Summary
Authorize corresponding protocol and treasury management upgrades to support Metronome lending pairs on external lending markets.
Abstract
Metronome has strong, sustainable opportunities to support looping yield strategies to a more diverse set of assets, and to a larger user base, through support for External Lending Markets.
In particular, such an upgrade allows Metronome to easily support points-accruing assets like LRTs. these assets and their points programs may not be compatible with Metronome Synth, and thus we cannot currently support such assets.
The technical portion of this upgrade will look similar to Maker DAO’s D3M buildout, which allows Maker to mint DAI into external lending markets. With this upgrade, Metronome will be able to mint msUSD, msETH, and msBTC into relevant lending markets. Similarly to Metronome Synth, these assets do not circulate until they are borrowed by overcollateralized positions.
Despite billions of dollars worth of TVL in miscellaneous yield-and-points accruing ETH LSTs and LRTs, no protocol yet is servicing looping yield strategies through synthetic ETH loans. This upgrade will uniquely enable Metronome to service this sector in a capital efficient manner.
For Metronome DAO, access to this new, high demand set of market participants enables the protocol to realize higher interest rates on synthetic loans versus the 0-4% fixed rates charged by Metronome Synth itself.
Expectations
Metronome will first coordinate on Lending pairs on Morpho Blue and Ajna for pairs using ETH LRTs as collateral and msETH as the borrow asset. The initial implementation from relevant internal parties looks like:
- Affirm collaboration with asset providers, such that any non-compounding APY (points, airdrops) is passed through to participants that engage with these deployments.
- Deploy corresponding lending market, working through a reputable curator when appropriate (such as Gauntlet on Morpho Blue).
- Deposit treasury owned msAssets to the corresponding market, enabling users to manually loop through the lending pair.
- Collaborate with external “looping helper” frontends such as Contango to automate the process for users.
The full implementation will also include dedicated direct deposit support as well as first-party looping frontend support.
Specifications
There are two components to this MIP.
The first involves whitelisting protocols/assets that Metronome and its treasury can support:
Enable the following External Lending Markets for utilization in this buildout, as well as for Metronome DAO Treasury to deposit msUSD, msETH, and msBTC into:
- Morpho Blue
- Ajna
- Euler V2
- Silo V2
Whitelist ETH, BTC, and USD-like assets from the following asset providers as potential collateral assets:
- Etherfi
- Renzo
- Swell
- Puffer
- Pendle
- Babylon
- Ethena
- Inverse
- Frax
- Hourglass
- Coinbase
- Lido
- StakedStone
- Mantle
- Stader
- Origin
- Alchemix
- Rocketpool
- Binance
- Ondo
- Vesper
- Blackrock (Buidl)
- Franklin Templeton (Benji)
The second part involves protocol upgrades to support the full “Direct Deposit” functionality:
-
Upgrade Metronome Synth Assets to support asset minting into approved Lending Pairs (through the manager contracts only).
-
Developer Manager contract that will handle msAsset mintage in a risk-minimized manner
-
This will look similar to a Vesper vault, with certain modifications to specialize the contracts for this exact buildout.
Lastly, this proposal pre-approves up-to $10 million worth of msAssets that can be deployed through Direct Deposit functionality to these markets.