et all, comparable to the nature of running a public company. The very act of governing this new token, too, and managing its treasury then becomes a whole new surface area of work.

I’m not confident that TrueFi has achieved fluency in operating the scope of work that comes with having a single token (proof points: consider the reduction in utility of TRU over time, or the reduced governance involvement over the past year), so I’m certainly not keen on seeing a second token spin out of this ecosystem without proper due diligence.

My opinion: while I’m quite bullish on Trinity and the value prop of TRI, if Trinity is planning to launch its own governance token expressly distinct from TRU, the relationship between the two projects should definitely be more closely scrutinized, and Trinity should then be realistically expected to fund its operations off its own treasury medium to long term than to rely on TrueFi treasury for funding.

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One consideration is having TRU maintain overall control(as MKR will over Spark) and commit towards a revenue split. So the TRI governance token could get 50% of the yield while TRU gets the other 50%. This would allow for airdrops to jumpstart and finance early use of TRI while still properly compensating TRU holders.

This would also allow TRU to fully run things during the early operational stages until the new token launch is ready.

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might require separate governance

Curious why you feel Trinity might require separate governance and independent tokenholders?

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Could @WallfacerLabs enumerate every possible benefit that Trinity may provide for Truefi directly?

I’ve reviewed the Trinity documents and read the proposal several times.

I only see Truefi in the Diagrams, and even then, there aren’t many noteworthy references to the advantages Truefi will experience.

I had anticipated seeing things like revenue share and or how beneficial it could be for portfolio managers within Truefi capital markets.

The very elements that have been debated over time as TrueFi’s primary objectives

Was Trinity built for TrueFi? or really as a stand alone protocol with its own ultimate goals accross defi ?

Furthermore, who will “own” Trinity, Truefi or Wallfacer?

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Was this a difficult question ?

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