CVP Proposal: Althea Finance - Unlocking LST Liquidity and Yield on Metis

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INTRODUCTION:

The much anticipated deployment of the Metis sequencer technology is set to catalyze substantial METIS token locking, spurring demand for METIS LSTs. Althea Finance harnesses the untapped potential of LSTfi yield on Metis, via a hybrid CDP Stablecoin and Yield Market platform. Enabling collateralization of yield bearing assets on Metis to mint aUSD, the Metis native stable unit of account, coupled with a yield market for speculation on yield bearing assets. This will enable optimized LST liquidity and yield on Metis. Introductory article here.

VALUE PROPOSITION:

  • With the introduction of their decentralized sequencer and $100m+ of grants, liquid staking is set to explode on Metis, with the launch of multiple METIS LSTs/LRTs.
  • This creates an urgent need for LSTfi/LRTfi solutions where holders of new METIS LSTs/LRTs can deploy their holdings to access liquidity & amplify yields
  • Althea Finance is meeting this need with the first all-in-one LSTfi/LRTfi solution for the Metis ecosystem
  • This will combine a Prisma-style LST-backed CDP stablecoin and a Pendle-style yield market in one product to unlock liquid staking yield and liquidity on Metis.
  • Finally, the THEA token at the heart of the Althea Finance ecosystem allows holders to earn revenue share, amplify rewards and participate in governance decisions.

UNIQUE FEATURES:

Bringing both a stablecoin and yield market solution together under one roof will also unlock a range of exciting synergies and innovations that have not been achieved by prior standalone products on the mainnet. For example, users will be able to deploy assets from our yield-market as collateral for minting aUSD to boost yields by leveraging Althea’s proprietary interest rates market. The unique structure of Althea Finance will allow it to emerge as the central hub of the entire Metis ecosystem, by offering:

  • A Stable Unit Of Account: As a non-rebasing stablecoin with yield accrual upon redemption, aUSD can become the stable unit of account for the entire Metis ecosystem.
  • A Foundation For Lending, Borrowing and Leverage: As the central stablecoin for Metis, aUSD will also unlock the potential for a variety of lending, borrowing and leverage options across the chain.
  • Secondary Debt Market: Althea Finance will also have its own in-house secondary debt market, creating new arbitrage opportunities for users.
  • LST Yield Aggregator: By accepting all yield-bearing assets as collateral, aUSD will become a de facto yield aggregator for the Metis liquid staking sector.
  • Sustainable Revenues: Althea will have multiple revenue streams from minting fees, redemption fees and borrowing interest fees. This means it can provide a sustainable income for governance token holders and voting incentives for liquidity that don’t rely solely on the native token.

Althea Protocol Deck (2)
Althea Protocol Deck (2)960Ă—540 58.2 KB

BENEFITS FOR USERS:

Metis recently made history by introducing the first ever decentralized sequencer on an Ethereum Layer 2. This paves the way for users to start staking their METIS tokens, stimulating demand for METIS LSTs, which will be supported by $100m of grants form the MetisDAO Foundation. In turn, the rise of METIS LSTs/LRTs will lead to a need for LSTfi solutions where METIS LST/LRT holders can access liquidity and amplify their yields.

Althea Finance will be the first all-in-one LSTfi solution for the Metis ecosystem, combining an LST-backed stablecoin with a native yield market to deliver everything Metis LST holders will need to maximize their yields and unlock liquidity. In addition the THEA token sits at the heart of the ecosystem offering rewards boosts, revenue share and governance rights.

Some of the key functionality that Althea Finance will offer to Metis users is:

  • A Multi-Asset CDP Stablecoin: Holders of both METIS and METIS LSTs/LRTs will be able to mint aUSD.
  • A Native Yield Market: A Metis native Pendle-style yield market allows users to speculate on the future yields of LSTs and other yield-bearing assets.
  • Revenue Share: THEA holders who stake their tokens will receive 50% of protocol revenues from minting fees, borrowing fees, trading fees, redemption fees and more.
  • Governance Rights: THEA stakers will also be able to vote on key aspects of the protocols functioning, including how rewards are allocated to protocol users.
  • Rewards Boosts: Locking THEA tokens will also entitle holders to a multiple on any yields generated on the Althea protocol, plus revenue share and governance.

BENEFITS FOR METIS ECOSYSTEM:

To estimate the size of the potential market for LSTfi solutions on Metis, one need only look at how the LSTfi sector has flourished on the Ethereum mainnet. 4 of the top 10 projects by TVL on the Ethereum mainnet are LSTfi/LRTfi projects, with a combined TVL of $50bn+ across all LSTfi protocols.

With the MetisDAO Foundation allocating $100m in grants to fund its expansion, and LSTfi being the main focus, there is an unprecedented opportunity for first-movers to grab a similar market share. The entire value of LSTs lies in the fact that they make staked tokens and rewards liquid so that they can be used on further yield-bearing activities. Therefore as METIS LST offerings begin to go live on Metis, there will be an instant demand to put them to use.

Althea not only meets that need, but does so in a manner that will generate substantial and sticky TVL, liquidity, volume and yield, engaging DeFi users and keeping TVL on Metis. Furthermore Althea is built on tried and tested secure sustainable, and highly profitable architecture and business/revenue models from Ethereum mainnet (with our own innovative twists).

ROADMAP:

CVP and Metis grant submission, early supporters raise and IDO on Hercules DEX by end of March/early April. TGE, CDP testnet, initial audits, and mainnet launch BD and marketing kick off in April. Mainnet launch and ongoing DeFi integrations from May onwards.

Althea Protocol Deck (1)
Althea Protocol Deck (1)960Ă—540 64.1 KB

SUMMARY:

METIS LSTs are coming to Metis! Ethereum has provided a blueprint for the potential. Users want liquidity, utility and optimized yield for their LSTs. Althea Finance brings two of the premier and proven models with an integrated Metis native CDP stablecoin and yield market. Based on proven revenue generating models, paired together to foster further unique innovation exclusive to Metis, and delivered by an experienced team. We’d love to connect with any fellow builders and active Metis ecosystem participants, so feel free to reach out on Twitter. Thanks for reading and we’re excited to build with you on Metis!

OFFICIAL LINKS:

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Dope proposal, Althea team! I think your business plan has a lot of potential to capitalize on the coming LSDfi on Métis. Excited to see this roll out. I have a few questions I’m hoping you could answer -

  1. Do users need both METIS and METIS LST to mint aUSD, or just one of either?

  2. Will aUSD/USDT or USDC LP opportunities exist for LP providers?

  3. Will 3rd party yield opportunities exist out the gate with aUSD?

  4. What kind of synergies are you looking for from other projects on Métis network? What kind of ideas with other projects can take Althea’s LSTfi system to next levels?

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Hey, thanks for the questions. Let me answer those for you.

  1. They will be individual isolated vaults. We will start with METIS, then onboard METIS LSTs as they gain TVL and traction. Following that we will also enable yield market PT-YT collateral in time locked vaults (there’s some info on these in the docs).

  2. Yes, we are going to work closely with Hercules DEX to build deep liquidity for aUSD pairs - this includes using a decent amount of the money from the IDO to seed a deep aUSD pool. We hope aUSD can evolve as the primary stable unit of account for pairs on Metis.

  3. We will be boostrapping with some emissions initially as is fairly customary and will be working on securiing the necessary liquidity depth and volumes to secure the oracles required for utility integrations into e.g. lending markets. In a sense the utilization of LSTs and yield market collateral will mean that aUSD itself is yield bearing too. Then of course we have the yield market which will be our own in-house “yield market” with many opportunities on aUSD and other LSTs/yield bearing assets on Metis.

  4. As you alluded to above, it’s all about liquidity, volume and utility (yield). Working closely with Hercules to build deep, sticky liquidity and trading volume, securing oracles to then connect with lending markets to enable looping and leverage on aUSD yield. It would also be great one day to have aUSD as a stable collateral for perps and options. Of course we want to connect with the METIS LSTs (and are already chatting with some) to make sure they are integrated as it’s a clear mutual win-win.

Top level answere there, hope that clarifies your questions. Let me know if there’s anything else you would like to know about.

4

Nice proposal i must say but couple questions

  1. How does Althea Finance’s integration of a Prisma-style LST-backed CDP stablecoin and a Pendle-style yield market in one product address the emerging demand for liquidity and yield amplification in the Metis ecosystem, and what potential synergies and innovations does this unique approach unlock for users?

  2. With the introduction of aUSD as a non-rebasing stablecoin with yield accrual upon redemption, how does Althea Finance position itself to become the central hub of the entire Metis ecosystem, facilitating lending, borrowing, leverage options, and serving as a yield aggregator for the liquid staking sector? Additionally, how does its sustainable revenue model contribute to governance token holders and liquidity incentives within the ecosystem?

1 Like
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Hi Bells,

Thanks for taking the time to review our proposal. Good questions, let me summarize:

  1. I actually wrote a thread that summarizes the thesis and product market here: https://x.com/CrossChainAlex/status/1771491335058637182?s=20 - In terms of innovations, both products work as standalone in their own right and address the gap in the market for boosted LST yield/speculation/leverage etc. etc. which has been proven to work quite well and meet a need on mainnet when you look at Prisma and Pendle. So we just saw an opportunity for both and have the capabilities to deliver both. But it also does open up innovation. Such as our timelock vaults using collaterals from our yield market to mint aUSD. This is quite a new innovation with the potential to offer higher yielding opportunities. This also lead to the creation of our secondary debt market that enables users to exit timelock vaults efficiently, as well as offering the opportunities for efficient “liquidiations” and or arbitrage (alongside more traditional peg stability and liquidiation mechanisms that we also have in place). There’s quite a lot to write on it and we are fine tuning all the time, but recommend checking the docs linked in the proposal for more details on some of the innovations and synergies and how it all works.

  2. So first off we need to boostrap sufficient liquidity to achieve this goal, which we are doing through our own careful oTHEA emissions strategy and working closely with Hercules to build deep LPs on their DEX. As you probably know a nice thing about stablecoins is that they are a dollar pegged stable unit of account. This makes it useful for many things. So, once we can do gain deep liquidity, we will be in a position to secure oracles, and also start to operate aUSD/(TOKEN) pairs positioning aUSD as a primary stablecoin for trading pairs on Metis. The fact it is decentralized and yield bearing is obviously a bonus vs. e.g. USDC or USDT. However, with oracles we can do so much more. We can partner with lending markets, perps DEX, options platforms etc. to build utility for aUSD. This could be via a lending market to enable users to lend out aUSD and generate more yield, or to loop/leverage. Furthermore, you could then imagine aUSD as a really nice collateral to back perps DEX or options etc. Again the stability is useful and it offers another utility and avenue for increased aUSD yield. This is a top level summary but hopefully you get the gist of the strategy and it all makes sense.

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Well detailed proposal team! Looking forward to the testnet, TGE and essential contributions in Metis eco.