#TBD - Self Repaying Loans

TBD- Self Repaying Loans

Proposal to commission research into enabling self repaying loans in Liquity by utilizing Chicken Bonds. Ideally this could be deployed to a low fee L2 to keep gas fees low. (Aztec, Optimism, or Polygon would be preferred in that order) - Inspired by Alchemix

Amount $TBD

1. Goals

Primary Objective: Incentivize users to create troves, and increase Chicken Bond (CB) throughput.
Expected Benefits As users create and flow some % of those funds to CB’s there will be more liquidity, for LSUD and more pressure to remain close to $1USD, as well as giving people to option to take out loans that will repay themselves.

  • This could be something that would be able to draw new users to our deployments on L2’s

2. Benefit & Impact

  • Liquity benefits from more users opening more troves, utilizing chicken bonds, and the marketing hook of self-repaying loans.
  • LQTY holders benefit from the increased fees
  • Users benefit by having the ability to take a loan out without ever having to repay it, all in one transaction (No need to repay as funds are available)
  • Success will be measured buy New Troves opened, and New CB’s Created after launch over the baseline trend of the past 3 months

3. Context

Currently Liquity offers amazing 0% interest loans, However, these loans still require being manually repaid. This comes with various friction points for users.

  • LUSD is not a fixed peg to USD, this could result in users having to repay additional funds (if 1LUSD=1.10USDC)
  • To repay a transaction there are several transactions that need to take place, each of which add friction and cost to the user.
  • If a user took a loan to purchase a RWA, and went from LUSD to their local currency there is an added layer of friction to depositing their local currency, swapping to LUSD, and then repaying their trove.

This Proposal could solve the increased user friction two ways (I think please big :brain:’s help)

Option 1: Limit the amount borrowable by a trove to allow the remainder to be withdrawn to create a CB and then automatically rebond (see defisaver’s implementation) the rebond funds would accumulate until there was enough in the bond to repay the Trove, at that point the user could claim the bond and repay the loan in in transaction, or repay the loan and take another to repeat the cycle again using their trove as a revolving line of credit.

Option 2: Don’t change the FE for the troves at all but add the ability for a CB to automatically repay a trove’s debt while automatically rebonding. (Again see Defi-Savers implementation)

I believe Option 2 is the least impact method, but still would require a good deal of research and solidity coding to turn into a real product.

Highlight the current issue and how your proposal addresses it.

4. Scope & Deliverables

Do the feasibility research to determine if this is something that is possible and report back to the DAO, include the cost of deploying to the perspective L2’s, and connect with Defi-Saver team to see if they are willing guide the developers through their codebase

Out of Scope
Actually building anything. This is a discovery proposal from a non-technical Liquity fanboy

5. Timeline

What happens if this proposal goes through? A high-level overview of the main steps required for its implementation.

  1. Month 1 - Reach out to Defi-saver team, and set up a meeting with them to determine the feasibility of forking their code (If we’re lucky they may build it?)
  2. Month 1b - Research the cost of deployment/testing/audits for the new code to a new L2.
  3. Month 2 - Report findings back to the DAO

6. Dependencies

@Reese would be responsible for liaising with the teams, but there is likely someone better suited to this job than him at this point

7. Ask & Payment

Since there’s not really a deliverable here I’d just like this to be something that gets done.

8. References & Useful Links

Include relevant context on your work, previous proposals you submitted, Twitter, GitHub, etc.
I’m currently the community manager for Coordinape, and I’ve taken a Liquity loan to pay for some RWAs

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