Proposal: Collateralizing VAI with $20 Million in Real World Assets with Credix Finance

Venus Governance Venus - Governance Discussions
1

Proposal: Collateralizing VAI with $20 Million in Real World Assets with Credix Finance

Authors: Credix Finance: @August (DeFi Partnerships & Strategy); @Chaim (Co-Founder & CGO)

Initial Disclosures:

  • The material herein is proprietary, for informational purposes only, and subject to change.
  • All content in this document and all associated discussions are non-binding on any involved party.
  • Please review all information carefully.

The information provided herein is for the sole purpose of establishing a potential business relationship between the parties and specifically for providing a preliminary non-binding proposal to Venus, and is subject to adjustment, change, and discussion. This overview may include or be based in part on projections, valuations, estimates and other financial data supplied by third parties, which has not been verified by Credix. This information should not be relied upon for the purpose of investing. Any information regarding projected or estimated returns are estimates only and should not be considered indicative of the actual results that may be realized or predictive of the performance of any investment. Past performance is not indicative of future results. The structure of the deal is in its developmental stage and - as such - is merely contemplated and subject to adjustment. Credix may at any moment withdraw all or part of the Proposal. All financial modeling is subject to assumption and error, and Credix reserves the right to modify, alter, and correct. Use or application of any model implies acceptance of the risk(s) of error, and waives liability for the model’s creator. The creator of the model is not responsible for the correctness or accuracy of the model. Rates are subject to change. Further, conflicts of interest may exist by and among the Parties, including that members of each entity may hold or acquire beneficial interests in each of the other Parties, their affiliates, and/or related entities. All investments carry risk, including the risk of loss of entire investment. Under no circumstances does Credix provide investment advice, tax advice, legal advice, or financial advice. This is not an offer to sell or a solicitation of an offer to buy securities.

Sentence Summary

This proposal (the “Proposal”) will establish a partnership whereby Venus will deploy $20 million in the Credix Liquidity Pool, a basket of senior-secured structured debt facilities issued to FinTech lenders in key Latin American markets with a targeted 12.0% APY.

Component Summary

1: Executive Summary

2: Strategic Benefits

3: About Credix Finance

4: Transaction Structure

5: Transaction Terms and FinTech Eligibility Criteria

6: Potential Risk Factors

7: Summary

Specification / Proposal Details

1: Executive Summary

Executive Summary

Credix Finance (“Credix” or “we”) proposes collateralizing VAI with a $20 million investment in Real World Assets (“RWA”) via its Liquidity Pool (“LP”), which is comprised of a diversified set of senior-secured structured debt facilities issued to emerging market FinTech lenders. The LP invests across the senior tranche of a basket of deals (currently 20) live on a Credix Marketplace with a targeted 12.0% APY. Principal and interest payments are made solely in USDC.

To date, Credix has deployed nearly $33 million of capital to non-bank lenders in Latin America with ~$2.8 million of interest repaid and no defaults or missed payments to the platform. Credix’s in-market “boots-on-the-ground” team has decades of experience in credit structuring, recourse, and debt recovery. A lower-risk, higher-return strategy to scale and could help secure VAI while unlocking capital in under-invested emerging economies.

We have been working closely with the Venus core team for several months to optimize the terms and structure of this proposal for Venus’ operations. We have jointly analyzed existing codebases with guidance from expert third-party advisors and are prepared to begin executing on this structure as soon as approved to do so. We are now excited to present this partnership opportunity to the full Venus community for approval then collectively move forward to implement it.

2: Strategic Benefits

In this section we outline some of the many strategic benefits to Venus of partnering with Credix.

  • Collateral Diversification: Real World Asset diversification would help protect Venus from crypto-specific market volatility by spreading the protocol’s exposure into traditional assets uncorrelated with the crypto sector. Venus’ Total Value Locked (“TVL”) is currently comprised entirely of cryptocurrency assets, which makes the protocol wholly exposed to the crypto market’s performance. In a broad crypto downturn, as seen several times in 2022, Venus could suffer substantially. Conversely, the Credix Liquidity Pool includes traditional loan types such as revenue based finance, hard asset backed loans, SME financing, student loans, and direct consumer loans. All deals on the Credix platform are overcollateralized. This diversification and excess collateral introduce a new source of stability for Venus.
  • Yield Generation: The Credix Liquidity Pool currently has a 13.8% 90-day trailing APY (APY as of 03.22.2023), paid 100% in USDC. The LP, which is designed for a 12.0% APY target, does not pay rewards via inflationary token emissions or invest users’ assets in any other protocols. The double-digits yield is generated by real, understandable loans and always paid in USDC, crypto’s de facto digital dollar. Fully deployed, this partnership would generate upwards of $2.4 million per year. This return could be used to strengthen Venus’ insurance buffer, fund ongoing expenses, buy back XVS tokens, or any other iniative decided upon by the community.
  • Layered Due Diligence: Venus’ Liquidity Pool investment would be protected by multiple layers of due diligence performed by seasoned professionals on the underlying borrowers. Credix’s internal Credit, Risk & Structuring team, which is the initial screen, brings experience from top-tier firms such as Mubadala, Deutsche Bank, LinkLaters, BNP Paribas, CPP Investments, and many more. The CRS team, located in-market in Latin America, meets with and thoroughly vets all potential borrowers. Once the CRS team completes its process, the Underwriters, traditional blue chip credit funds, perform complete secondary due diligence. The Underwriter invests in the Junior portion of the debt facility, which is subordinate to the Liquidity Pool’s Senior position thus aligning all investors’ incentives and strengthening deal due diligence.
  • Aligned Incentives: Subordinate to Venus’ capital in the Liquidity Pool, the Underwriters would comprise the Junior tranche with the asset originator providing over collateral at the SPV level, which also holds an excess spread generated by the underlying assets. This excess spread buffer represents the asset originator’s potential upside and remains in the SPV. Thus, the FinTech and then Underwriters would absorb any unexpected losses on the underlying assets before the Liquidity Pool would. Finally, Credix’s fees are paid as the final step of the waterfall after all investors receive their respective remittances. This mechanism aligns all incentives directly with Venus’. They will “take their own losses” on any poor lending decisions first providing Venus and the other Liquidity Pool investors comfort that they will act in the best interest of all investors.
  • Investing Alongside Highly-Regarded Institutions: Venus would be investing alongside or ancillary to seasoned equity and credit investors that have already tested and validated the Credix platform. Credix is trusted and supported by some of the most reputable institutions across traditional finance and web3. Our equity investors include blue-chip names such as Motive Partners, ParaFi Capital, and Valor Capital with equally experienced underwriting partners. Addem Capital, MGG Bayhawk, and Almavest are a few of the key firms that have led investor due diligence on individual Credix deals.
  • Successful Prior Stablecoin Backing: Venus may look to other stablecoins that have already successfully integrated with the Credix Liquidity Pool as collateral backing. In January 2023, UXD Protocol initiated its integration with Credix whereby ~50% of the UXD stablecoin will be backed by Credix’s Liquidity Pool. The yield earned on the investment, a targeted 12.0% APY, is passed on to UXP holders via token buybacks and the protocol insurance fund to further secure the protocol. UXD worked closely with the Credix team to assess the risks, both technical and commercial, prior to finalizing this architecture. Our protocols continue to collaborate very closely and the investment has delivered tangible value to UXD’s community where Credix has strong support.
  • Impact Investing: The growth of Latin American economies is hindered by a lack of accessible capital. This limits not only business growth, but also upward mobility within these societies. Credix enables the funding of debt facilities to LatAm FinTech lenders that then distribute that capital directly across their local markets. Venus has the opportunity to unlock life-changing opportunity by funding these facilities and moving capital to the underserved markets where it has historically been difficult to access.
  • Uncapped Scale Potential: A stablecoin with full collateral backing can only grow to the size of that collateral’s Total Addressable Market (“TAM”). Thus, for a 100% crypto backed stablecoin, the scale potential is limited to the total market cap of its approved crypto collateral. Credix’s TAM is exponentially larger. Today, there is a ~$5 trillion annual funding gap in emerging markets, with over $1 trillion, or ~22%, concentrated in our core LatAm markets we seek to address. Through Credix, VAI can scale to nearly limitless supply. Our borrower demand is extremely high and there is no shortage of high-quality capital deployment opportunities solidifying our longterm growth potential.

3: About Credix Finance

Overview

Credix Finance is a next-generation credit infrastructure providing borrowers in emerging countries access to previously untapped capital. Credix runs the protocol that facilitates the transaction between the investors and the borrowers, making capital accessible at an attractive rate directly to local institutional lenders that then lend the funds to individuals and SMEs in their core markets. Investors can access these securitized, high-yield opportunities directly via the Credix platform. Credit funds (’‘Underwriters’’) can invest in credit deals directly, or can spread their risk by investing in liquidity pools, which are diversified across deals. The diagram below provides an overview of a Credix marketplace.

Note: Diagram represents an example deal structure. Individual deals may differ.

Credix allows for the creation of marketplaces which contain individual deals. Comprising each marketplace are select deals, each of which is split up into tranches, creating investment opportunities for investors with different risk/return profiles. Most often a senior/junior/excess collateral design is used. In this setup, the senior tranche has the lowest risk, with the lowest return because it is protected by more junior tranches in case of defaults. In many scenarios, if a default happens, the originator would lose part of its excess spread, before affecting its own excess collateral. If additional defaults come in, the junior investors will lose (part of) their invested principal and gained interest as it flows to the senior tranche. Though this tranche setup is used in the majority of deals, the Credix platform allows for the creation of up to 10 tranches.

Since launch, the Credix marketplace has funded nearly $33 million of emerging market loans, with several other deployments in process, generating approximately $2.8 million of interest repayments.

Background

Credix Finance was conceptualized in early 2021 by Thomas Bohner (CEO), Maxim Piessen (CTO), and Chaim Finizola (CGO). Longtime friends and colleagues, these three founders recognized the need for access to credit in emerging markets and set out to solve that inefficiency by leveraging their deep understanding of blockchain technology. Credix began as an idea in May of 2021, became a full-time focus by November and closed its Seed Funding round in December of 2021. In September 2022, we announced our $11.25 million Series A round led by Motive Partners and ParaFi Capital. Other key investors in the round included Valor Capital, MGG Bayhawk Fund, Victory Park Capital, Circle Ventures, Fuse Capital, and Abra. These noteworthy partners continue to stand alongside us as trusted advisors and many have joined as liquidity pool investors as well. Since the Series A, we have nearly doubled our team, expanded into new geographic markets, and invested heavily in fortifying our technical infrastructure.

In just over one year of full operation, our platform has unlocked approximately $33 million of capital for underserved emerging economies across Latin America while expanding our product suite and continuously working with some of the most prominent investors in both decentralized and traditional finance.

The Credix Team

  • Thomas Bohner (Founder, CEO)
    • LinkedIn; Twitter
    • Responsible at Credix for defining strategic priorities, coordinating execution with management, and relationships with key shareholders, investors, and business partners.
    • Spent his career designing and delivering complex financial services solutions across capital markets and banking.
    • Launched from the ground up a blockchain sales & engineering team across 3 continents, growing to 100 FTEs. Closing major deals with clients such as London Stock Exchange Group, BNP Paribas, and Euroclear.
    • Experience:
      • Vice-President, Head of Blockchain and Crypto - IntellectEU
      • Associate - P20 Consulting / Hogan Lovells
      • Analyst - Motive Partners
    • Education:
      • Master in Finance - University of Antwerp
  • Maxim Piessen (Co-Founder, CTO)
    • LinkedIn; Twitter
    • Responsible at Credix for our global technology and product strategy & execution, translating stakeholder needs and requirements into a scalable product architecture and coordination with the engineering team.
    • Physicist with strong expertise in artificial intelligence & blockchain working on innovative products at IntellectEU for the private banking and investment management industry.
    • Experience:
      • Head of Product Management - IntellectEU
      • Head of AI, Data, and Quantum Computing - IntellectEU
    • Education:
      • Advanced Master in Artificial Intelligence - University of Leuven
      • Coding Bootcamp - Le Wagon
      • Master in Physics - University of Antwerp
  • Chaim Finizola (Co-Founder, CGO)
    • LinkedIn; Twitter
    • Responsible at Credix for commercial and business partnerships, scaling growth through marketing, communications, and business development.
    • Led emerging market business development and marketing efforts at IntellectEU. Launched ClaimShare, a fraud detection product for the insurance and financial industry using DLT.
    • Experience:
      • Head of Business Development, Emerging Markets - IntellectEU
      • Product Manager - IntellectEU
      • Marketing & Growth - Settlemint
    • Education:
      • Master in Finance - University of Antwerp
  • August Widmer (DeFi Partnerships & Strategy)
    • LinkedIn; Twitter
    • Experienced traditional finance professional with deep expertise across the web3 ecosystem specializing in decentralized finance.
    • As Credix’s head of DeFi Partnerships and Strategy, August will serve as Venus’ primary point of contact.
    • Experience:
    • Education:
      • BA from Hampden-Sydney College
  • Carolina da Costa Carvalho (Head of Credit Risk and Structuring)
    • LinkedIn
    • Accomplished private equity professional with experience sourcing, leading, and delivering creative capital solutions across Latin America, specializing in the Brazilian FinTech sector.
    • Experience:
      • Private Equity Investment Professional I (Noon Capital Partners)
      • Private Equity Investment Professional I - Infrastructure (CPP Investments)
      • Private Equity Investment Professional I (Mubadala)
      • Education:
        • BA from Insper Instituto de Ensino e Pesquisa
        • MBA from Columbia Business School
  • Christian Corcino (Head of Capital Markets)
    • LinkedIn
    • Senior emerging markets, capital markets, and structured credit leader with proven track record launching new businesses and products
    • Experience:
      • Co-founded AlphaNotes
      • Senior Vice President for Working Capital Solutions and Alternative Assets Syndication at GE Capital
      • Vice President of Emerging Markets structured products origination and trading at Deutsche Bank
      • Education:
        • BA from Manhattanville College
        • MBA from Cornell University
  • Marco Bottino (General Counsel (Brazil & Emerging Markets))
    • LinkedIn
    • Experienced lawyer with broad expertise in Credit and Structured Finance, Securitization and Distressed Debt Investment, as well Bankruptcy and Debt Recovery.
    • Experience:
      • Capital Markets Foreign Associate at US law firm Simpson Thacher
      • Founding Partner of Bottino Advogados focused on bankruptcy and credit recovery
      • Partner of private equity firm Zion Invest
    • Education:
      • BA from FGV-SP
      • JD from PUC-SP
      • LLM from the University of Chicago.

Credix Links

Website; Documentation; Application; Medium; Twitter; LinkedIn

4: Transaction Structure

Preliminary Transaction Structure

Venus would collateralize $20 million of VAI with an investment into the Credix Liquidity Pool. The capital would be generated by newly minted VAI, which would then be converted to Solana-native USDC and invested in Credix’s LP. The diagram below outlines this flow of funds and associated contractual relationships.

Note: Process would operate in reverse for the realization of interest repayments to Venus Protocol.

The following outlines key assumptions and processes referenced in the above structure:

  • BEP-20 RWA Token: Venus would create a BEP-20 token to represent its investment in Credix’s liquidity pool. Using an oracle, the token would be valued equivalent to Venus’ Credix LP Tokens held on Solana. This “placeholder” is necessary because there is no BEP-20 representation of Credix’s LP Token today. MakerDAO uses a similar operation for its Real World Asset investing, which is outlined in its MIP21: Real World Assets - Off-Chain Asset Backed Lender.
  • Venus Off-Chain Entity: Credix, like many RWA investment opportunities, is a permissioned platform limited to investors compliant under Know Your Customer / Business (“KYC”) and Accreditation / Qualified investor status standards. Venus, governed and operated by its community, would need to establish an entity to undergo Credix’s compliance and regulatory verification. The entity would establish the Solana Wallet referenced herein that is ultimately used to invest in the Credix liquidity pool. Other protocols have successfully implemented off-chain entity structures and may be examples Venus could follow to invest with Credix. For the avoidance of doubt, our views here do not opine on the legality or provide any sort of legal advice related to the establishment of such an off-chain entity.
  • Exchange: Our proposal is that Venus swaps VAI for USDC-SPL via an exchange which would then be withdrawn to Solana for investing in the Liquidity Pool. This would eliminate a counterparty by allowing the swapping and bridging from VAI (BEP) to USDC (SPL) to occur on one platform.
  • Solana Wallet: The Credix platforms operates on Solana with native USDC (“USDC-SPL”), which Venus would need to use in order to invest. We propose Venus mint VAI, exchange that new VAI for USDC-SPL via an exchange, then withdraw that USDC-SPL to a Solana wallet. Venus may then initiate the investment with the USDC-SPL in its Solana wallet. We have worked successfully with multiple Solana wallet solutions, including Fireblocks, and can provide platform suggestions to the community.
  • Credix LP Token: Credix Liquidity Pool investors receive a Credix LP Token which represents their pro rata interest in the LP. This token accrues in value as principal and interest payments are made on the underlying loans. LP Token holders may then redeem the accrued value on the Credix platform to recognize their respective earned yield amounts. The LP Token is non-transferable and only available on Solana today, not able to be deployed as a wrapped version. Venus would need to hold the LP Token in its Solana wallet and periodically redeem the accrued value, either manually or through smart contracts. Using an oracle, as described above, Venus would hold the BEP-20 RWA Token value held on BNB equivalent to the LP Token value on Solana. As the LP Token’s yield is redeemed, that capital would be sent back through the process outlined above:
    • Redeem LP Token accrued value as USDC-SPL
    • Send USDC-SPL from Solana wallet to Exchange
    • Withdraw from Exchange as VAI
      • Note: May also exchange to another asset on BNB Chain if desired.

5: Transaction Terms and FinTech Eligibility Criteria

Preliminary Transaction Terms

We propose Venus deploy $20 million into the Credix Liquidity Pool at a targeted Annual Percentage Yield (“APY”) of 12.0%, paid entirely in USDC. The Liquidity Pool’s APY does fluctuate based on the underlying loans’ dynamics, but its target is 12.0%, which it has historically exceeded into the range of 13%.

Below is a summary of the preliminary terms we propose:

  • Principal Amount: $20 million
  • Targeted APY: 12.0% paid in USDC-SPL (varies at rate paid to all LP investors)
  • Investment Medium: USDC-SPL
  • Term: No term. Withdrawals may occur as liquidity is available anytime following the Initial Lockup Period (see below).
  • Disbursement Schedule: Beginning at contract implementation; Targeted $5 million per month subject to VAI liquidity and market dynamics. Final Disbursement Schedule will be established working with Venus and Venus advisors following a successful initial vote.
  • Standard Lockup Period: Initial 90 days
  • Venus Protection: Venus’ investment would always be in the senior position of the underlying debt facilities, thus ensuring downside protection by junior tranches and excess collateral.

Ongoing Deal Monitoring

Credix works to deliver investors maximum transparency through full on-chain reporting and real-time third party monitoring agents.

  • All asset transfers will be trackable on-chain through block explorer platforms
  • Credix will lead ongoing deal monitoring through multiple third party service providers and provide all investors regular updates
  • Key areas the monitoring agents will assess include:
    • Delivery of debt facility
    • Compliant collateral pledging
    • Cashflow management and verification
    • Loan origination to fintech
    • Eligibility criteria check for fintechs and end-borrowers
    • Ongoing monthly reporting

FinTech Eligibility Criteria
Credix facilitates the creation of debt facilities to best-in-class Latin American FinTech lenders that meet the parameters defined below at the time of origination

Factor Criteria
Eligible Geographies Emerging markets in Latin America, primarily Brazil, Mexico, and Colombia
Historical Loan Performance Minimum of 12 months of loan performance data
Collection Rate (LTM Average)* ≄ 75%
First Payment Default Rate (FPD) (LTM Average)* ≀ 5%
Delinquency 30+ (LTM Average)* ≀ 10%
Delinquency 90+ (LTM Average)* ≀ 10%
Underlying Assets Interest* Monthly fixed payments (not less frequently than quarterly) with an average excess spread of 1.3x the facility financing fee
Sectors Factoring with & without recourse; SME revenue financing; SME equipment financing; Leasing; Asset-backed loans; Remittances; Supply Chain Financing; Payday/SS benefits advances; Buy-now-pay-later; Consumer; Credit Cards; Agriculture loans
Collateral of Underlying Loans Off Balance Sheet: Fiduciary assignment of underlying assets within defined eligibility criteria; Potential additional guarantees on a deal-by-deal basis. ‖ On-Balance Sheet: All-assets pledge; No debt senior to Credix’s facility (preferably); Additional deal-by-deal covenants (e.g. maximum debt-to-equity ratio, tangible net worth minimum, etc.)
KYC & AML Full KYC/KYB and AML verification and compliance
Documentation Able to provide the fintech loan tape/portfolio, legal docs and recovery information
FX Hedging ForEx risk hedging determined on a deal by deal basis led by the Junior Underwriter. The operational execution of the hedge will be carried out by the administrator of the SPV where the FX currency risk lies

Note: Current eligibility criteria optimized for current market conditions and may evolve as market dynamics shift.

*Magnitudes calculated based on an equivalent portfolio to that of the expected transaction to be financed (i.e. product, credit scoring quality, etc.)

6: Potential Risk Factors

Summary of Potential Risk Factors

This summary of risks below is not intended to be comprehensive and other unforeseen risk factors may materialize throughout the investment period.

  • Counterparty Risk: Venus would interact with several new counterparties in the transaction which could add a layer of complexity and potential risk. Venus and Credix have not yet worked together and it is assumed that Venus would establish an off-chain entity under this transaction structure. These specific risks are mitigated as Credix has had no defaults since inception with its capabilities trusted by blue-chip firms, as investors in both deals and the company. Additionally, other crypto-native protocols have successfully used off-chain entities in multiple large-scale deals providing a template for Venus’ approach.
  • Underwriting Risk: As in any lending structure, a significant level of trust is placed on the underwriter to source and execute appropriate loans. Credix works to mitigate any such risk by performing stringent due diligence and monitoring on every FinTech lender. Our platform is designed with an unprecedented level of due diligence security as a FinTech must pass Credix’s then the Underwriter’s processes in order to be onboarded. Credix’s Credit, Risk, and Structuring team is highly skilled with deep local knowledge. Additionally, specific parameters will be defined as to the type of loans the FinTech may issue and we always utilize an in-market servicing agent.
  • General Operational Risk: General loan operations, including recoveries, rely heavily on each FinTech’s operational processes. While this may pose a structural risk to some, it is mitigated as we ensure our FinTech partners have records of exemplary asset quality, clearly defined recovery processes, and are led by top-notch seasoned management teams. In short, we will only work with the best. Additionally, at Credix we’ve launched over 20 tokenized bonds and in the meantime are well positioned to assess this kind of risk.

Strong alignment of incentives overarches all facets of this partnership and significantly mitigates all of these potential risk factors. Credix, the Underwriters, and every FinTech lender will be financially incentivized to act in Venus’ best interest. They are repaid only after Venus is repaid.

7: Summary

We believe this proposal is a unique opportunity for Venus to partner with one of the most innovative and trustworthy lending platforms on-chain or off-chain. By backing VAI with Real World Assets in our Liquidity Pool, Venus can diversify into assets insulated from crypto volatility while generating a targeted 12.0% APY, thus delivering stability and above-market returns. Venus’ investment would be structurally safeguarded by excess collateral coverage, its senior position in each debt facility, and multi-deal diversification built on the deep credit analysis performed by Credix and our Underwriting partners. Central to all of these aspects, we would be unlocking capital for underserved markets in Latin America and providing real, tangible, economic benefits to the local populations.

We are excited to present the Venus community this proposal and engage, discuss, and ultimately execute it. We believe this will be the beginning of a mutually beneficial and long-lasting partnership between Venus and Credix.

9 Likes
2

My thought on that, correct me if I am wrong


  1. its a risky business to provide liquidity with such conditions
 at the end Credix are issuying uncollateralized loans, to pretty much everyone who “qualify” . For me it sounds like it is a Quick / Flash Loan scheme.

  2. It is not clear what exactly comes as collateral? What are those RWA in the “real world”?

1 Like
3

This proposal provides a transparent and secure investment opportunity for Venus Protocol while supporting Latin American FinTech borrowers. Great news for emerging economies! :clap: :clap: :clap:

3 Likes
5

Bilal:
I only just heard of this, am I reading this right? They want Venus to mint 20M $VAI against ‘uncollateralised’ Debtors. How long have they been in business for? They seem to be doing their own risk management and I believe they want to gamble with our money when the world is approaching a recession and banks are going bankrupt. I like the idea, I always have a DO IT YOURSELF approach to these things. I mentioned something like this to Patrick. Venus should resume its grant program and pay out VIA to promising and high potential businesses to draw more regional communities to venus which will individually be signed off by our DAO. There’s also the issue with the RWA token
 It’s 100% a security
 I understand Venus is DEFI but connecting us with RWA could bring about future instability for Credix. My proposal Venus allows users to request uncollateralised or under collateralised loans on a case by case basis using our DAO. There’s an existing BNBChain project (CPOOL) that offers this we could fork for this implementation. This is similar to how our isolated lending works.

As for VAI, it’s a decentralised stablecoin so let’s stick to decentralised collateral wherever possible.

This idea needs to be made decentralised with community involvement for each and every business/loan application.

I’m open to hiring you to find us these fintech start-ups and let out DAO handle it from there.

Questions: are these real world assets loan agreements between fintech startups in Latin America, if so could we see examples of these loan application agreements?

To end it of, I do like the idea and I’ve been wanting this for VAI for a long time. Was thinking our Venus star members could target busines/start ups regionally but letting experienced professionals filter through this does sound more attractive. I’m willing to support this if you can address all doubts.

*I read the complimentary steakhouse proposal (I missed this earlier). Nothing alarming there. They are taking care of some of the concerns I raised here at reasonable costs.

Please address.:

  1. Are these real world assets paper agreements where person A could get out of by defaulting on the loan?

  2. Is the Vai kept in your treasury or is it sold to USDC (or similar) once transferred.

  3. If a business accepts the terms of the loan agreement will they be offering anything directly to Venus? What I would like to see is for businesses we support to accept VAI as a form of payment and hold its balance sheet in VAI (to bring much needed liquidity to the platform)

1 Like
6

The execution is much more difficult than theories.
I am going to vote against it proposal

So many uncertainties and you don’t know how it turns out

1 Like
7

I don’t like it neither.
20M VAI not collateralized by actual liquidable tokens, that’s against the definition of VAI as an overcollateralized stablecoin.
Fintech assets are not tangible assets, it’s basically forcing VAI holders to invest into some sartups. Some chance to get +12%, high chance to lose all. Investing into startups should be done with capital and stock options. High risk, high reward, but here it’s high risk and 12%APY reward.

And what would they do with 20M VAI minted out of thin air? There’s barely 800K of liquidity for VAI currently.

1 Like
8

Not a good idea
 I don’t like it at all
 hopefully our voices are heard
 Please don’t vote for this proposal with the community wallet

1 Like
9

Please see the disclaimers in the original proposal above which are also applicable to these comments.

Hi @Eugenius: Thank you for your review and questions. Please see our responses and let us know of further questions.

  1. its a risky business to provide liquidity with such conditions
 at the end Credix are issuying uncollateralized loans, to pretty much everyone who “qualify” . For me it sounds like it is a Quick / Flash Loan scheme.
  • Credix provides liquidity to finance pools of familiar asset types, such as auto loans, leases, credit card receivables, mortgages, and business loans. These asset types represent contractual obligations to pay.
  • The Credix Liquidity Pool consists of senior-secured loans, meaning it is first in the repayment structure, and invests in the Senior tranche of a diverse set of debt facilities (‘’deals’’)
    • Each deal consists of hundreds or thousands of individual loans allowing for diversification (borrower, geography, asset types, etc.).
  • Credix issues less debt than it has assets meaning all facilities in this pool are overcollateralized and backed by full legal agreements.
    • To illustrate, for every $100 of loans in the underlying pool of assets, Credix would only issue $90 of debt. The $10 difference represents the amount of “overcollateralization,” which serves as a cushion for debt investors.
  • The diagram below depicts the typical SPV structure of an individual deal (note the LP position):
    • Average Liquidity Pool deals over-collateral ratio: ~117% today.
    • In case of defaults, first the fintech will lose their potential upside and then their equity. If more defaults occurred, the junior investor will be affected before the liquidity pool, according to the waterfall and aligning incentives.The junior investor participates in the due diligence and underwriting and are tradfi credit funds, specialized in EM credit.
  • Potential borrowers must meet defined eligibility criteria then pass stringent screening, structuring, and due diligence processes conducted by our internal teams and specialized credit funds.
    • Please see Section 5 of the proposal for a summary table outlining these eligibility criteria.
    • Our screening & diligence process typically include:
      • KYC / KYB of company & management; on-site diligence & interviews
      • Financial analysis (historical, current, internal modeling, etc.)
      • Credit analysis (loan tape, collections, policy, etc.)
      • Legal review (company docs, ownership, etc.)
  • This process has helped our platform maintain a pristine record of 0 defaults and 0 missed payments for investors to date.
  1. It is not clear what exactly comes as collateral? What are those RWA in the “real world”?
  • Two types of Collateral exist:
    • An asset representing a contractual obligation to make payments.
      • These are contracts, such as leases, mortgages, loans, and agreements that define payment obligations to create the contractual cash flows.
      • These are “real” assets such as vehicles which can be pledged as additional collateral
    • Over-collateral in the form of equity pledged to the SPV, which can be in the form of cash or additional assets as described above
  • Liquidity Pool investors receive an “LP Token” which technically represents their pro rata investment in the pool.
    • The pool invests in the Senior position of a basket of overcollateralized deals.
      • The LP Token is an investor’s claim on their respective portion of each of these overcollateralized facilities.
  • Each facility is issued to a fintech non-bank lender that provides loans to SMEs and consumers and remain in the bankruptcy remote SPV during the tenor of the facility, monitored by a 3rd party agent.
    • The chart below outlines the current Liquidity Pool’s composition of underlying loan types:
  • Collateral underlying these deals in the “real world” is secured by traditional legal agreements.
1 Like
10

Please see the disclaimers in the original proposal above which are also applicable to these comments.

Hi @Isitbathtime: Thank you for your review and questions. Please see our responses here and above then let us know of further questions.

  1. Are these real world assets paper agreements where person A could get out of by defaulting on the loan?
  • Facilities extended to the fintech lenders are backed by loan portfolios with true sale of the assets (“loans”) into our SPV. These are indeed secured by traditional legal agreements. Additionally, the fintech posts equity as first loss collateral which would be liquidated first in the event of defaults.
  • Fintech clients can not just default on their loan. They have a legal obligation to repay, with the right of seizure of goods in order to recover the loan, and their personal credit score will be impacted very negatively.
  1. Is the Vai kept in your treasury or is it sold to USDC (or similar) once transferred.
  • We do not custody funds.
  • Venus would convert VAI to USDC then deploy that USDC into the Credix Liquidity Pool.
  • The Liquidity Pool USDC would be deployed across the senior tranche of a diversified basket of debt facilities, which is then off-ramped into local currencies and finances the fintech facilities
  • Venus would recognize principal and interest payments in USDC which it could then hold or convert to an asset of its choosing.
  1. If a business accepts the terms of the loan agreement will they be offering anything directly to Venus? What I would like to see is for businesses we support to accept VAI as a form of payment and hold its balance sheet in VAI (to bring much needed liquidity to the platform)
  • Businesses in this instance would be the fintechs receiving debt facilities. They will be receiving local fiat currency to fund their lending activities and not yet transacting in VAI or any other digital asset.
1 Like
11

Please see the disclaimers in the original proposal above which are also applicable to these comments.

Hi @Jmn: Thank you for your review and questions. Please see our responses here and above then let us know of further questions.

  1. Fintech assets are not tangible assets, it’s basically forcing VAI holders to invest into some sartups. Some chance to get +12%, high chance to lose all. Investing into startups should be done with capital and stock options. High risk, high reward, but here it’s high risk and 12%APY reward.
  • Credix is not investing in fintechs or startups, but is purchasing their portfolio of loans, which is backing the facility our platform finance for them. This means that even if the fintech would go down, the investor’s claim is on a segregated loan book.
  • Our facilities are overcollateralized by tangible assets. Please see the replies above for more detail on the structure.
  • To date, our capital providers have not experienced a single missed payment or default.
  • Venus would be invested in the Liquidity Pool which is the senior, most protected, tranche of a diversified basket of facilities (+15 today). This is the most protected vehicle on the Credix platform.
  1. And what would they do with 20M VAI minted out of thin air? There’s barely 800K of liquidity for VAI currently.
  • We recognize VAI does not have the liquidity and volume of a USDC or USDT. Converting from VAI to USDC may initially be a slower, more metered process. We will work with the Venus community to establish the optimal schedule based on market conditions and VAI liquidity.
  • One key goal of this structure is that it could actually increase VAI liquidity by collateralizing the asset with a highly scalable asset class: traditional private credit. As referenced above, our identified addressable market today is over $1 trillion and we have long-lasting partnerships already in place to deploy hundreds of millions (in USD terms) across LatAm.
1 Like
12

Thanks for having provided insights.

to deploy hundreds of millions (in USD terms) across LatAm

So your business is pretty much like Financiera Contigo or CAPEM. They exist for >10 years, and have portfolios in the $50M. They will be your competitors, I’m not convinced you’ll be able to easy overtake their market, which is, for the whole LatAm, maybe in the billion, not in the trillion. Private credit (auto, installement, home
) is a profitable business but with many solid lenders already in place.

Converting from VAI to USDC

If you plan to borrow VAI and just convert it into USDC, why not borrowing USDC at the first place? With 20M VAI whose sole purpose is to be swapped for another token, you’ll create a gigantic sell pressure, and no usecase, on a token struggling (and mostly failing) at keeping its peg.
I don’t see how this could benefit to VAI, excpet being sacrificed in case of failure, like UST was for TerraLuna or HUSD was for Huobi.

But considering there’s less than 1M liquidity and 2M market cap for VAI currently, you’ll have to wait for VAI to actually work before starting your plan. With VAI mint re-enabled, it will increase the market cap, create sell pressure, but no more liquidity.

You should first have a stablecoin that works on its blockchain, and then you extend it to the Real World. Like DAI did. You’re doing the opposite.

1 Like
13

I agree that using VAI only to convert to USDC is a risk of excessive liquidity, which is very difficult to maintain. Plus, the transfer of liquidity from one chain to another does not look like something convenient and fast. It is likely that there is a more detailed business model that will demonstrate the benefits to the community members and dispel all concerns, while it is very difficult to assess the potential of this proposal.

1 Like
14

Please see the disclaimers in the original proposal above which are also applicable to these comments.

Hi @Jmn: Thank you for the follow up. Please see the replies here and let us know of further questions.

  1. So your business is pretty much like Financiera Contigo or CAPEM. They exist for >10 years, and have portfolios in the $50M. They will be your competitors, I’m not convinced you’ll be able to easy overtake their market, which is, for the whole LatAm, maybe in the billion, not in the trillion. Private credit (auto, installement, home
) is a profitable business but with many solid lenders already in place.
  • Credix is not a direct lender to SMEs and consumers.
  • Credix extends debt facilities to non-bank lenders that then lend to SMEs and consumers, similar to the way a traditional bank would provide a warehouse line of credit to a non-bank lender.
  • In our model, Financiera Contigo and CAPEM might actually be borrowers on the Credix platform as they source external capital to fund SME and consumer loans. Those both appear to be high-quality examples that are the type of organizations we work with. In fact, we have already partnered with multiple similar fintechs that have originated over 100M USD in loans and we have live operations with similar lenders in Mexico.
  1. Regarding VAI liquidity:
  • Our goal is to partner with Venus and scale this partnership as VAI’s presence grows.
  • We recognize VAI’s trading depth today is not as deep as other top stablecoins and will work to fund this partnership incrementally as organic demand grows.
  • We are not proposing to immediately mint or swap $20M of VAI, but instead to do the process over an extended period based on market dynamics with the health of the protocol and stablecoin in focus.
15

Financiera Contigo and CAPEM might actually be borrowers on the Credix platform

Ok, so I was wrong about your business target, thanks for having corrected. You’re closer to Esketit so, which also gathers deposits in USDC or USDT and lend them to non-bank lenders, themselves providing private credits to end consumers.
Your model would be similar, in LatAm, and with Venus as an intermediate, which ensure privacy (they have a KYC).
The yield is consistent too: they offer 11%, yours is 12%.

Still, the market is not in the trillion. 1T is the GDP of Mexico, 1T is the marketcap of the whole cryptosphere, not the market of non-bank finance in LatAm.

2 Likes
16

Thanks for the responses. I’ve had my own private discussions with a few community members that talk privately on telegram :sweat_smile: Steakhouses are addressing the biggest concerns and with steakhouse onboard I will back Cerdix (high risk high rewards for me personally but if the team is confident I’m in!). My question is, after speaking to some other Venus community members - This feels like a long term strategy, which is great I fully support that! But there are also members here that are looking for short-term goals. They might only hold Venus for 3
6 months or plan to exist at the top so they will not accept a proposal that could bring short term damage and aren’t interested in proposals with long term goals.

Having a breakdown of our partnership with milestones and short term targets would help more of us see the benefits :wink: so what are the short term goals, any short term damage, what are the noticeable milestone achievements and long term goals with this?

1 Like
17

Hi @Isitbathtime: Thanks for your comment and considerations. I think that’s a very good point you raise. We are able to move relatively quickly with this pilot and expect to be able to potentially upscale this collaboration in the future as our partnership matures, and we realize mutual benefits.

Looking at what’s next in the short term, I would split it in three phases.

  1. Preparation. As soon as both the Steakhouse proposal and this current Credix proposal pass the first vote, both teams will be working closely with the Venus team to get the infrastructure, final due diligence and tech ready for the collateralization to be implemented. We expect this process to take approximately 4 weeks.
  2. Collateralization & Funding. We’ll work with the right parties to convert the VAI, mitigating sell-side pressure by working with experienced OTC desks as much as possible. We expect Venus could gradually deploy the full amount over the course of 4-6 months after a positive VIP vote. We plan to work alongside the Venus and Steakhouse teams to make this a smooth and efficient process. Each incremental investment would begin earning the targeted 12.0% APY as soon as it is deployed.
  3. Yield generation. As soon as an USDC is deposited in the pool, the LP tokens are expected to start earning yield for Venus, generated by the underlying RWAs (collateralized by “hard assets” such as autos loans, motorcycles loans, invoices, etc.). The protocol can choose what to do with the generated USDC: automatically re-invest or withdraw for other purposes such as buying back governance tokens, implementing a native yield, etc


So overall, if all goes according to plan, we would expect the protocol to start earning yield on an initial funding tranche by May.

In the mid/long term, we can explore increasing the collateralization volume (after community vote), creating specific RWA pools with specific assets for Venus or creating specific RWA vaults. We’re very excited to explore all options with the community and see a lot of potential and synergy.

1 Like
18

what is possible donwside of this RWA thing? What theoretically can go wrong? What are Venus protocol risks in a simple terms?
Also, Please provide a real example of how this all works in Colombia, let’s say (cause you guys operate in Colombia, as I understand), that can be understood by anyone, cause the way how you explain things may not be understandable for anyone

1 Like
19

It would be awesome if you could elaborate on the questions that were brought up by Eugenius.

If I understood everything right, you are proposing that VENUS mints 20.000.000 new VAI.
So far, so good.

I think that no matter how slowly VENUS will try to swap those VAI and how many OTC Desks are being used: VAI will depeg.
If you do not believe so: Time will tell.
I remember the days when minting was enabled and every John and Jane Doe were selling VAI at no matter what price: I don’t wont to see those times again.

Perhaps it would be better if Venus BUYS VAI when it is below peg.

Lets assume that swap for USDC is possible.
At the current rate 20.000.000 VAI will swap for 19.400.000 USDC
If there will be a small wonder and you will receive close to 20.000.000 USDC: perfect!

Whoever would buy those VAI is a question that does not need to be answered.
But another question is: What will the buyers to with it?

Lets say they stack it into the vault and earn 0,9 APY (should be the rate if you throw 20.000.000 VAI at the vault, perhaps its even less).

Don’t you think this will create sell pressure again?
Who wants 0,9 % APY when every other stable has more?

Another problem: Liquidity wise, there would be nothing gained, compared to todays situation.
So a small sell (at the moment 50k VAI sold, would push send the price to 0,85 USD) would make the stability fee kick in and whoever minted those VAI would have to pay high stability fees.

What about a bad actor intending to liquidate the assets that where used to mint those 20.000.000 VAI? I think you could easily push the price somewhere, where your minted VAI has to be liquidated

What am I missing here?
It all seems to be a lose lose situation.

1 Like
20

Hi @Hiromatsu: Thank you for your comments and review. We’re in the process of drafting replies to the questions from both you and @Eugenius, which we’ll have posted ASAP.

Thank you again,
August

1 Like
21

Please see the disclaimers in the original proposal above which are also applicable to these comments.

Hi @Eugenius: Thank you for your review and questions. Please see our responses and let us know of further questions.

  1. what is possible donwside of this RWA thing? What theoretically can go wrong? What are Venus protocol risks in a simple terms?
  • The “RWAs” in this instance are private credit investments. Some of the primary risks associated with this type of investment are:
    • Liquidity Risk: Typically 1-3 year duration limits liquidity of underlying assets.
      • Credix Liquidity Pool mitigates this by pooling investor capital into one liquidity pool. This means investors don’t need to remain within one deal for the full tenor as other investors also get in and out of the liquidity pool as capital comes in through other investors, interest repayments, amortizations,
 Also, Senior position (Liquidity Pool including Venus in the proposal) receives interest repayments first. Lastly, we’re working on features to create additional liquidity solutions.
    • Credit risk: Risk that a high volume of pledged loans default, causing missed interest/principal payments.
      • Credix mitigates this with a comprehensive multi-layered due diligence model and ongoing monitoring by third parties. Our platform has seen no missed interest payments or defaults to date. Additionally, we work with monitoring agents to provide investors a real-time data feed on underlying assets that tracks eligibility, covenants, defaults, etc. This is visible within the platform on a deal by deal basis.
  • Outside the realm of private credit, smart contract / technical risk is a consideration.
    • We will work very closely with the Venus team throughout the implementation and ongoing throughout the investment. We plan to hold regular calls to share updates from a technical perspective and solicit any feedback from the Venus team. We believe that working together on a seamless integration will help mitigate smart contract risks.
    • Credix mitigates this and other protocol risks through a layered security model. Please see this blog post from Maxim (Co-Founder & CTO) for full detail.
  1. Also, Please provide a real example of how this all works in Colombia, let’s say (cause you guys operate in Colombia, as I understand), that can be understood by anyone, cause the way how you explain things may not be understandable for anyone

  • This is a great request. Thank you.

  • As you note, we are active in Colombia. We expanded there with a proof-of-concept facility for our $150M partnership we announced with Clave, a Colombia asset originator.

  • For a purely hypothetical example, let’s use a Small-to-Medium Enterprise (SME) debt facility. The diagram below lays out how the illustrative flow of funds and contractual relationships in this type of deal. Below it are the associated steps in order of how they are executed. Please keep in mind that each deal varies, but this is a general framework that we build upon as/if necessary.

  • Each deal is housed in a Special Purpose Vehicle (“SPV”). This serves as the interaction point for all investors and borrowers.

  • Steps:

  1. Investors provide capital to SPV through the Credix platform
    1. Non-bank lender pledges equity in the SPV
    2. Underwriter invests USDC in Junior tranche of the facility
    3. Liquidity Providers invest in Liquidity Pool which invests in Senior tranche of the facility
      1. Venus would invest in the Liquidity Pool and therefore in the Senior tranche
  2. Non-bank lender issues loans to SMEs
    1. SMEs pledge collateral (+ equity, creating over-collateral) to the SPV in return
      1. Collateral may be equipment, hard assets, receivables, etc.
  3. Third-party agents contracted by Credix monitor all operations
    1. Back-up servicer prepared to collect principal & interest payments
    2. Monitoring agent provides investors real-time data on the underlying loans made to the SMEs
  4. SMEs make repayments of principal & interest
    1. Funds go directly from the end-client to the SPV, not to the fintech
    2. Senior tranche is paid first (Venus’ position)