[OCEP-01] OATH Chapter Establishment Proposal - Aurelius

[bebis]

Proposal Title: OATH Chapter Establishment Proposal - Aurelius

Chapter Chain: Mantle

Proposal Type: OATH Chapter Establishment Proposal

Proposal Author: Justin Bebis

Date: 10/10/2023

Executive Summary:

Aurelius is a DeFi lending platform that seeks to leverage the Ethos Reserve V2 codebase to mint the $AUSD stablecoin and utilize underlying collateral to bootstrap an integrated Granary Finance lending market on the Mantle Network. By reducing the cost of capital and improving outcomes for ecosystem stakeholders, Aurelius envisions becoming a cornerstone of the Mantle DeFi ecosystem, aiming to be its premier native Collateralized Debt Protocol (CDP).

Proposal Specifics:

Aurelius is designed to harness existing OATH infrastructure and technology to bring cutting-edge DeFi solutions to the Mantle network. To this end, Aurelius proposes that the OATH Foundation grants our team license to use the Ethos Reserve V2 codebase as an official OATH Chapter.

Through Aurelius, the OATH Ecosystem will gain significant exposure to the Mantle network without the burden of incentives being placed on the $OATH token. Additionally, through the bargaining power provided by Aurelius’ upcoming $AU token, our team has been able to secure a grant from Mantle alongside key partnerships that would have otherwise not been possible.

Potential revenue streams include minting fees, borrowing fees, and revenues from exercised $xAU option tokens. Aurelius has also secured a 200,000 $MNT ecosystem grant from the Mantle Network and, combined with the support from the OATH Foundation, will be a competitive force against other similar dApps.

Another contribution Aurelius commits to is a liquidity pool which features AUSD-ERN (stablepool) and stAUSD-stERN (yield-bearing-correlated pool) available on Mantle. These pools would be mutually beneficial, and the OATH ecosystem is invited to help bootstrap and promote these opportunities to help introduce the Aurelius product as they see fit.

Chapter Revenue Breakdown:

• Minting/Redemption Fees

100% Directed to Bonded $AU Stakers

• Borrowing Fees

80% Directed to Bonded $AU Stakers

• Exercised $xAU

  1. 70% Directed to Bonded $AU Stakers
  2. 15% Directed to Aurelius Treasury
  3. 15% Directed to OATH Foundation Treasury

Chapter Token $AU Distribution Breakdown:

The above are 2 examples of emission curves we could implement for $AU token distribution. The constant rate of decay will emit 8.8% of the incentive supply in the first month and lower the rate of decay by 8.8% in each following month, where the Ramp Up + Decay curve would ramp at a similar rate into a peak where it would then start to decay.

In either case, we could add an option to the $xAU system which allows users to receive $AU for free by locking for 6 months with a second option to purchase $AU at a discounted rate. This would effectively defer incentives to at or after the peak and give new users a unique method of gaining entry into the ecosystem.

Because Mantle is a brand new network, getting people familiar and comfortable with the Aurelius platform will be a top priority. Introducing a 6 month cliff to team, bOATH, and incentive tokens could give $AU time to establish footing and onboard new users before the supply is fleshed out.

The standard “Constant Decay” emission curve could have a set of $xAU options which increases the discount over time, from 90% to 50% over the course of 6 months with an alternative locking system. Over these first 6 months, exercised options could all be directed to protocol owned liquidity with fee sharing set up at the 6 month mark with $bAU.

A key element of the Aurelius strategy comes through a partnership with the Ramses team via Cleopatra DEX. $AUSD will play a key role in onboarding teams and in CLEO liquidity, and our platforms will feed off of each other as we penetrate the Mantle market. Through our combined efforts, focus on POL, and commitment to growing the Mantle ecosystem, there is significant opportunity to play off of each other.

The Incentives section of the tokenomics will be distributed as follows:

10% in $xAU for air drops and referral rewards distributed linearly after token launch

45% for voting incentives on partner DEX

25% for borrowing incentives

20% for miscellaneous incentives, to be distributed in response to market changes

The bOATH section of the tokenomics will be distributed as follows:

100% in $AU distributed over 6 months to $bOATH stakers

We propose this amount either be distributed after a 6 month cliff or via $xAU, depending on the emission mechanics decided above. Giving $AU a chance to grow its liquidity base will be important after launch. Alternative methods of launch can also be explored to bootstrap liquidity.

The Liquidity Provision section of the tokenomics will be distributed as follows:

60% for DEX liquidity

40% for CEX liquidity

The Developer Grants section of the tokenomics will be distributed as follows:
An allocation of tokens will be made available as co-incentives to teams who integrate $AUSD on their platforms, or to developers who build tools or protocols that support or utilize $AUSD.

The team members section of the tokenomics will be distributed as follows:

Maintainers of the platform, KOLs, and other contributors will receive vested allocations of $AU tokens. Aurelius has been developed by OATH core contributors to demonstrate the efficacy of the Chapters initiative, all of these tokens will be used to alleviate overhead costs and incentivize developers that work within the broader OATH ecosystem.

Team Members / Experience:

Elaborate on the experience of the proposal team and why they will be successful implementing the proposal.

OATH Foundation developers have extensive experience deploying and maintaining the OATH technical suite of infrastructure. Since Aurelius leverages OATH tech, the crossover makes deploying and maintaining Aurelius intuitive and rehearsed.

Key Objectives & Success Metrics:

Objective: Establish Aurelius as a leading lending platform on the Mantle Network.

Metric: Top 2 lending platform on Mantle by TVL on DeFiLlama

Objective: Foster a robust ecosystem where users can earn real yield and other incentives.

Metric: Top 5 native Mantle project by market capitalization, with more than 50% of $AU tokens staked as $bAU.

Objective: Establish a strong and engaged Mantle-native community.

Metric: Grow impressions on Aurelius twitter to top 5 among Mantle-native projects

Risk Assessment:

Network Adoption Risk:

Because Mantle is a brand new network, the success of Aurelius is, in part, beholden to the success of Mantle. Though we can do our best to create a vibrant, thriving ecosystem and onboard new users, we rely on the Mantle team to keep pushing their technology stack forward and finding PMF.

Experimental Risk:

Aurelius, though utilizing the OATH technology stack, is approaching both CDP and lending primitives in a unique fashion. Because it’s unnecessary to incentivize assets supply-side at the lending level, there will not be any supply APR to alleviate borrow-side interest rates. How this mechanical change will affect usership is to be determined.

Because of these mechanics, Aurelius will rely heavily on real demand for DeFi loans. To source this demand, the Aurelius lending market will place a strong emphasis on mETH and USDY usership, and focus on assets like ETH and stablecoins in the CDP itself to supply demand for leverage.

Additional Details:

Aurelius is not just a lending platform; it represents a vision for the future of DeFi. With its unique approach to borrowing and staking, combined with the support of the Mantle Network and the OATH Foundation, Aurelius is poised to redefine the DeFi borrowing landscape. The community’s support and feedback will be invaluable in shaping its trajectory.

[yuvi]

It’s hard to speculate on the % allocations because it’s impossible to know how the product will penetrate and if allocations need to be adjusted, but I think that it is a reasonable start state.

I am in favour of the ramp-up and then decay emission curve, for the purpose of market penetration, and emitting xAU (50% haircut or 6 month bAU) early instead of waiting 6 months, for a number of reasons:

• It keeps oath eco participants engaged from the outset, instead of waiting for 6 months
• It allows the protocol to go through price discovery without fear of a large cliff at 6 months causing irrational behaviour
• It reduces technical debt for the team, who can set up $xAU emissions infrastructure from the start instead of the burden of managing a step change at 6 months.

The more the team can ‘set-and-forget’, the better imo.

Keen to see what others think along with other justifications.

[bebis]

i mostly agree with this sentiment, i guess the main thing here would be defining in absolute terms what xAU should actually be.

[SAMSoN]

Congratulations on securing the grant. Your proposal is well-structured and appreciated. Aurelius, while building upon Ethos, brings its own unique risk profile and opportunities for network penetration. The proposal’s commitment for two liquidity pools could contribute to boosting ERN’s recognition and liquidity. It’s positive that Aurelius isn’t simply forking Ethos Reserve, as this allows both tokens to maintain clear identities.

Here are some of the positives I see:

• Enhanced network exposure for OATH.
• Reduced liquidity expansion costs for ERN to Mantle, and the potential for AUSD and ERN to collaborate on other chains in the future.
• Access to additional funding through Mantle Grants.
• The advantage of leveraging existing Ethos technology, such as stERN, which can expedite Aurelius’s launch and development.
• Increased adoption of bOATH through contributions.

The proposed success metrics appear both realistic and ambitious.

Among the two proposed emissions models, I prefer the ramp and decay model. This approach, combined with xAU, has the potential to generate substantial revenue and demand before the scarcity narrative takes hold.

I will continue to follow this thread and further consider this proposal.

[Cato]

I agree with yuvi’s statement. it’s hard to speculate on the % allocation at this time, but thus far, I like above proposal.

[Cato]

For the Revenue breakdown, i would like to suggest if Aurelius can adopt Sonne’s revenue distribution. On Sonne, when staking their SONNE token, users have the option of either staking their token to earn more SONNE, or to earn USDC. This gives users the flexibility on what they would like to receive back from buying up and staking their AU token. Some will want more AU, while others may want a stablecoin. In Aurelius’ case, USDC can be replaced for AUSD. Revenue generated by the protocol can be used to buyback AUSD from the market and give it to AU stakers. This in turn helps stabilize AU’s peg to the $1, or at least should.

[Charles]

Great proposal, really excited for Aurelius to be getting underway.

Some thoughts:

• I support the ramp-up and decay, but I wonder about timelines and if 6 months is more than enough for ramping-up/market penetration. Would 3 or 4 months not suffice?
• I agree with Yuvi about emitting xAU early rather than the cliff.
• I would also rather team tokens be either linearly vested over a year, or smaller chunks unlocked over a schedule (25% per quarter or similar).
• I would propose the locking period for bAU conversion to be cut to 3 or 4 months, and for the instant discount to be at 60%. I think a 6 month lock is too long, and I would argue the more beneficial action for the ecosystem to so have bAU lockers supporting liquidity. This would also coincide with a shorter ramp-up schedule.

Thank you for the well-written proposal, looking forward to filtering through everyone’s ideas and finding good solutions.

Absolutely pumped for Aurelius to showcase some powerful OATH tech on Mantle!

[0x_mau]

Great initiative to expand the oath ecosystem to Mantle. I realise that we would not be able penetrate a lot of other chains without the chapters. And that the chapters will help grow awareness for the oath eco system as a whole.

But as an oath LGE participant I feel like an investor in the tech stack that has been build, and that is now being licensed out towards the Chapters. I agree the Chapters are needed but I also seek to protect my own interests as an investor.

With this proposal what bOath holders get in is 10% of the AU supply. LGE participants could argue this is a 90% dilution on their Oath. For new token holders this does not apply of course, they could see this as a “free” airdrop or something like that. This is not the case for LGE participants. So I am looking for a way to compensate LGE investors for their dilution. As they literally paid for the development of the software that is now being licensed out.

The best solution I can come up with is that Oath LGE participants get a share of the AU supply. Again, they paid for the software that is now licensed out. I propose 10% of total supply is dedicated to LGE participants pro rato. Maybe a part should come from the current bOath allocation? So 5% for bOath and 10% for LGE participants. Open for discussion seeking a fair distribution to all parties involved.

Besides this I feel that looking at this as a licensing deal, also 10% of revenue earned through exercised $xAU tokens should be directed to bOath stakers (as discussed before):

1. 70% Directed to Bonded $AU Stakers
2. 10% Directed to Aurelius Treasury
3. 10% Directed to OATH Foundation Treasury
4. 10% Directed to bOath Stakers

This will create a constant flow of revenue towards bOath. I believe it is very important to have an ongoing stream of licensing fees flowing towards bOath. This will make bOath the centrepiece of the Oath universe and a true defi powerhouse.

Please note that I will argue that the above applies to all future Chapters.

W/r/t/ $AU Distribution breakdown. Why are team members and KOL in the same slice? Please split this up. We had a discussion about this before I was told this would be mainly KOL? I am afraid of a conflict of interest since the Aurelius team is the same as Oath team. Would not apply for other Chapters with a “foreign” team. Please specify.

I agree with Yuvi, ramp up and decay model and prefer vesting lineair over 6-12 months instead of a cliff.

W/r/t $xAU I would prefer to go for an option that always brings in some fees. Now there are two flavours: 50% discount or lock for 6 months. Could it be feasible to have a lineair increasing discount over time? From 50% to say 90% after 6 months for example?

Thanks for the hard work, looking forward to discuss.

[roelio]

In my understanding the collateral used in the CDP is deposited in the lending part.

• When users deposit collateral in lending part is it mixed with deposits from the CDP?
• What happens when a particular lending market has high utilization and people are not able to withdraw their collateral from the CDP?
• What happens when a particular lending market has high utilization and there is not enough collateral available for redemptions?

[bebis]

I am down for something like this - main points of feedback here:

• LGE came almost a year after the launch of Reaper after the protocol had already generated millions in fees - OATH doesn’t compare well to tradfi analogs since it was a fair launch governance token and a vast majority of LGE resources were placed into liquidity pools. I’m sure you know this.

• Despite that, I am of the opinion that the best way to grow the ecosystem is to make OATH attractive as a digital asset commodity. Directing resources to bOATH improves liquidity and ensures that incentives are desirable to LPs. +1

• I wonder if we can find a fit for that floating 10% that benefits both parties - i would be interested in exploring the idea of using it to accumulate OATH in the Aurelius treasury for use in voting and possibly as a means to distribute $xAU or get OATH into the hands of the Mantle audience.

To be honest, the team slice I see as auxiliary - we are working to skill up community members to become Mantle SMEs, we are teaming up with an agency to help scale up the marketing and any KOL distributions will happen through them.

The purpose of Aurelius is to create a low-maintenance version of Ethos to address a new market for the benefit of OATH. Ideally, Aurelius will help reduce overhead costs on the OATH foundation as it grows and give us a new marketing tool for the OATH tech stack. Seems very well aligned - would like detail on the conflict of interest point (i kind of get where you’re coming from but i think we’re not quite on the same page).

Myself, the treasurer, and community contributors will mete out team-allocated $AU as it is efficient to do so to ensure maximum impact to the OATH Ecosystem, of which Aurelius is part. I will probably take a vested percent and distribute a vested percent among others who work on the project, then use the rest as part of the overall budget for bounties, attracting KOLs, and KPI based rewards for community contributors.

I like the idea of an increasing discount, maybe from 30%-70% over 3 months or similar, or 10%-100% over 6 months. Could be elegant since it would give users flexibility, but I’d need a sanity check w/r/t complexity.

[Dirtybubble]

Very hyped for the first chapter in the oath ecosystem sonne finance does a similar model implementing editions of the protocol on different blockchains to gain market share and I believe it engages the community more. For example I was exploring linea dapps on defillama and came across mendi finance. It’s a friendly fork of sonne, but still drove me to engage and ask questions. I see a successful path for this chapter I believe the current curve and decay is good. User adoption will be crucial, however I think the current community and newcomers who enter will be pleased with what is offered. Congratulations guys!

[yuvi]

to the best of my understanding…

assets deposited via lending will be mixed in a the lending protocol level but not accessible to the cdp counterpart. the cdp vault will supply to the lending market but the lending market will not supply to the cdp if that makes sense.

utilization will impact the ability for cdp users to withdraw collateral. however it is also associated with high interest rates that will motivate borrowers to repay or lenders to provide more. this should free up collateral to be withdrawn. it’s a cost of doing business.

high utilization affecting redemption is a legitimate long tail risk. the cdp will only allocate a % to being managed and can be scaled up and down according to market conditions. while that mitigates the risk, it does not eliminate it. again, long tail risk is a cost of doing business, and in this case one we hope to never pay, and will manage very very carefully.

[0x_mau]

I understand your point on the LGE part

Sorry to say I do not fully understand what you mean with the 2nd and 3rd bullet. Please explain.

IMO it is really important that there is an ongoing stream of rev share from the Chapters towards bOath (in Aurelius case 10% from $xAU exercising).

W/r/t/ the team slice I seem to be the only one with these worries so I hereby surrender on this part

[bebis]

Because there are already going to be a ton of revenue and token streams shooting to bOATH, I’m suggesting that instead of 10% of the revenue streaming to bOATH, we compel Aurelius to buy back OATH from the market with that 10%, which will accomplish something similar without Aurelius needing to sacrifice 20% of its revenue.

[Cato]

This could work as it will integrate Aurelius into Oath’s governing system and give it a voice in its affairs. It is utilizing Oath’s OP stack chapter technology so it naturally has a stake in Oath. The only thing is that if Aurelius continues to buy oath and get bOATH, it can become a major whale and accumulate too much power in Oath’s governance. This needs to be a cap on this.

In addition, buybacks could disincentivize users from staking and getting bOATH because a) oath price will go up to such an extent that they will want to sell and b) there is less incentive for ppl to get bOATH since they will not be getting much revenue from Aurelius or any other chapter. Why provide liquidity and get bOATH when you can just buy and hodl Oath in your wallet until the prices goes up and then sell.

We could get Aurelius to do buybacks but only for a short while, then those revenue should go to bOATH stakers.

[Teenus]

What about 5% to buy backs 5% of revenue?

[0x_mau]

What ton of revenue and token stream are we talking about. I might be missing something.

For example if Aurelius is using Digit and Reaper tech does this generate revenue towards bOath?

[A_S]

I personally advocate that Aurelius buyback OATH to pair with their own token to use as POL and increase OATH’s tradeable liquidity on Mantle.

[yuvi]

I like this idea because it supports OATH and bOATH indirectly, so users don’t have to choose one or the other with fear of missing out. It also supports trading volume, cross-chain network effect, and reduces bOATH yield dilution and liquidity centralization.

Noice.

[Marph]

I agree with A_S on this one!

Looking forward to the Aurelius chapter.
Need to re read Meditations to prepare I guess