[Temp Check] Add WOO as collateral on Arbitrum (v3)

Governance
1

Author:
Ben Yorke leads the Ecosystem team at WOO Network and has worked with the project for nearly 3 years. Here is his profile on Twitter and Lenster.
Date:
This proposal is first submitted on 2023-10-24.

Summary

This proposal recommends onboarding WOO as collateral to Aave v3 on Arbitrum, with 2.25m WOO protocol LP commitment.

Motivation

WOO Network is one of the largest cryptoasset trading projects with a leading centralized exchange, WOO X, and decentralized exchange, WOOFi. WOO Network has a large global audience with many active community members spanning CeFi and DeFi. The WOO token has emerged as a top 100 asset with many spot and perpetual future listings across top centralized exchanges, as well as on-chain liquidity across multiple networks.

Across all networks, WOO has around 90,000 unique holders in our strong community of traders and DeFi-savvy users. The WOO token plays a central role in each trading application in the WOO Network product suite. Our token holders can stake WOO tokens to get fee discounts, access to early stage token launches or unique yield products on WOO X. In DeFi, our community can stake on WOOFi to earn real yield in USDC funded by fees on WOOFi Swap, a cross-chain dex with Top 10 volumes according to DeFi Llama. Over 30% of the circulating supply is staked, so there is strong demand for holding WOO tokens long-term. Currently, there are no other lending integrations in DeFi and our community has expressed strong interest in unlocking the ability to safely borrow against their WOO holdings.

1. Token Data
Holders: ~90,000
Total Supply: 2,250,658,857

2. Market Data
Market Capitalization: $345M
Fully Diluted Valuation: $449M
Daily Volume (CoinGecko): $100M+ across Spot and Perpetual futures markets

Specification

Ticker: WOO
Contract address: Arbiscan
Price Feed: 0x5e2b5C5C07cCA3437c4D724225Bb42c7E55d1597

Risk teams are invited to recommend risk parameters at a potential ARFC stage.

Although we don’t anticipate there being a shortage of usage, the WOO team will also commit to provide 2.25m WOO (~$500k at current prices) for at least 1 year in order to bootstrap the borrowing market.

Disclaimer

WOO Network has no conflict of interest, or third-party involvement, that might negatively impact this initiative or Aave.

Next steps

  1. Gather community feedback on this TEMP CHECK
  2. If community consensus is reached, escalate this proposal to TEMP CHECK Snapshot stage
  3. If the snapshot outcome is YAE, escalate the proposal to ARFC stage

Copyright

Copyright and related rights waived.

3 Likes
2

We would be in favour of listing WOO but on Aave V3 Ethereum.

Liquidity for WOO on Arbitrum is significantly lower than Ethereum. Seeding the pool is an added benefit and reason to consider Arbitrum as well but we would prefer to be conservative and not rely on this commitment to justify the listing.

Additionally something to consider - the DAO is going through the v2.5 upgrade soon and v3 later so passing new listings might take a few weeks.

3 Likes
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A few reasons for picking Arbitrum:

  • The chainlink price feed for WOO is available on Arbitrum not Ethereum atm
  • Arbitrum has become the hub of WOO holders. WOO’s dex, WOOFi has the staking module which utilizes Arbitrum as the controller chain where swap fees are consolidated and buyback WOO everyday. Also almost 40% of the total staked WOO is on Arbitrum.
  • Been pushing WOO liquidity on Arbitrum by partnering with Traderjoe in addition to the liquidity supported by WOO’s own dex WOOFi. We expect the adoption of WOO on Arbitrum continues to grow
  • WOO on Arbitrum is supported on Binance
2 Likes
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Thanks Ben.

Do you have any suggestions on the initial parameters?

Does @ChaosLabs or @Gauntlet have any thoughts on this collateral?

1 Like
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Would defer to the experts in this case, but I imagine as the WOO marketcap is quite similar to FXS (around half a billion), parameters similar to the ones accepted on that recent ARFC:

Parameter Value
Isolation Mode Yes
Borrowable Yes
Collateral Enabled Yes
2 Likes
7

I like the proposal as a whole.

One interesting point to highlight is that WOO is launching WOOFi Pro on the mainnet soon, starting with Arbitrum. This launch will expand their product range and add more value to the token, which should attract more token holders.

WOOFi Pro aims to bring CEX traders on chain. They’ll be enticed by its low latency, the trading incentives, and improved features for WOO tokens holders. Traders will want to have exposure to the WOO token while using it as a collateral, AAVE can help with that.

1 Like
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Also as stated in multiple projects’ Arbitrum STIP plan e.g. Traderjoe, WOO related pools will get incentivized by ARB so expect the WOO TVL on Arbitrum to continue growing in the next few months

1 Like
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Should the community wish to list WOO on Arbitrum v3, Gauntlet recommends the following parameters.

Parameters

Parameter Recommendation
Isolation Mode YES
Borrowable YES
Collateral Enabled YES
Stable Borrowing NO
Supply Cap (WOO) 6000000
Borrow Cap (WOO) 4500000
Debt Ceiling $500k
LTV 35%
LT 45%
Liquidation Bonus 10%
Liquidation Protocol Fee 10%
Reserve Factor 20%
Base Variable Borrow Rate 0
Variable Slope 1 0.09
Variable Slope 2 3.00
Uoptimal 0.45

LTV, LT, LB, Liquidation Protocol Fee, IR

WOO annualized historical volatility is roughly ~ 95%. We recommend initializing WOO with LT/LTV/LB/IR params in line with assets with similar risk profile set on Aave v3.

Initial Supply and Borrow Caps

Given WOO is a new asset listing, we use our conservative methodology to recommend initial supply caps. These caps are limited by WOO liquidity.

  • WOO has a 25% depth value of ~6m via WOOFi sPMM pool
  • WOO circulating market cap is ~69m
  • WOO ADV is roughly ~50m

Isolation Mode

In line with other assets of similar historical volatility and market cap, we recommend initializing WOO in isolation mode. We recommend a debt ceiling of $500k, limited by our initial supply cap.

2 Likes
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