Moloch DAO Grant Application- Debt DAO Cash Flow Oracle (CFO)
Project Title
Debt DAO
Categories: Privacy + DAO Tooling
Contact:
Twitter: debtdao
email: Ç Wa lk [@] debtdao finance
Description
Debt DAO is the “Pipe for Crypto” offering revenue-based financing to cryptonative entities like DAOs and protocols. Our Spigot smart contract secures borrowers’ on-chain cashflows to automatically repay lenders. Because many DAOs have purely on-chain revenues, the Spigot is able to escrow 100% of cashflows if a borrower defaults. This is the first time on-chain loans have trustless protections for lenders that borrower’s revenue must be used to repay them.
Debt DAO is the one stop shop for cryptonative credit. We are building the coordination layer to buy, sell, underwrite and manage credit by aggregating lenders, borrowers and service providers into a single platform. While contributing at DAOs, we saw firsthand the lack of solutions for growth financing. With our extensive experience in DAO treasury management and market research, we have built a peer-to-peer Line of Credit contract to service the dynamic funding needs of growth stage DAOs.
Manifesto/Vision
We’re working on putting together a synthesized copy of our values and beliefs. You can view our living doc on Debt DAO Culture in Notion
Problem
Basically the problem beaks down into two core issues:
- Figuring out how to create trust of future repayment entirely onchain while remaining anonymous and censorship resistant.
- Designing a financial product for DeFi native users, especially smart contracts.
While contributing at DAOs, we saw firsthand the lack of solutions for growth financing. Their main options are either distributing tokens directly like liquidity mining and having them dumped, selling to VCs at a discount to get stables, or dumping from treasury directly for stables (bad look). These all lead to dilution for existing token holders, are unsustainable in the long term, and cost more in dollar terms than financing a loan.
Taking out loans and lines of credit are some of the most basic things a business can do in the real world but DAOs and protocols have no way of accessing these simple services because they can’t KYC, they work with cryptocurrencies, funding is offchain so isn’t composable with DeFi, and all the other bad things with TradFi.
Debt DAO is here to provide cryptonative credit to sustainably fund growth stage DAOs and protocols.
Solution
For our two problems we have two solutions
- Spigot smart contract - Collateralizing Future Cash Flows
- Line of Credit contract - DeFi Native Credit
Our Spigot smart contract secures borrowers’ on-chain cashflows to automatically repay lenders. Because many DAOs have purely on-chain revenues, the Spigot is able to escrow 100% of cashflows if a borrower defaults. This is the first time on-chain loans have trustless protections for lenders that borrower’s revenue must be used to repay them.
Our Line of Credit smart contract (”line” for short) enables flexible repayment schedules and on demand liquidity. A single borrower’s line can support multiple lenders, multiple assets, and multiple interest rates. This means a DAO can take a loan in ETH and DAI and manage collateral and interest payments all in the same place very easily. It also creates a competitive lending environment where FRAX might try to undercut rates that FEI is offering a borrower or vice versa. The borrower can easily refinance in one transaction because they are all in one contract.
Product Features
Assets - support for multiple assets per lender and per credit line allowing for ease of syndication (i.e. does not have to be solely in USDC from one lender).
Competition - lenders can compete on interest rates within the same contract, giving borrowers the lowest interest rate possible in the market.
Enforcement - revenue and/or asset based collateralization with our Spigot and Escrow contracts.
Flexibility - no fixed repayment schedule on line of credit drawdowns.
Liquidity - borrower can drawdown or lender can reduce/withdraw facility at any time.
Cheap Rates - Lower interest rates through using Spigot on top of depositing collateral tokens
Easy Stablecoins - No dumping tokens or taking bad VC deals to get precious stables. Get stables instantly now and pay back later
Anon First - Absolutely no KYC requirements. DAO treasuries and autonomous smart contracts alike can open a line to get leverage and increase returns.
Validation
- Led the first ever DAO debt financing round by Redacted for $2.5 million line of credit.
- Raised money from Dragonfly, GSR, Daedalus, The LAO at $50m valuation
Progress
- custom smart contract to collateralize protocol revenue streams and use to automatically repay loan
- custom smart contracts developed for line of credit product for DAOs and protocols
- Subgraph done
- Webapp in the works
- Currently undergoing audit by Halborn and then Quantstamp for our Line of Credit and Spigot contracts
DeFi’s First Debt Financing Round for a DAO
Debt DAO is known for facilitating DeFi’s first debt financing round for Redacted, a meta-governance asset management DAO. Redacted used the $2.5m revolving line of credit for large protocol expenses such as contract audits. The revolver allowed Redacted to pay for their operational expenses without having to sell valuable treasury assets into deteriorating market conditions. This strategy maximized yield on treasury assets deployed to Convex Finance. Lender repayments were made out of income earned on Convex.
Differentiation (from other projects)
- no KYC required
- trustless revenue based financing via Spigot
- on demand liquidity for borrowers and lenders at any time
- peer2peer lending not pool2pool (AAVE,COMP) or pool2peer (MAPLE,GFI)
- lend, borrow or collateralize any asset with chainlink oracle
- ERC4626 support for collateral tokens
- Programmable credit for protocols
Team
Kiba Gateaux
2016-2018 - International Fashion Model
2018-2020 - Fullstack dev at ConsenSys
2019-2021 - DeFi degen, link marine, snx spartan
2021-2022 - MetaFactory, Index Coop, CREAM contributor
2022-present - Debt DAO cofounder
CWALK
2015-2021 - TardFi at JPM focused on Securitized Products & Structured Credit
2020-2022 - DeFi degen, Ondo Finance contributor
2022-present - Debt DAO cofounder
Grant Request $
| Role | Budget |
|---|---|
| financial/data analyst | $30,000 |
| Solidity Developer(s) | $65,000 |
| Audit | $50,000 |
| Total | $145,000 |
What the Funds Are For
Research how to implement onchain oracle for tracking DAO revenue over time. Much like Uniswap pool TWAP price oracles were some of the first onchain pricing mechanisms, we belive enabling this TWAR revenue oracle will enable a proliferation of onchain DeFi applications and offchain analytics and insights into the inner workings of DAO finances.
Some DeFi integration examples of a TWAR oracle would be Debt DAO’s use of your average revenue over 3 months and your current amount of debt to generate a DSCR and asses if the loan is at risk or not and programmatically start securing the loan by selling off collateral, increasing interest rates to incentive repayment, or other mechanisms to ensure lender repayment. If we track derivatives like revenue volatility we can build crazy DeFi products like bonding curves for corporate bonds with dynamic pricing based-off revenue volatility from a TWAR oracle. Or automated lines that scale your liquidity based-off revenue projections.
Those are just ideas for Debt DAO specific products for issuing and managing debt instruments. What are other uses for a TWAR oracle outside of what we need it for? Another great example is a fellow grant applicant Nomi and a ton of other projects with similar approaches who could use TWAR data for more accurate predictions of credit scores. Instead of guessing what is real revenue vs airdrop or supply side vs protocol fees, a TWAR oracle lets you know exactly what revenue is coming without needing custom yet redundant code to inaccurately label data. Someone like GalleonDAO could build an index of project tokens based off how stable their revenue is or for the fastest growing DAOs. The possibilities are endless.
The work is divided in three components:
- Research - Research financial statements and interview lenders/degens/DeFi devs to figure out optimal metrics to track for revenue based finance (maybe TWAR isn’t right) to use in our loan.
- Implementation - Start updating Spigot or creating Library for it that will track the metrics according to the spec defined in Research phase.
- Experimentation - Integrate into our LineOfCredit as new form of collateral and try creating new financial products with it.
We will post updates and reports of progress anywhere Moloch demands a sacrifice 
Help Requested
- EVM optimized contract design
Additional Resources, Links, Portfolio
All Smart Contracts
https://github.com/debtdao/smart-contracts
Subgraph
https://github.com/debtdao/subgraph
Webapp