[KCF Application] Shoebill Finance, KLAY-LST Collaterizable Lending Platform

Klaytn Community Fund Grant Program Pilot
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Shoebill Finance respectfully requests $220,000 worth of KLAY from the Klaytn Community Fund (KCF) to support the operation and expansion, for an essential component in advancing KLAY mass adoption as envisioned in Klaytn’s Vision 2023 Map.

1. Product Name: Shoebill Finance (https://shoebill.finance)

2. Product Description:

Shoebill Finance empowers KLAY holders to maximize their assets and actively engage with the Klaytn ecosystem. Users can utilize Shoebill Finance in the following ways:

- Liquified Staked Token (KLAY-LST): Users can deposit their KLAY-LST as collateral to borrow KLAY at a high Loan-to-Value (LTV) rate. Additionally, users receive KLAY-LST’s yield reward, enhancing the value of their assets.

- Maximizing Yield with Low Risk: Borrowed KLAY can be staked again, used as collateral to borrow more KLAY, and optimize yield while minimizing liquidation risk.

- Investment Opportunities: Shoebill Finance encourages users to explore other Klaytn projects for potential profits and repayment, providing a competitive borrowing Annual Percentage Yield (APY) with relatively lower risk.

3. Team Information

- Team Name: Arkhe
Arkhe

- Team Description: Arkhe is a team made of DeFi experts with in-depth experiences in the field.
Team Arkhe has been having several meetings with Klaytn related corporates previously and communicated with Klaytn Foundation so far.

- Representative: PaguInfo, CEO of Arkhe as well as DeFi blogger/influencer (https://pgyinfo.tistory.com)

- Portfolio: Arkhe had collected $320M+ of cumulative TVL and $80M of All Time High TVL through previous projects on BSC/Avalanche/Klaytn.

4. Grant Proposal

- Size of grant: Total $220,000 worth of KLAY

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- Milestones:

▷ Milestone 1: Add of at least 1 other KLAY-LST collateral in 1 month within receival of KCF

▷ Milestone 2: $1M TVL within 2 months within receival of KCF
Milestone 2 is the final milestone regarding KCF but Shoebill won’t stop for expansion and grow furthermore

- Impact on Klaytn Ecosystem: Most of the received KCF will be used for liquidity provision, to stimulate collateral deposit (currently, GCKLAY) for leveraging or seeking for other investment opportunity. By leveraging, the amount of collaterals at least stay in the ecosystem in the form of KLAY, while the circulation of borrowed KLAY will also enhance liquidity and activates dApps in Klaytn Ecosystem.
Both are impacting activities to expand the use of KLAY, which is aligned to Klaytn’s Vision 2023 Map.

5. Budget Proposal

The plan for the use of KCF funding is divided as follows:

- Liquidity Provision: $200,000 worth of KLAY will be used to provide liquidity in the KLAY pool, allowing users to borrow KLAY with an attractive Annual Percentage Yield (APY).
In the event of Shoebill Finance’s closure or after a period of 5 years, whichever comes faster, all received KLAY for Liquidity Provision (except the amount used for Audit and Marketing, which is $20,000 worth at the time of KCF receival) will be returned to the Klaytn Foundation.

- Audit and Marketing: $20,000 will be allocated for Audit and Marketing fees, with transparent reporting of expenses.

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Hi, ShoeBill team. Thanks for filing the application.

I have some questions.

  1. Can you share more detail of your portfolio? What kinds of protocol you developed and what is the status quo?

  2. What is your target APY with the given liquidity provision?

  3. Also, could you please share the rationale why you choose $200,000 worth of KLAY? What is the reason that you choose $200,000 worth of KLAY?

  4. To make an attractive APY, you will not give any interest for the $200,000 worth of KLAY. Is this right?

  5. How can you guarantee that the liquidity will be returned?

Thanks again for the proposal.

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Dear. Colin,

Thanks for your questions and interest on the proposal.

Please refer below answers.

  1. Arkhe has launched mainly yield farming projects forked originally from Sushiswap (specifically Uniswap → Sushiswap → Pancakeswap → GooseFinance) and tweaked a bit of functionalities and added other features like delegated farming, NFT farming, NFT raffle, raffle buy-back and so on. Arkhe has also developed auto-compounding service, lending protocol, LST CDP stable token project, Single-sided stable swap, CP-AMM & Curve-type hybrid DEX and so on.
    On Klaytn, Arkhe has launched Neverland, DeFi 2.0 forked from OlympusDAO, and PeterFarm, an yield farming project.

  2. The APY for depositing KLAY is determined by the total borrow rate (the ratio of borrowed KLAY for total KLAY) of the protocol.
    Currently, it’s set to around 0% to 3.5% APY for 0% to 92% borrow rate and the slope changes to 3.5% to 200% APY until 100% borrow rate.

  3. In terms of operation and liquidity provision, it’s actually the more the better. However, Arkhe understands it’s a period of retrenchment of Klaytn Foundation so we have minimized the amount of fund request. It would be greatly appreciated if there’s any more room of the fund for the liquidity provision.

  4. Correct. We will be able to set it not to receive lending interest through smart contract.

  5. We can set multi-sig smart contract including the wallets of Klaytn Foundation, and/or we can sign a physical contract.

Please let me know if there’s any more questions or if you need any more explanation of the project and proposal.

Sincerely,

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LST tokens have not been publicly verified.

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Representative examples of LST tokens include gclay, stklay, etc.

These tokens were created by a well-verified team and would have gone through a sufficient audit process for security reasons.
(Team created by swapscanner, kracker labs)

A detailed explanation of the Crader team’s concerns is needed.

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Dear. Creder-Itcen, @Creder-Itcen

We have verified the tokens, sbKLAY and sbGCKLAY.

sbKLAY: Klaytnscope.com

sbGCKLAY: Klaytnscope.com

Thanks for your interest and bringing attention of the missing verification!

It would be greatly appreciated if you also mentions your opinion regarding Shoebill’s KCF proposal. We will answer promptly if there’s any question or issue!

Sincerely,

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Dear. SJ_ppp, @SJ_ppp

Thanks for your interest and information.

Creder-Itcen pointed out our tokens which were internally used for deposit/withdraw of KLAY and GCKLAY.

We have verified them now.

Please let us know if there’s any question or issue!

Sincerely,

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Since the proposal is not editable, Shoebill changes proposal and adds proof of previous projects’ information as below.

  1. For the budget proposal, the timing for returning KLAY used for liquidity provision changes from ‘5 years or in case of closure of Shoebill’ to ‘2 years or in case of closure of Shoebill’.

  2. For the team information proof of portfolio TVL and other features is as below

Please also find the number of international users for HoneyBee on Jan 2022 as below.
87.2% is outside of Korea.

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With this operation and marketing experience, Shoebill will play a role to lure international users to Klaytn ecosystem.

Please feel free to comment if there’s any of suggestion or inquiry.
Shoebill will respond and adapt promptly!

Sincerely,

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Thanks for the answer. Some following questions. I have lots of curiosity of this proposal. :slight_smile:

  1. Even if $200,000 worth of KLAY is provided to the liquidity, the expected APY for the lender is the same as 3.5%? What is the APY for the liquidity provider? Since $200,000 worth of KLAY will not receive any APY, there could be differences of APY with/without this liqudity.

  2. What makes users provide liquidity to the pool? Anyway after two years the $200,000 worth of KLAY will be withdrawn. Before happening this, you need to have a plan to fill the liquidity from the users.

  3. Also, from the lender’s perspective, the interest should be less than the interest of staking. But on the other hand, for the liquidity provider’s perspective, the interest should be greater than the interest of staking. This is somewhat contradicting. Any good answer for this?

Thanks.

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Dear. Colin,

Thanks for your question and here’s the answer.

1. Currently, borrow yield slope is as below.

Base 0%
Protocol total LTV 0~92% → Borrow yield 0~3.5% APY
Protocol total LTV 92~100% → Borrow yield 3.5~200% APY

Please refer the parameters here

While Protocol Total LTV = Total Borrowed KLAY / Total Deposited KLAY, if we add $200K worth of KLAY, the formula will be as below

Supply (Lenders’) APY = Borrow APY * Protocol Total LTV * [Total Deposited KLAY / (Total Deposited KLAY - $200K worth of KLAY) ]

Simply,
= Borrow APY * Total Borrowed KLAY / (Total Deposited KLAY - $200K worth of KLAY)

For example, if there’s $500K worth of KLAY supplied and $460K worth of KLAY was borrowed, and if we deposit $200K worth of KLAY from KCF,

Protocol Total LTV = 92%
Borrow APY = 3.5%
[ Total Deposited KLAY / (Total Deposited KLAY - $200 worth of KLAY) ] = $500,000 / $260,000 = 1.923

Supply (Lenders’) APY = 3.5% * 92% * 1.92 = 6.19%

It is accurate to calculate the yields in APR and convert it to APY but the example skipped it to be simply understandable.

2. Agree, so Shoebill is internally considering below plans.

Firstly, as answered in No. 1, it will be a good bootstrapping way if we can supply KLAY from KCF.
Secondly, as we discussed in the video call, it will be another good bootstrapping way if we launch our own goveranace token and reward supply and borrow.

However, we will check the market condition closley and will have more deep discussion and consideration for the timing for proceeding strategies.

3. For the ‘Collateral Depositors’, currently users who is staking GCKLAY as collateral, it’s ture that the borrow yield is less than the yield given from the node staking (typically around 6%) to proceed leverage.

Therefore, Shoebill has set the borrow yield to be reasonably lower than the node staking yield, currently 3.5%, at the condition of the healthy Protocol Total LTV, which Shoebill thinks 92% considering liquidation penalty.

It is also true that the higher the supply yield, the more KLAY will be supplied. However, Shoebill believes there’s also merit to supply KLAY to Shoebill even if the supply yield is lower than the node staking yield since there’s no ‘unstaking period’ and suppliers can withdraw instantly to utilize it freely and it’s one of the highest yield of singly KLAY staking around the ecosystem in that circumstance.

KLAY-LST (GCKLAY) suppliers get the node staking yield after deducting reserve factor (10%) even if it’s in the Shoebill’s contract.
(The reserve factor is also explained in the docs link provided above)

Sincererly,

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Budget seems to be too much high

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Dear. hanwooHan,

Yes $220K is a big amount but please also take a look that Shoebill will return $200K worth of KLAY 100%.
Those KLAY won’t be sold or circulated at all and solely used for liquidity provisioning which will give advantages for those who use Shoebill Finance by distributing all the borrow yield of it to the users.

Please understand this proposal in this regard.

Sincerely,

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In addition to the previous proposal, Shoebill is also developing stable swap to give more use case of KLAY suppliers.

Users can deposit sbKLAY, cToken of those who supplied KLAY on Shoebill, paired with KLAY or GCKLAY. (LP pairs may vary)

Shoebill will adopt X^3Y + Y^3X = K formula, which has the best efficiency among existing stableswap even comparing to Curve.
It will give less slippage to the users who want to proceed swap, arise more arbitrage opportunity while provides enhanced usability for Shoebill users.

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The impact analysis will be based on TVL and swap volume so it’s hard to calculate it quantitatively but Shoebill believes it’s a new concept to Klaytn ecosystem and will bring advantageous effect.

Please take Shoebill’s proposal in this regard.

Sincerely,

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Honestly don’t see value to this proposal. At the moment you have far less borrowers “aka users”, then liquidity providers. In-addition you have not really achieved much adoption with 134.41K liquidity, I don’t think a 200k$ liquidity ask would be reasonable as its very unlikely to solve your issue of very few people interested in using your platform and more likely to hurt your platform in the short term until you could get some natural growth happening and minimal adoption.

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