HIP 3 - Volkswagen Microbus Collateral Onboarding

Proposals
1

Summary

This improvement proposal aims to form a strategic partnership with Finance Ventures, allowing the “VWMBp” token to be integrated into the Hifi Protocol as collateral. The intent is to facilitate Finance Ventures’ ability to extend credit to its borrower, Kevin Bradburn, using Hifi Protocol’s DeFi infrastructure, with a collateral ceiling of 10 VWMBp token, a fixed oracle value of $65,000 USD per VWMBp Token, and a 125% collateralization ratio (80% loan-to-value).

The VWMBp Token is a digital representation of an extremely valuable vintage Volkswagen Microbus. Finance Ventures will be originating a loan to the owner using the vehicle as collateral. Capital for the loan will be sourced from the Hifi Lending Protocol. The VWMBp token cannot be liquidated on-chain, but if the borrower defaults there are provisions in the contract for liquidation of the real-world asset.

Details

Under the proposed Agreement of Association, Hifi DAO will enable Finance Ventures to leverage the Hifi lending protocol by utilizing the VWMBp Token as collateral to secure credit represented by hTokens.

As per the agreement’s conditions, there will be a collateral ceiling of 10 VWMBp tokens, which will have a fixed oracle value of $65,000 USD per VWMBp Token, and a 125% collateralization ratio. The collateral ceiling is set as a cap on the credit extended to Finance Ventures in this agreement.

Upon this proposal’s success, Hifi DAO will execute the necessary variable changes to the Hifi Protocol’s Fintroller. Hifi DAO will also enter into a legally binding Agreement of Association with Finance Ventures which can be viewed here.

To safeguard Hifi DAO’s interests, Hifi DAO will designate Mainframe Group Inc. to monitor Finance Ventures’ monthly financial updates. Finance Ventures is required to comply with specific loan eligibility criteria to ensure only high-quality loans are financed, and they must also provide regular monthly reports.

In case of a default by Finance Ventures’ borrower, an explicit collateral liquidation process is in place to ensure the recovery of the outstanding hTokens. More information about Hifi’s framework can be found on the blog, here.

Benefits

Expanding Hifi’s Utility: The partnership with Finance Ventures and integration of a real-world asset, with a defined collateral ceiling, showcases the utility of the Hifi lending protocol in facilitating credit extension for real-world assets while managing risk.

Establishing Strategic Partnerships: The partnership with Finance Ventures allows Hifi DAO to expand its reach and engagement within the DeFi sector and traditional finance.

Risk Management: By establishing a collateral ceiling and a fixed oracle value, the proposal provides a balanced risk management approach while ensuring transparency and stability.

Voting

To approve the proposal, facilitating Finance Ventures to extend credit to its borrowers via Hifi protocol with the specified collateral ceiling and fixed oracle value.

To disapprove the proposal, maintaining the current operational status of Hifi DAO.

Voting Period: 2 days

Effect

Upon majority approval, Hifi DAO will execute the partnership agreement with Finance Ventures and take the necessary technical steps to integrate VWMBp Token into the Hifi Protocol with the set collateral ceiling and fixed oracle value.

If the majority vote disapproves, no further action will be taken regarding this proposal.

It is recommended that DAO members review the full agreement for a comprehensive understanding before casting their votes.

This proposal will go live in the next 24 hours and this post will be updated with a direct link to the proposal on tally.

Edits

Jul 11

  • Changed VWp → VWMBp (Changed name to reflect actual token symbol.

  • Added link to VWMBp

2 Likes
2

Well written proposal for consideration.
Is there any further detail available towards Finance Ventures e.g. who are they, their background etc?

3

How did the team settle on 80% loan-to-value for the agreement? Are there any market comps to support that level?

4

6.2.b of the contract seems very friendly to the borrower. I am curious how these terms were agreed to.

Does 6.2.b.4 of the contract imply there are current liens against the asset? Has a title check been reviewed and discussed publicly to confirm the asset is unencumbered?

Has the team compared the default sale and repayment clause to other market comps to ensure the waterfall is considered fair to the lenders and the borrowers?

5

Hi Everyone, not a lawyer; However the contract, I believe is a solid agreement with balanced terms. Feel like the default provisions strike a fair balance, protecting the lender’s interests while allowing some flexibility for the borrower; ensures accountability, offers room for resolution, and considers unforeseen circumstances & promotes a collaborative approach. Let’s embrace this opportunity to onboard real-world assets & work together to update and enhance the contract as we gain momentum. Exciting times ahead! once we do this once, it allows us to do it again and again and again, and again. We will grow our TVL so big and be unstoppable!

3 Likes
6

After re-reading the documents, while I’m still not a fan of the default language as drafted, given sections 4.5, 6.5 and 6.6 I am comfortable with moving forward in support of the vote.

In future, I request more time between announcing a vote and the actual vote to ensure the community has time for due diligence and proper Q&A. This feels very rushed to me.

3 Likes
7

I would also request that information be more organized and presented in such a way that allows for a thorough review by the community and to ensure that all information is made available.

Transparency of information is something that is also worth reviewing further, especially given confidentiality clauses in the legal agreements. I believe there might be issues in the way information is presented for future votes, in part, due to these confidentiality clauses and the community’s need for transparent information.

8

I agree, this proposal feels really rushed. I would of thought the team would of allowed more time so people can get professional advice before voting.

9

Under the ‘Documentation’ section, I believe it’s crucial that we encompass elements such as title, registration, insurance, and inspection. In relation to the lien, how will this be displayed and who will be responsible for reporting this information to the DMV? What assurances do we have to prevent potential manipulation of title by other parties?

10

Great question @HarambeNeverForget. Yes this is exactly how we arrived at 80% loan-to-value. This is standard for this type of vintage collectable automobile.

11

Yes, happy to provide additional clarity here @jaydubb.eth. Our objective here is to prototype out the legal frameworks and demonstrate that it works. To achieve this, we’ve simplified things as much as possible. So Finance Ventures is a simple LLC that I own and control. If things go well in this demonstration, there will be a more formal entity put together with strategic partners similar to what we have in Crown Ribbon, and that will replace Finance Ventures LLC in future RWA deals. I’ll also note that I do not expect Finance Ventures LLC will bring me any financial benefit.

3 Likes
12

@doug I appreciate your reply. What information can you share with the community that supports that statement? Having you tell us that is standard is one thing but I believe the community needs proof that it is the standard as well.

13

This is very helpful to understand. Thank you for sharing.

14

There are not current liens, but we will be adding a lien to it as a part of our processes here. The relationship here with Finance Ventures is such that FVLLC is to represent the DAO’s interests in servicing the Debt FVLLC has between it and Kevin, here. It might be a bit dense, but this blog post outlines our framework.

1 Like
15

This is fair feedback about it feeling rushed. Our blog posts have been surfacing the most important aspects of this proposal weeks before creating it. You may have the wrong expectations in what role you need to play during this time. We’ve hired lawyers to draft these agreements and ensure the DAO interests are protected. We do not expect our community to fill that role, it should be done by professionals. As these proposals scale what we are trying to build is a set of processes where DAO members can feel their interests being represented and protected. We are currently at the prototyping stage. So it’s very helpful to understand what we can improve on and what are the best ways we can scale these proposals. Our general approach has been to pattern after other DeFi projects we trust in the space.

2 Likes
16

@HarambeNeverForget If you can articulate how I can provide that I’d be happy to put a reasonable effort forth. My guess is that it would still be the community trusting my representation of what’s been represented to by someone with industry experience. This is how we got to these numbers, so not sure it provides any additional assurances.

It may also be worthy of note that currently, resources being risked on this loan are supplied 100% by the core team, so we are the only one’s with financial exposure as lenders today.

17

I’m definitely leaning towards the overly critical as I’m used to being the backstop for professionals that make mistakes. I believe this is an example of where information transparency and clarity will help the process, even when it comes to someone like me being hypercritical. While I’m trying to be helpful, at this stage, the help may not be so helpful but without understanding the full structure I wouldn’t know that. You control FV. [xyz] law firm drafted the legal agreement. Pricing and valuation information was sourced from [I forgot the name of the source as I’m typing but someone reputable]. The collateral % of 80% is market standard and here are a few comps to prove it.

Basically, a clear assumption book would clarify a lot of this.

18

Checkout our framework blog post The traditional lender in the blog post is Finance Ventures in our circumstance here. They will be representing the interests of the DAO and servicing the debt. We have all the reassurances afforded us by the US legal system and the legal agreements each party is entering into.

Finance Ventures LLC will be putting a Lien on the title with the DMV. They also have verified and have in writing evidence of a current insurance policy that covers it for equal or greater value than the appraised value of the vehicle. The borrower is required to maintain this policy for the duration of the loan.

19

I admitted in the discord that this is not my direct area of expertise and others confirmed 80% was also standard. For those not in the market, a few examples of loans showing 80% lending rates or a signed statement from a professional from a reputable lender would also be helpful. For now, I’ve done enough to get myself comfortable but I would expect others might not have done the same work.

1 Like