Proposal: add support for renFIL (Filecoin)

Hi Aave Fam, :wave:
I’m Corbin from ConsenSys Codefi, and we’ve been working on getting a tokenized version of Filecoin (FIL) onto Ethereum mainnet using Ren Protocol (renFIL).

I’m proposing we add depositing and borrowing (not collateral) support for renFIL to the Aave market.

Filecoin brings decentralized storage to DeFi, and renFIL allows all types of new decentralized applications to be built to further the space:

  • :busts_in_silhouette: Storage mining syndicates
  • :desktop_computer: Data markets
  • :art: Shared UIs/images/content
  • :globe_with_meridians: Lossless capital hosting

But these applications need a robust lending market to thrive, so storage miners can borrow renFIL/FIL to stake and FIL holders can earn a yield on their holdings. Adding renFIL to Aave would unlock these new applications🔓, expose the Filecoin community to Aave📈, and create a large new market on the protocol🎉!

Ren Protocol was chosen as the tokenization service because it is already managing large bridges in production, including $301 million in renBTC as of this writing. Collateral support for renFIL may be added later, but we recommend waiting for more price stability of FIL and renFIL before enabling.

We’d love to get the community’s thoughts and feedback on this proposal! Thanks!

Filecoin Information

Project

Filecoin is a distributed storage network based on a blockchain mechanism. Filecoin miners can elect to provide storage capacity for the network, and thereby earn units of the Filecoin cryptocurrency (FIL) by periodically producing cryptographic proofs that certify that they are providing the capacity specified. In addition, Filecoin enables parties to exchange FIL currency through transactions recorded in a shared ledger on the Filecoin blockchain. Rather than using Nakamoto-style proof of work to maintain consensus on the chain, however, Filecoin uses proof of storage itself: a miner’s power in the consensus protocol is proportional to the amount of storage it provides.

Filecoin was founded in 2015 by Juan Benet, has been backed by Sequoia Capital, Andreessen Horowitz, and Union Square Ventures, and its mainnet went live on October 15, 2020. The network is governed by the Filecoin Foundation and the Filecoin Foundation for Decentralised Web.

References

20 Likes

Filecoin is huge already in this space, hurrah for this proposal! :tada:

7 Likes

Filecoin would be a great addition to Aave!

5 Likes

I love the idea of a step by step approach (taking out the risks) and fully support this proposal.
An obvious case of win win win.

  • Utility for Filecoin.
  • TVL and fees for REN.
  • TVL and fees for AAVE.
4 Likes

This is a good idea.

1 Like

I’m a member of the Filecoin team, and can say with certainty that the Filecoin & IPFS communities are very excited about this!

5 Likes

complete support for this, both as collateral and currency to borrow.

many actors of the Filecoin ecosystem have the capacity to ‘mine’ but not enough $FIL to work at full capacity, borrowing the assets would allow them to work without having to both buy FIL and the hardware.

a lot of holders could use it as collateral to increase their positions or diversify.
as the $FIL asset is fairly new and still in price discovery, and $RenFIL not live yet, I think conservative LTV parameters as a start could be the safest option.

12 Likes

I’m in favor of renFIL support, and I believe renFIL in particular offers a unique value propositions, as it allows an additional option for gaining access to FIL.

I’d be curious if Ren had a library that would allow would-be borrowers to natively borrow renFIL and convert it to FIL and send it directly to the borrower’s FIL wallet for use with mining.

I’m not sure if the RenJS library, which allows for native BTC deposits on Curve to convert to renBTC or wBTC and vice versa, would be capable of doing something similar for renFIL.

If it’s interesting for FIL holders and would-be users of renFIL, I can look into it and write back here after confirming.

8 Likes

Sounds like a great fit for Aave and a great addition to the ecosystem as a whole!

2 Likes

Ren wrapped tokens became a standard in the industry. I fully support renFIL and the many more that are yet to come!

1 Like

What Marc is pointing out is very important and what I think will make supporting FIL in general successful in Aave.

There are three categories of users:

  • Storage users: users that have other assets and want to pay for storage using leverage products (e.g. a project betting on returns (or collateral capital valuation increase) that is higher than the FIL borrowing interest)
  • Miners: given the new Filecoin change, miners earn ~25% of their block reward straight away, as long as the borrowing interest is lower than their earnings, services like Aave could be the strategy for which small to medium miners would bootstrap mining operations.
  • Large investors: there are several Filecoin investors that may want to lend to miners to earn additional FIL interest and right now this can only be done via centralized services.

This may also be a building block to more complex tools for which investors can invest in mining pools (exposing themselves to FIL or other currencies of choice)

Note that renFIL is not the only FIL related asset, there is also WFIL (being made) and HFIL (already done - except US customers may be restricted to use it)

2 Likes

This is a great idea, as it would allow users to borrow FIL to run a node without having to sell their other assets. Basically try their hand at a little business without having to sell the house.

For any renX tokens, not sure if the proposal is to list them as renX tokens, or just have the renVM run in the background and the users simply see their actual tokens in AAVE (e.g. BTC, FIL, ZEC, etc)

For reference in MakerDAO folks are pushing for WFIL over renFIL. I have no specific preference

There hasn’t been a proposal for renFIL on MakerDAO yet but it will definitely be proposed sooner or later.

For reference: Cream voted for HFIL a few weeks ago https://forum.cream.finance/t/proposal-list-hbtc-and-hfil-as-collateral-assets/123

I support adding renFIL as collateral for aave .

Adding new revenue streams and making aave the home of innovation should come at the forefront of what we are doing .

1 Like

Risk Analysis

In addition to the details above shared on the FileCoin protocol, it’s important to note 8 audits have been conducted to cover the different aspects.

The network is governed by the Filecoin Foundation funded by 5% of the supply with a 6 year vesting. Protocol Labs leads the development funded by 15% of the supply also vested. 70% of the 2 million FIL supply form the block rewards incentives as highlighted in the cryptoeconomics documentation.

Filecoin market has grown fast quickly reaching a wide audience and great market metrics with good liquidity.

The overall risk level of FIL is B which would make it fit for listing however it needs an ERC wrapper.

RenFIL

RenFIL is a tokenized representation of Filecoin on the Ethereum blockchain offered by RenVM decentralised custody. It is an ERC-20 backed 1:1 with native FIL locked in RenVM. Darknodes power the network, with the need to stake REN that can be slashed when the Darknode is responsible for loss of assets. For security reasons RenVM can adjust the fees to try and keep the ratio of bonded value to locked assets value 3 to 1 implying circulating supply of renAssets is affected by participation in RenVM and the REN bonded value.

The analysis below focuses on the risks of RenFIL mitigated by the market risks of FIL.

RenFIL Smart contract Risk: C

RenVM is a byzantine fault-tolerant network that is able to securely in a decentralized manner do ECDSA threshold key generation and signing via sMPC, which allows RenVM to securely manage private keys of different assets like Bitcoin and Filecoin, and wrap these assets on smart-contract chains. Since launch, RenVM has processed around $1.5B in total volume of Bitcoin, Filecoin, Zcash, Bitcoin cash going to and from Ethereum. The smart contract risks of RenFIL are mitigated by those of RenBTC which has been battle tested by the markets.

Technically, renFIL is a proxied token standard ERC with some features on top:

  • Mechanism of exchange rate (similar to Aave slashing)
  • Permit for approvals
  • Recovery of other tokens sent to the contract

RenFIL Counterparty Risk: C
There is a proxy admin which can update all the logic of the contract with a 7 days timelock controller by a multisig, controlled by the team. Even with 7 days, it may be impossible to mitigate the consequences of a contract upgrade with minting for example.

Furthermore there is an EOA (Externally Owned Account) with permissions to mint, burn, change the exchange rate and decide which tokens sent by mistake to the renFIL contract are recoverable.

This results in the capability to burn tokens of a particular address (potentially the ones contained in aToken) and the change of the implementation under the proxy.

RenFIL Market Risk: B (based on FIL)

RenFIL market capitalisation is unknown with very little liquidity in the markets. The redemption process is permissionless enabling smooth liquidations into the liquidity of FIL.

Risk Parameters

Given the centralisation of RenFIL it can only be listed as borrow asset

Reserve Factor 35%

Variable Interest Rate Model

UOptimal 80% (since not a collateral)

R_0 0%

R_s1 7%

R_s2 300%

3 Likes

Thanks for the risk analysis Alex!

Hey Aave family, we hAave a proposal for you, if you think governance should vote on adding renFIL, Corbin humbly requests AAVE holders to delegate to him so he gets enough proposition power to publish the vote on-chain! :ghost: