Hi All,
I want to announce a new project we’ve been working for some time now called Ballast that’s tackling some of the biggest problems we see in DeFi today.
- DeFi is incredibly difficult for non crypto-natives
- Yield Farming is riddled with risk, i.e one sided Ponzi’s, non-innovative project clones.
- Trust is inverse to innovation. The more “trusted” a DeFi platform is, the more it gives up in terms of upgrade ability and product development best practices.
A big assumption of ours is that a community of people working towards collaboratively maximizing their gains will outperform any individual(s) doing the same, and at its core, this is what ballast is meant to be, a means for people to pool funds into asset pools that they then deploy together, running each pool as a micro-DAO of sorts.
Thats mission #1.
On the 31st January, we released our community token $BLST on Uniswap by way of an IDO. In any case, the below is much of our white paper.
I would genuinely appreciate feedback and hope you join our budding community.
https://Ballast.finance.
Multistrategy Community DeFi Pools
Abstract
Today, the Decentralised Finance (DeFi) landscape utilizes Asset Pools, staking and its sub-activities to generate substantial yields for on-chain users. However, the capital in DeFi is often under-optimized - requiring active management of funds by liquidity providers to search for the highest yield protocols, act with uncertainty and accrue unnecessary transaction fees. Furthermore, these funds are mostly stuck-on-chain and can’t be used for any financial application that lives off-chain as no simple protocol between the two exists. Decentralized Finance, while promising, lacks off chain impact. Ballast seeks to optimize DeFi yields for on and off chain applications through the use of community run asset pools and poolDAOs that permit groups of people to define their own strategies with the help of Ballast’s rebalancing mechanics.
This paper explores how Ballast will solve these problems by presenting a free, open, decentralized, distributed, liquidity infrastructure, platform, and application programming layer for use in on, and off-chain applications.
DefinitionsAsset Pool means a collection of stablecoins and other crypto assets that have been characterized or exhibit the behavior of currencies, which have been deposited into smart contracts for a period of time. There are intended to be several Ballast Asset Pools, and users can create new ones by spending the platform’s native token.
Liquidity Provider or LP means a person or entity that has deposited cryptocurrency into a Asset Pool.
Yield Oracle means an on-chain service that queries and aggregates APY across various blockchains outside of the ballast ecosystem.
APY means annual percentage yield.
vAPY means variable annual percentage yield.
DAO means decentralized autonomous organization.
poolDAO means a decentralized autonomous organization that governs a specific pool.
Platform means the Ballast ecosystem as a sum of its components.
Proof of Liquidity is the underlying mechanism that mints Ballast Tokens.
Ballast Token, or BALFI, is the native token of the Platform, providing the holder with certain governance rights over the Platform’s poolDAO.
IntroductionThere is a fundamental problem in how liquidity is accessed in traditional financial systems. For example, a fintech company may need to access liquidity to underwrite loans, but that capital often is expensive, difficult to secure, and comes with cumbersome restrictions. Furthermore, retail rates on checking and savings accounts generate 0.5% APY in a “high yield” account. Meanwhile, holders of stable-coins, ether, bitcoin, and other cryptocurrencies will stake those assets for variable yields that are superior to what traditional finance offers and can swing by double digits daily.
Ballast incentivises its participants to deposit their capital into pooled investment funds by providing a mechanism that maximizes their vAPY. These funds are established, updated, and optimized by the pools members while Ballast algorithmically rebalances the deposited assets to the protocols that at any given moment have the highest yield and are within risk tolerance as defined by the liquidity providers through a poolDAO.
The utilization of these pools is further incentivized through the introduction of partner applications. Partners are real companies, who need to tap into liquidity, can pay interest on that liquidity, and can likewise deposit cryptocurrency assets into their participatory pools to maximize their vAPY on assets. Partner pools are created ad hoc for a specific partner organization or a syndicate of organizations, and capital flows through a smart contract that the poolDAO has to approve. If a Partner requires liquidity but cannot provide the needed APY, the smart contract calculates the net-difference between the market and Partner APY. The loss in APY is debited from future partner yields, or the smart-contract is rejected.
In terms of the risks, the proposed poolDAO voting model in this paper mitigates bad actor attacks by limiting the voting power of any individual or group through a weighted coefficient multiplied by LPs. To further secure assets on Ballast Liquidity post launch, the platform will explore how to add on-chain insurance for pool participants to participate in - though we believe that the DeFi insurance sector is still too nascent for any tangible integration.
Underlying mechanismsThe core of Ballast is the Asset Pool. Ballast participants fund a decentralized distributed Asset Pool. This Asset Pool is connected to two Ballast-specific applications, a Yield Aggregator and a Yield Optimization Engine that takes cues from the Asset Pool’s poolDAO where to place assets and how to maximize yield. An Asset Pool can also be connected to an application protocol that can draw against liquidity through a pre-approved smart contract.
Asset PoolsAsset Pools are a sum of cryptocurrencies provided by LPs earning a vAPY through Ballast’s Yield Engine. LPs participate in a pool-specific poolDAO. The “1 token = 1 vote” model is replaced with a levered and tiered system that allows all LPs a voice.
Pools CreationThe community can create new pools by spending BALFI on the Platform; any community member or Partner with enough BALFI can create a pool and set its initial parameters. The foundation sets new pool fees.
Approval MechanismpoolDAO and DAO proposals can be submitted by spending BALFI on the Platform in the form of a standardized contract. The foundation sets proposal fees for pools.
Weighted votingPool voting tokens ($BALFI)/(vt) are lockable for a selectable lock time tl , where tl < tmax, and tmax = 4 years. The voting weight for any LP is likewise adjusted based on the number of assets (a) provided in a pool and the number of LPs in a pool, where average assets per LP equals a/𝛴(lp). The voting weight then would equal: wCoeff = (a/(√vt))(tl/tmax)/𝛴(lp)
Specifically, the weight coefficient seeks to achieve an equitable distribution of voting power while compensating for the sum of assets deposited and the length of time the voting tokens are locked multiplied by the square root of those tokens.
Native Token(s)
$BALFI is developed with the ERC20 standard and created only when there is liquidity in the Platform’s Asset Pools. Its intended use is to provide utility across the network and aid in poolDAO and DAO decision-making. The preliminary utility of the token will be:
poolDAOStaking tokens into Asset Pools will provide use of funds governance. Specifically:
Voting to approve or reject partner transaction proposals, e.g. approval of a rolling credit-line; and
Limiting or expanding yield engine parameters.
Submitting proposals to the poolDAO.
DAOProtocol fees for issuing a new Asset Pool proposal, e.g.:
Creating a new Asset Pool;
Splitting an existing Asset Pool into two Asset Pools; and
Combining multiple Asset Pools in to a single Asset Pool
Community feedback on non-binding Platform proposals and changes, e.g.:
Adding a new stable-coin to a Asset Pool; and
Creation of a new Asset Pool by the foundation.
The proposed utility should be considered foundational in terms of Platform operability. As the technological, social, and business structures utilizing blockchain technology continually develop and will evolve for the foreseeable future, so will Ballast continue expanding on BALFI’s utility. As an example, post-launch feature development includes on-chain-pool insurance exploration / integration.
BLST is developed with the ERC20 standard and has a maximum circulation of 6,260,870 BLST. The token is used as a membership token, and gives those interested in DeFi yield farming strategies access to a private Ballast Discord Channel where members freely share information, strategies, and new protocols. The community will be run as a DAO, and exist beyond the launch and minting of BALFI beings, carrying with it benefits such as access to early features, including a DAO-run investment pool.
BLST distribution will be 57.36% Community, 42.64% Foundation, and released to the public at the foundation’s discretion.
Token Allocation
Ballast believes it is vital that all stakeholders participate in the Platform’s utility to facilitate Platform success. Including, but not limited to, the Ballast community, composed of Liquidity Providers, early adopters, and detectors of Platform vulnerabilities. Other stakeholders include partners who use the Platform for liquidity and the Organization developing it.
The BALFI Tokenomics model is publicly available. (Please see white paper)
Token Supply Over TimeAt t=0 (i.e., launch), the total BALFI supply is zero. The first Asset Pool deposit event initiates the BALFI minting process via a Proof of Liquidity model. Designed to incentivize early adoption and long-term participation, BALFI minting occurs on a logarithmic scale, with diminishing BALFI returns over time. Ballast will use an accelerated model of Bitcoin’s halving mechanism to control BALFI supply.
Spent tokens. Spent tokens are controlled by the foundation, and should be released back into the community for bounties, adoption, or other incentives.
Stakeholder Token DistributionTokens will be distributed as follows. The supply over time is based on allocation percentage.
Liquidity Providers receive 57.36% of the annual BALFI distribution for providing liquidity on the Platform. As the largest holder of BALFI by percentage, their input in the DAO is of significant value, as is their involvement in the poolDAO. This allocation percentage can only change in favor of the community.
Organization The Foundation is composed of representatives from the Community, Platform partners, and the Core Team. BALFI allocation for the Foundation is locked and acts as a safeguard mechanism. The Foundation has emergency authority powers over the Platform and can act independently in the event of an exploit or vulnerability. It also decides how to utilize BALFI spent on proposals and other Platform functions. The Foundation retains a flat 19.8% of BALFI distributed.
The Core Team will appoint foundation members for the first four years. The DAO will be empowered to decide whether to remove or replace these members. At any given time, the Foundation must be composed of at least one representative from each of the Community Partners, and the Core Team (i.e. a minimum of three members), and no one group’s representative(s) shall constitute more than 49% of the Foundation’ members. The Foundation may elect to terminate itself given provisions for the automatic allocation spent BALFI exist, and no sooner than 2027. At this time, the BALFI in the reserves will be distributed to the Community.
Adoption is key to any new platform; for that reason, when LPs add liquidity to the Platform, a variable amount of BALFI (aT) is allocated to them for participating in the Asset Pools and then distributed weekly on Monday 00:01 UTC. When an LP liquidates its position in a Asset Pool, its time spent providing liquidity for the week is calculated into the weekly distribution.
Adoption allocation (aa) is calculated as aa=(d/7))*((aT/52)/𝛴(lp)). aT follows the same BALFI availability model as the Platform, with available allocation for adoption decreasing as a function of time.
Bounty tokens are distributed ad-hoc to those software engineers and developers outside the organization who identify Platform vulnerabilities and offered as community involvement incentives in addition to compensation in Stablecoins. The Foundation may set the Bounty.
The Core Team and Employees are allocated 15.6% of BALFI, and one member of the Core Team shall sit on the Foundation. BALFI initially allocated the Core Team vests over a four-year period with annual cliffs. Tokens allocated to the core team in years 5 on, vest at monthly installments, any member of the Core team no longer with Ballast, loses their rights to the unallocated tokens which are then transferred to the Foundation’s reserves.
Employees’ BALFI (eT) follow the same vesting schedule as BALFI allocated to the Core Team and subject to the following annual allocation formula =(d/365))*((eT/e)) where e is the number of employees.
Investors follow the same vesting schedule as BALFI allocated to the Core Team, except that at the end of Year4, the 259,000 tokens that would otherwise be allocated for Investors are ballooned from the Foundation’s reserves. Investors may also elect to trigger the balloon at the end of the 24th month post platform launch.
Yield AggregatorThe Yield Aggregator queries the APY across various lending protocols, decentralized exchanges, and yield farms. It then aggregates that yield and presents the yield as a current and as a moving average over 7, 30, 180, 360 days, giving the poolDAO data on each protocol’s performance.
Yield Optimization Engine (YEO)Each respective poolDAO can set its Asset Pool’s Yield Engine parameters by selecting those platforms where they wish to collect Yield from - this mechanism allows Liquidity Providers to choose the levels of risk they are comfortable with.
ProtocolThe Protocol is the layer that interacts between the Asset Pool and the application. After a Partner passes due diligence conducted by Ballast.finance and is approved to participate in an Asset Pool, they are asked to execute a smart contract with the underlying terms of the agreement (e.g., loan). The smart contract gets passed onto an Asset Pool that matches the contract’s risk requirements. The poolDAO votes to accept/reject it. If no appropriate Asset Pool exists, a new Asset Pool can be created by the approved Partner by spending BALFI in which LPs can participate.
The risk for the smart contract on the pool can be underwritten by an independent firm selected at the Partner’s choosing, similarly to how security audits are presented to the crypto community or provided by the Partner bare (without an audit). Loans will be collateralized and be liquidated automatically, should LTV pass a threshold that no longer makes the loan sustainable.
poolDAOs can set parameters whether they want to lend collectively or in an ad-hoc capacity specific to each LP’s account. Each loan will be over-collateralized.
Specific technologies related to the movement of liquidity from stable-coin to fiat have been identified; however, a decision on integration has not been made.
Loan Delta VarianceAt present, there is a discrepancy between expected yields within the crypto environment and traditional lending. DeFi APY can fall into a range of .25% to 20%+, while this could be competitive with traditional lending. DeFi applications further incentivize Liquidity Providers with native tokens that hold a floating economic value and can be converted to stable-coins or fiat on various exchanges. To compensate for this delta, Ballast has identified potential models to mitigate differences in APY.
These include a staking instrument by the Partner, where the Partner’s future APY may be redistributed to the Liquidity Providers, resulting in an overall higher pool APY for the post payback period a drawdown and redistribution of the Partner’s BALFI tokens to cover the difference in vAPY. These models are only speculative at the moment and subject to regulation. However, we take the position that the best case will be defined upon the development of the smart contracts protocol with the feedback of all stakeholders.
Platform and Protocol FeesBallast charges a 0.045% fee on all transactions, and a variable carried interest charge on Protocol use of funds.
ImplementationDeFi projects on Ethereum have shown that as the price of the asset increases, network fees become unbearable and exclusionary for most DeFi participants. To decrease entry barriers and ensure the Platform is fair and democratic, a minimal on/off-boarding fee structure will be implemented. For this reason, the Platform will likely be built on Cosmos using the Cosmos SDK Parachain Development Kit deployed on Polkadot in a subsequent version. It will and must be interoperable with the Ethereum network.
Platform Accessibility Liquidity ProvidersWhile the decentralized nature of the Platform and blockchain, in general, facilitates ease in the transfer of funds, we are also aware that bad actors exist on-chain. For that reason, we will be blacklisting those addresses also blacklisted by Centre and Tether and comply with any government agencies to ensure no illegally acquired funds are stored on the network.
We will likewise comply with all applicable KYC requirements mandated by governments with jurisdiction over Platform activities and integrate an AML Oracle to Asset Pools.
Partners and ApplicationsPartners need to pass an approval process to participate on the Platform. The registration process starts with a Partner indicating their desire to become a Ballast Partner with a description of the business and use case they desire to build. Suppose the use case fits with the long-term vision of Ballast and provides sufficient value to the community. In that case, the Partner is asked to complete a registration process where Ballast verifies the Partner’s identity and that of the company (via a KYC/KYB process), the proposed use of funds, and risk profile as defined by Ballast at a future date.
Ballast will review the information and contact the Partner if additional information or documentation is needed. If approved, the Partner will receive their Sandbox API Key to give the Partner access to all features in the sandbox environment. The Partner will use that environment to build its business integration.
Developer tools and APIsDeveloper tools specifications will be released in a technical document.
Disclosures
* The technological, social, and business structures utilizing blockchain technology are continually developing and will evolve for the foreseeable future. Accordingly, the plans, strategies, and implementation details described in this whitepaper will likely evolve as well and, accordingly, may never be adopted. Ballast reserves all rights to develop or pursue additional or alternative plans, strategies for implementation details associated with the Platform.
*DeFi is a new experimental form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments and instead utilizes smart contracts on blockchains. While we conduct due diligence on each platform that we invest in, the reality is that DeFi and crypto, in general, are an extremely volatile asset class.
*Prices of some assets can swing +/- 20% in value in a single day. Investing in yield farming and Asset Pools carries with it liquidity risk, as well as smart contract risk. Software exploits are known to happen. Coverage can be purchased for these assets but decreases returns.
*Crypto is also subject to Regulatory Risk, and due to its relevant infancy, limited guidance exists on national and international regulatory environments.
