Liquidity loan to support USDs TVL and Demeter liquidity pools - Copra Finance

Community Contribution
1

Proposal Outline
Copra Finance helps defi protocols issue capital-efficient loans that can promote their growth. We would like to propose a loan to support the TVL of USDs and its Demeter pools. Beginning with a loan size of $100k and a tenor of 1 month, and scaling up the size and duration as our lender network becomes more familiar with the capabilities of Sperax protocol.
Our loans are capital efficient and require little upfront cost, can be rearranged between whitelisted pools in our smart contracts, and can generate additional income for the Sperax treasury.
If Sperax is interested, please have a representative sign up for our Beta using this link to our landing page, where you can also sign up as a lender if interested.

Proposal
Copra Finance proposes a 1 month, $100k USDC loan to boost the TVL of Sperax protocol’s USDs stablecoin which could also be deployed to USDs Demeter pools.
The loan interest will be decided upon after a due diligence process, but e.g. 15% APR loan interest implies a monthly interest of 1.25% (i.e. $1,250 per month). The loan interest will be paid in the same currency as the loan principal i.e. USDC. Any yield earned beyond the interest rate will be given to Sperax protocol upon settlement.
The security deposit will likely be 5-10% of the loan principal. For a $100k loan, the deposit would be $5k - $10k.

Loans are secured by our liquidity warehouse smart contract and hence funds can only be distributed to pre-determined, whitelisted pools.

Use Cases of Copra Loans for Sperax
Our loans are capital-efficient, we are not a money market. Borrower protocols typically offer up a treasury deposit, typically 5-10% of the loan principal depending on the loan’s interest rate.

Any protocol-owned liquidity (POL) you have deployed can be used to make the deposit, hence another use case of our loans for Sperax could be to help liberate any deployed POL.

Our loans offer protocol managed liquidity, protocols can interact with our liquidity warehouse contract to rearrange liquidity between whitelisted pools during the loan. This allows borrower protocols to maximize the yield earned on the loan principal. Following our due diligence process, certain Demeter pools can be whitelisted in the liquidity warehouse contract and the loan can be rearranged between these pools throughout the loan.

Finally, our loans can offer the Sperax treasury an additional source of income. Any yield generated by the loan principal beyond the loan interest can be kept by Sperax. The current USDs yield alone should easily cover the loan interest.

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Future Use Cases
Loans can be scaled up over time to further increase the TVL of USDs.
In addition to providing collateral for USDs, Copra loans could also be used to boost the liquidity of USDs Demeter pools. Additional liquidity would support the growth of the Sperax stablecoin across the Arbitrum network and generate additional yield for the protocol treasury.

Copra Links and Blurb
If you are interested, please check our docs for more details on the loan format and follow us on X (@CopraFi) to stay up to date with our protocol developments.

Docs: For Protocols | Copra: Docs
Website link: above in Proposal Outline, please sign up for our Beta.

Copra aims to enable ‘The Internet Corporate Bond’ by building the on-chain debt market for protocols. The initial use case of our loan is to help DeFi protocols raise protocol-managed liquidity that they can flexibly deploy to better promote growth. The loan is not overcollateralized yet fully secured on-chain, made possible by a liquidity warehouse mechanism and further backed by protocol-level resources.

1 Like
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Please post a complete proposal with technical aspects of how this will work out for the Sperax DAO. It is not clear what the DAO is supposed to do. What kind of collateral do you want the DAO to post for such kind of a loan. What more information do you need to conduct the diu diligence at your end?

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Hi, thanks for your interest, just wanted to answer you here. I can add some more technical details above shortly.

After agreeing upon the terms of the loan with the DAO (loan principal, loan interest, loan tenor, deposit percentage, whitelisted pools, loan currency), we would conduct long-form due diligence.

We conduct due diligence independently based on the information available in protocol docs and by examining your pools. Our major concerns are liquidity and drawdown risks, so any related information or historical data you could pass us would be helpful.

In terms of collateral, the DAO would need to commit a security deposit in the agreed-upon amounts into our liquidity warehouse smart contract.
If the loan were to be purely conducted in USDC, then the collateral would also be posted in USDC.

Just as an example, for a 100k USDC loan, with a 10% security deposit, the DAO would need to post 10,000 USDC into our liquidity warehouse before starting the loan. Likewise, the loan interest would be expected in the same ratio and currencies.

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I don’t think the DAO can provide USDC as security, it doesn’t own any USDC tokens.

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What assets does the Sperax DAO hold?

Any chance I can see a multisig address?

Another offer we can facilitate is the use of protocol owned liquidity (POL) as collateral. Any POL deployed in Sperax can be withdrawn, used as the loan deposit in our liquidity warehouse, which will enable it to be redeployed during the loan to collect interest.

There can be some flexibility on this if the DAO is genuinely interested in a loan to boost the Sperax protocol.