OGN as a collateral asset on Venus Protocol ETH mainnet Core Pool
Summary
Origin contributors would like to propose the addition of an Origin Token (OGN) market to Venus Protocol as a core market
Motivation
The proposal seeks to introduce a new market into Venus on Ethereum for OGN. The new market would lead to increased TVL for Venus, additional revenue to the Venus Protocol and DAO from active loans and liquidations, and will attract a wider user base. At the moment there is only one market live for using OGN as collateral, and it is on the Base chain. This could be the first market on mainnet for borrowing against OGN.
We anticipate that the new OGN staking program will achieve staking APYs ranging from 30-50%. If the cost to borrow OGN from Venus is lower than the staking rate, presumably there will be demand to borrow OGN and stake it, taking advantage of the spread.
Background
Origin Token (OGN) is the governance and value accrual ERC20 token for Origin Protocol. OGN is an older token that launched in 2018 and has gone through several iterations over the years. OGN has more than 46,000 holders across mainnet, Base, and Sonic. Holders who choose to stake OGN for xOGN receive DAO voting power, 100% of Origin Protocol’s protocol revenue from performance fees from Origin’s products, as well as periodic distributions of the Origin Protocol DAO’s treasury assets. TVL for Origin’s products can be found on the analytics page.
OGN has been heavily audited by OpenZeppelin and other reputable auditing firms, with audits being conducted quarterly. Previous audits can be found in the docs here. OGN pricing can be determined using the OGN/USD Pyth oracle, Uniswap TWAP oracle, or the Coingecko pricing API.
OGN is listed on 50+ exchanges globally, OGN liquidity pools are currently available across various DEXs:
We would be happy to answer any questions on Origin Protocol, OGN, or the proposal itself. The Origin team can be reached at any time via the Origin Discord server.
I would love to see an analytical report highlighting the potential benefits for Venus. So far, it is not clear to me how OGN can strengthen the position of our protocol in Ethereum.
The addition of OGN to Venus Protocol’s Ethereum Core Pool is an exciting move. Expanding support for OGN, especially with its strong staking incentives could indeed attract new users and drive more TVL to Venus. But my concern is liquidity, is it sufficient enough to be listed on our core market?
Can you share an example of an analytical report you have in mind that has been put together specifically for onboarding a new market to Venus? I can try and put one together if we don’t have one already that can be shared.
My thought is, if OGN staking is yielding 30-50% APY, people will gladly borrow OGN from the Venus OGN market, so that they can stake the borrowed OGN to profit from the spread (assuming there is available OGN in the market to borrow, and assuming the cost to borrow is lower than the staking APYs).
High borrowing activity would lead to increased borrowing cost for this strategy, which would also mean the APY for supplying OGN to this Venus market would also increase. OGN holders who aren’t participating in staking would likely supply OGN to this market to generate earn a yield. That would start a nice flywheel of lends and borrows.
People who supply OGN to Venus as collateral also benefit from being able to borrow other tokens at the same time, which would mean more activity with other Venus-supported tokens, and possible liquidations, which Venus benefits from.
The Origin team can deepen the liquidity onchain as needed, and can also help by seeding the market with some liquidity to prevent any cold-start problem, and to ensure there is available OGN to borrow. The market could also start with parameters that are conservative, maybe starting with something like this:
I was referring to Venus’ earnings. The protocol earns money from liquidating positions, and for this to happen, there needs to be high activity in the market. For example, as users, we can clearly see the contribution of launch pools on Binance. Users actively provide liquidity in BNB and borrow BNB, which has a positive effect on Venus’s earnings and generates significant income, which is distributed to Prime accordingly. That’s why I asked how we can predict the profitability of the OGN market for Venus. Is there any report or additional information?
I see that there is OGN staking, and if OGN staking gives a higher APY than borrowing, then it’s only a matter of time, because any market inefficiency is corrected. Therefore, as soon as users approach the maximum loan threshold in the pool, the progressive loan rate will exceed the staking spread, making such a strategy unprofitable, given the lock tokens. And if it’s a matter of time, how will market efficiency be maintained afterwards?
There is no such report as of yet. OGN staking has been live for years now, but never at this capacity. Predicting profitability would come down to what parameters get approved for the market, as well as utilization rate, and current OGN staking APY. Once we have all this information we can more accurately estimate the profitability of the OGN market for Venus.
I wouldn’t call this an inefficiency, I would call this an opportunity. It would be up to each individual user to decide on how much they’d like to stretch their LTV rate, but the opportunity is clear - if you can borrow OGN for less than the staking rate, you can profit from the spread. And if utilization of the market gets too high and it no longer becomes profitable to borrow, then supplying OGN to the market would become an opportunity to earn yield on OGN instead - and by doing this users bring down the utilization of the market. We can start the flywheel and prevent any cold-start problem by making sure there is available OGN to borrow from the market at the start.