DFP-60: Add Flat Money Leverage as an Integration

dHEDGE Feature Proposals (DFPs)
#1
Header Content
Author Edson Ayllon (@relativeread)
Created 2024-06-17
Status Completed

Motivation

Opening leverage using Flat Money allows dHEDGE managers access to leverage trading the staked version of Ethereum, currently supporting rETH. This allows managers to trade ETH that’s always at a slightly better price over time. And as the counter party is UNIT, which is stable by being delta neutral, low borrowing rates for leverage are expected as leverage scales up.

Description

Flat Money is a protocol with a two sided market, flatcoin holders and leverage traders. Today, it uses rETH as collateral for the flatcoin and to leverage trade, reducing external dependencies while using a more capital efficient form of ETH.

Leverage traders in Flat Money leverage up a staked version of ETH with its own APY on ETH, offsetting funding costs of borrowing ETH to leverage trade by providing a better settlement price than normal ETH would provide the longer a position is open.

This proposal builds on DFP-59 and adds support for leverage trading on Flat Money from the contracts side.

Implementation

Contract guards will be designed to whitelist leverage trading with Flat Money contracts.

Due to withdrawals being asynchronous, depending on keeper execution unwinding positions, withdrawal liquidity must be made available to allow depositors to withdraw. Due to this limitation, Flat Money leverage integration will be made available to managers on a case by case basis, requiring whitelisting.

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#2

Thank you for writing this proposal.

I am in favor of the concept of integration of flat money integration. However I am concerned about risks relating to this integration, has any risk assessment been completed here? And if so, could the results of this assessment be included here (and in future proposals)?

Some controls are suggested under the implementation, including Contract guards and manager white-listing. What risks is this control aimed to address, and can more information be given regarding how this controls parameters will be set?

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#3

Hi. The main risk manager whitelisting addresses is the possibility of blocking depositor withdrawals, as mentioned in the proposal. We expect this limitation to be temporary, and future versions of Flat Money or dHEDGE contracts can work around this limitation, after which this integration can be opened to all managers.

As for due diligence, we’ve worked closely with the Flat Money team, reviewed their contracts, and have helped onboard TVL for them by helping them with a vault through Toros. Flat Money has undergone 2 audits, have an ongoing bug bounty program, and have no exposure to 3rd party protocol risk outside of staked ETH tokens (RETH) and oracles from Chainlink and Pyth.

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#4

Thanks Edson for providing this clarity.

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