Problem

The current paradigm in protocol design, token engineering and standards does not incentivise the development of Ethereum ecosystem for the web3 consumer.

• Poor tokenomics and token engineering has led to the launch of volatile tokens, that in some cases have been over-leveraged to bring down the overall ecosystem e.g. FTT.
• Yield generation or yield farming has encouraged ponzinomics and not focused on producing real value or real yield for web3 consumers
• Risk modelling in DeFi has primarily focused on financial risk and systemic risk, while ignoring neglecting the risk of the individual consumer. This is in part due to a lack of competence/skillset in the space.
• The token standard (ERC20) is an administrative standard, it is not a security standard and is seen as some as designed to facilitate the airdrop economy within web3

Solution

The proposed solution to the problems outlined in the previous problem statement includes several innovative strategies:

Firstly, a tokenless protocol that utilizes stablecoins will be developed to create a more stable and secure platform for the community. This approach will reduce the risks associated with launching tokens and provide a more reliable source of funding.

Secondly, a new form of "real yield" will be introduced through premiums paid by real people into risk pools. This approach will provide a more dependable source of yield generation, enhancing the financial sustainability of the DeFi space.

Thirdly, a decentralized autonomous organization (DAO) will be created to support a consulting-like organization of risk modellers, actuaries, and data scientists. The community will vote on the most critical risks, and the best risk modeller will receive a percentage of the risk pool, as written into the smart contract. This approach will ensure that risk modeling is more targeted and informed by the community's needs.

Lastly, temporal and locked liquidity pools that vary based on risk level will be developed. This approach will enable users to make more informed decisions on the risks associated with particular investments, providing greater transparency and accountability.

Collectively, these solutions aim to enhance yield generation, risk management, and overall stability within the DeFi space.

Proposal

Project Plan: Innovative Solutions for Yield Generation and Risk Management in DeFi

Objective: To enhance yield generation, risk management, and overall stability in the DeFi space by developing innovative solutions.

Timeline: 18 months

Phase 1: Concept and Design (3 months)

• Conduct market research and analysis of existing DeFi platforms and solutions.

• Develop a detailed project plan, including milestones, timelines, and resource allocation.

• Form a project team, including developers, risk modellers, actuaries, and data scientists.

• Develop the concept and design for the tokenless protocol that utilizes stablecoins, the risk pool, and the DAO.

• Finalize the design for the liquidity pools that are based on "frequency and severity" calculations in risk and insurance.

Phase 2: Development (9 months)

• Develop and test the tokenless protocol that utilizes stablecoins.

• Develop and test the risk pool that is built on different chains and maintains consistent funds based on stable currencies like USDC.

• Build the DAO and develop the voting mechanism for community input on the most critical risks.

• Develop and test the liquidity pools based on "frequency and severity" calculations in risk and insurance.

• Integrate the different components of the project and test the overall system for functionality and reliability.

Phase 3: Launch and Deployment (6 months)

• Launch the platform and initiate marketing and outreach efforts.

• Continue to refine the system based on user feedback and market trends.

• Expand the project by integrating with other DeFi platforms and protocols.

• Develop partnerships and collaborations with other organizations in the DeFi space.

• Continue to build out the risk pool and add new stable currencies to support the overall ecosystem and reduce systemic risk.

Resource Allocation:

• Project team: 6 full-time employees (developers, risk modellers, actuaries, and data scientists)

• Infrastructure and technology: servers, software, and development tools

• Marketing and outreach: advertising, community engagement, and events

• Legal and compliance: legal services and regulatory compliance

Note: The resource allocation and project timeline are estimates and subject to change based on the needs and requirements of the project.