Unlocking Exponential LP Token Liquidity

Centrifuge Governance Governance discussion
1

Introduction

Umoja Labs would like to propose that the Centrifuge community invest 218k CFG into research and development (R&D) to determine how best to unlock better secondary market liquidity for Centrifuge LP tokens (DROP, TIN). Specifically, the R&D would determine if the real-world-asset token bonded curve (RWA TBC) model is a viable pathway to

  1. eliminate liquidity provider lock-in by increasing secondary market liquidity for LP tokens, and;
  2. either (a) transform the CFG token into a flatcoin (b) introduce a new Centrifuge token, or (c) create a multi-protocol token that is bonded to the value of Centrifugeā€™s tokenized RWAs (and thus serves as a higher-liquidity, exchangeable asset for said tokenized RWAs).

In our research, we found that Centrifuge could exponentially increase its LP token liquidity from its existing lock-up and cooldown model by enabling a RWA TBC either between Centrifugeeā€™s originated assets and the CFG token or between such underlying assets and a new Centrifuge token. The bonded token would be considered a flatcoin. Flatcoins, underpinned by tangible assets like bonds or real estate, offer a decentralized yet stable value, algorithmically linked to price indexes like the U.S. CPI.

We believe that Centrifuge can make the model the most user-friendly and the most sustainable in the industry by simply allowing LPs to exchange their LP tokens for a single flatcoin, enabling the Centrifuge to purchase its own originated assets at a discount & generate recurring revenue in the process.

Objectives:

  1. Exponentially increase secondary market liquidity for LP tokens
  2. Increase protocol revenues by enabling re-purchase of LP tokens at a discount by enabling LP token exchange with a protocol flatcoin
  3. Establish Centrifuge as the only RWA protocol that enables instant secondary market liquidity

Proposal:

Today, our proposal focuses on the following:

  1. Centrifuge community invest 218k CFG for additional R&D of the RWA TBC model. The investment will be paid out on a milestone basis - which each milestone requiring transparent findings/update reporting to the Centrifuge community.
  2. Execution of R&D with a final recommendation to the Centrifuge community (via a proposal) to either (1) develop the model into Centrifugeā€™s existing protocol ecosystem, or (2) not develop the model.

Additional Resources:

You may find the draft white paper of our research here.

You can find a video walkthrough by myself here.

Let us know your thoughts. We would love feedback from lenders, managers, borrowers, and token holders on this new model before moving to a formal proposal.

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