ON THE BALLOT: This Ape Improvement Proposal Wants To Bring Zero Liquidation Loans To The $Ape Ecosystem
Kyle
Apr 28, 2024
2 min read
There is an Ape Improvement Proposal on the ballot this week that aims to introduce a new type of DeFi to the $Ape ecosystem, giving the ApeCoin DAO the opportunity to be long on $Ape while also allowing the $Ape community to borrow without the fear of liquidation.
AIP-363 titled “Unlocking $APE’ potential: Building a credit market with MYSO Finance,” is an ecosystem fund allocation proposal written by ApeCoin DAO Contributor and MYSO Operations and Partnerships Lead Dominic.
“MYSO Finance is building a novel peer-to-peer DeFi lending and borrowing protocol, using Zero-Liquidation Loans (ZLLs). ZLLs are a novel DeFi primitive that allow (i) borrowers to borrow without liquidation risk and (ii) lenders to lend in underdeveloped credit markets with higher yield potential,” Dominic wrote. “For DAOs, ZLLs are a powerful new tool to increase the utility of their native token and to enable them to use their reserves in a more productive and strategic way.”
In AIP-363, Domic proposed that the ApeCoin DAO allocate $750,000USD worth of $Ape to the Governance Working Group, enabling them to lend $Ape to community members on MYSO.
“ We propose the creation of a lending market for $APE, utilizing MYSO’s v2 protocol,” Domic wrote. “This initiative can offer community members access to non-liquidatable loans, thereby enhancing the utility of the $APE token. If there is confidence in the continuous growth of $APE and a desire to offer more incentives to $APE token holders, establishing a non-liquidatable lending market is an effective way to achieve this objective.”
Further in the comments section of this proposal, Dominic explained how a ZLL loan on MYSO would work and why the DAO would want the GWG to lend with $Ape as the underlying collateral.
“With Zero-Liquidation Loans, the borrower has the option (but not the obligation) to repay the loan. A rationale borrower will be repaying the loan if the collateral is worth more than the borrowed amount. At expiry, if the loan amount is worth more than the collateral amount, a rationale borrower would not be repaying the loan. In such a scenario, the lender (e.g., the ApeCoin DAO) can claim the collateral (e.g., $APE), akin to a buyback strategy implemented by various DAOs.”
The window to vote on AIP- 363 is currently open and ApeCoin DAO Contributors have until Wednesday, May 1st, to cast their coins and vote on this Proposal.
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