Lodestar Finance is an algorithmic borrowing and lending protocol that is aiming to bring the critical DeFi primitive of decentralized money markets to Arbitrum communities.
This Lodestar Finance AMA is joined by Quanta and Coopes, the founders of Lodestar Finance, and BigK, one of the main developers of PlutusDAO.
They discuss the plvGLP token, its use cases, and Lodestar’s impact on the ecosystem.
Read our notes below to learn more.
Background of Lodestar Finance Team
Quanta is one of the founders of Lodestar Finance.
Started in crypto before DeFi summer in 2020, and started on this project 6 months ago.
Quanta values all the projects on the Arbitrum network working together creating an interoperable network.
Coopes has been in the space for some time, has experience in mining ETH.
Background of PlutusDAO Team
BigK started investing in ETH in 2016 and 2017 and in 2020/2021 dove more into crypto.
He connected with Ethersole, started to build a team, and launched with wrapped assets, eventually including plvGLP.
PlutusDAO Bribes
The PlutusDAO team is bullish on onchain derivatives.
Dopex users will be competing for emissions similar to the curve wars, and that’s what the team targets for the PLS assets.
The end game would be that the PLS token generates bribes from different projects whose Ve tokens are acquired.
Projects Supported by PlutusDAO
Jones is a further layer built on top of Dopex, with the aim to help people manage options; it’s the third project as a PLS asset.
plvGLP
GLP is one of the largest assets on Arbitrum and it powers GMX.
esGMX (escrow GMX) is attached to GLP.
Users and projects of GMX didn’t like the fact the rewards were locked for a time.
GLP wrapper would withhold the esGMX rewards but would add PLS incentives on top that would be liquid.
Users benefit because they get liquid rewards, and the Lodestar project benefit because they get to keep esGMX.
plvGLP Fee Structure
esGMX rewards are being taken and that could be considered as a fee.
2% exit fee that goes into DAO treasury.
10% fee on the ETH yield.
All of that is balanced with the PLS rewards.
Use Cases of plvGLP
3 major strategies.
1. Leverage long into PLV: Use plvGLP as collateral in the Lodestar money market, borrow stablecoins, and purchase more plvGLP. Loop this.
APR is affected by the GLP payouts, the stablecoin borrow rate, and the amount of leverage.
2. Hedged: Borrow BTC or ETH against plvGLP or another volatile asset. This will mute the volatility in the position because the user will be net short the asset used to buy into GLP with.
GLP going sideways or down will make more money than if it goes up.
3. Delta neutral: Match the weight of stablecoins, BTC, and ETH as the user loops into the position. Buying into GLP with roughly the same assets that GLP is made of creates a somewhat neutral position.
What is Lodestar Finance?
The project is rolling out in 2 phases.
V0 protocol will be launched in a couple of weeks, it’s a compound fork.
V1 will allow users to collateralize liquid-staked assets.
PlutusDAO is an ideal partner.
The goal is for Lodestar to become the Arbitrum maximalist money market.
Other PLS Assets to be Added by Lodestar Finance
One of the top contenders would be DPX (Dopex).
Would like to see Sperax getting chainlink support.
Generally, liquid staked assets that Plutus is working on.
Lodestar’s Impact on the Ecosystem
BigK
Currently, there is very little that can be done with a PLS or PLV asset other than stake it.
Lodestar will open more things that can be done with the assets and that in turn will open the user base to more people.
Other projects can build their own structured products on top of these lending products.
Lodestar is one of the first pieces of infrastructure that are needed to build out a project even further.
Future Demand
When there is debt denominated in a certain asset, there’s future demand for that debt.
E.g. the entire world has USD-denominated debt, which is making the USD relative to other currencies strong.
All this debt is creating future demand for USD.
This can be done in DeFi as well.