Cicada’s Official Response:
While it is true that Market Neutral lending on Truefi hasn’t scaled as initially anticipated, there are a lot of pieces of the puzzle that must be taken into consideration here:
Firstly, we have always prioritized managing default risks for the MNL space and as such have been extremely conservative with selecting and underwriting borrowers to be onboarded on the TrueFi platform. Under the current contract with the DAO, we receive additional TRU compensation if additional pools are opened. If we were to maximize our short-term gain and attempt to extract unjust value from the DAO, we would have added more borrowers to the platform considering there is no shortage of borrowing demand; Bastion Trading, founded by TheSkyHopper, for example, is currently borrowing over $6m on Clearpool. We have reviewed/underwritten over 10 counterparties with many currently on Clearpool and other platforms, but after careful assessment we’ve only selected those we consider have the strongest profile to ensure the integrity of the MNL exposure for TrueFi. The fact is that we act responsibly as a risk manager due to our belief in delivering long term value to TrueFi and the DAO, despite this being perceived as “underperformance” in the short term. The asymmetric return profile of all lending means saying NO to the wrong deals is more important than rubber stamping pool to aggressive borrowers.
Additionally, recognizing the challenge in scaling the uncollateralized Market Neutral Lending (MNL) vertical given the relatively muted lender activities, our strategic plan, as clearly elaborated in Cicada’s and Arkis’ roadmap, is to provide an additional risk management layer to grow the collateralized borrowing vertical on TrueFi, which address the pain point of uncollateralized risk (from lenders’ perspective) and capital efficiency (from borrowers’ perspective). Please find the Arkis proposal here.
We also have invested considerable internal resources, in both manpower and dollar amount (in excess of $30k) in building the RWA (asset-backed lending) on TrueFi. Our commitment to RWA has been clearly articulated in our roadmap and proposal to the DAO forum. We have been working in the background with our legal counsel, borrowers and distribution channels to prepare the launch of the RWA vertical on TrueFi. We currently even have a Proof-of-Concept pool in late-stage negotiations that was expected to open a LoC on Truefi in the next few days. Moreover, if we were to continue our service to the DAO, we are positioned to bring over $6.1MM of additional capital from two other borrowers we currently have on Atlendis (see here https://app.atlendis.io/). If the DAO and BoD are committed to expand the RWA vertical as we have seen from various posts in recent months, this will be the most important alignment to consider given we have demonstrated our track record in executing the RWA strategy. We see Truefi as an important tech platform for building and scaling this initiative, leveraging off-chain capital channels, and we believe our expertise will help TrueFi to realize its full potential.
Cicada has continued to deliver value to TrueFi despite the ongoing DAO drama, Wallfacer’s removal, and a voting attack and lack of Dev support. Throughout this period, we’ve proactively supported the transition from Wallfacer to the BoD, and engaged with stakeholders to formulate the long-term growth strategies with key stakeholders. However, the delay in finding and securing a suitable technology provider, coupled with broader uncertainty, have significantly hindered our ability to execute key initiatives such as deploying ARB token incentives, and confidently advancing the RWA vertical on TrueFi. It is unfortunate that the Board of Directors decided to introduce further uncertainty by proposing a more centralized governance structure in their most recent proposal (TFIP-19) without any sort of plan to service providers.
We appreciate the opportunity to work with TrueFi to unlock the significant value its technology offers. As a risk manager, transparency has been a guiding principle for us from the very beginning - that is why we decided to build our business on a public blockchain. We also urge the community to take a long term and unbiased view in considering our proposal. We welcome constructive discussions on how we can enhance our product offering on TrueFi and further refine our operating model to better align with the platform goals. As such, please post any questions or concerns you might have below or on TFIP-18 and we are happy to work towards a common ground.
Thanks!