RFC: Deploy Euler to BNB Chain

Title: RFC: Deploy Euler to BNB Chain

Author(s): AdamBNB on behalf of BNB Chain Foundation

Related Discussions: N/A

Submission Date: 18th Jan 2023

Summary

The BNB Chain team proposes the Euler community to support the deployment of the project on BNB Chain. We believe that the goals of BNB Chain and Euler align perfectly, turning a possible collaboration into an event that could prove quite fruitful for both parties. In this proposal, we will develop the rationale by which we believe this to be true.

BNB Chain is fully supporting the Euler community and its contributors on its vibrant journey and fully understands how challenging the development of a top project might be. Keeping up with the market requires intense work from the developers, management, and the community. If we add to these challenges new collaborations, there are numerous incentives to align and puzzle pieces to fit. Therefore BNB Chain remains mindful of Euler’s development and plans, leaving open to Euler DAO and its community when a deployment on our chain would best fit their roadmap.

BNB Chain

BNB Chain is a decentralized Layer 1 EVM compatible that uses Proof of Staked Authority (PoSA) as the consensus mechanism. At the time of writing, it has 26 active independents validators, we are looking forward to increasing (to 41 active validators) this number in the near future. In Q3 the Nakamoto coefficient of the network has increased to 8, a figure that falls within the industry median. BNB Chain is composed of the BNB Beacon Chain (previously Binance Chain) and BNB Smart Chain (previously Binance Smart Chain). BNB Chain is known for its short block time – the average block time is 3 seconds – and low fees.

BNB Chain has a wide and active DeFi Ecosystem with the second largest TVL after Ethereum. The biggest project – in terms of volume and TVL – is PancakeSwap, the DEX with the third highest TVL (~$2.3B) across chains and also has one of the highest daily volumes granting a high degree of liquidity to many supported assets. Other dexes such as BiSwap, DODO, and iZumi also play an important role in the ecosystem, enhancing the liquidity available on the chain. Venus is the most important BNB lending project with about $700M in TVL (4th biggest lending protocol). Since September, Liquid Staking has been gaining more and more traction, by delivering new use cases to the holders of BNB. Wombat is the largest stableswap protocol on BNBChain. With a TVL of more than $100M, it has been able to handle volumes of more than $400M on peak days. These are only a handful of the hundreds of Defi projects that exist on BNBChain, which is the second most active DeFi protocol after Ethereum. The trading volume of BNB DeFi Dapps is also among the highest across chains.

The greatest strength of BNB Chain is its community and user base. BNBChain is the chain with the most daily active users, the most transactions, and also the chain with the most unique active wallets. We believe that the chain’s greatest asset is this community.

Data

  • BNB Chain had 1M DAU and an average of 2.5M to 3M transactions per day during October. During Q2 of 2022, BNBChain had 427,134 unique active wallets, which accounts for 20.26% of all UAWs
  • In Q3 of 2022, BNBChain was the second biggest DeFi chain with a TVL of $7.6 billion, experiencing a 28.67% increase from Q2 2022
  • At the time of writing BNBChain TVL is ~$6.7 billion; the chain has not experienced significant outflows and the decrease in value locked can be mainly attributed to the sharp decline of crypto asset prices after the market events of the second week of November
  • BNBChain’s TVL market share has been steadily growing since January. On May 15, the BNBChain TVL market share was 6.7%. Today it holds over 9%
  • The main assets by volume are BNB, BTC, ETH, CAKE, BUSD, USDC, and USDT, which could be considered for the first batch of assets composing the initial GLP pool on BNBChain. Nevertheless, we remain open to suggestions
  • BNBChain also supports a large set of wrapped or pegged tokens that could be relevant for Euler lending pools (ETH, BTC, … are within this list)

Technical framework

Chainlink, Pyth (through Wormhole), Binance Oracle, and The Graph fully support BNBChain. Nodereal, Ankr, InfStones, Quicknode, and Chainstack are the public RPCs and BSC Scan is the reference token tracker of the network.

BNBChain actively audits the network and its smart contracts with a robust set of security providers. Some of the audits have been performed by PeckShield, VeriChain, CertiK, and Quantstamp, and their results are publicly available. BNBChain runs several initiatives focused on security such as Avenger DAO, a community-run security infrastructure project designed to protect users on BNBChain from possible exploits, scams, and malicious actors.

Motivation

The BNBChain team has been closely monitoring Euler’s development over the past few months, watching how the Euler protocol has been hitting one milestone after another. The fact that Euler has been one of the lending protocols that has experienced the best performance during this year marked by bearish sentiment has not gone unnoticed. We believe that this behavior has been similar to that of BNBChain, which has strongly established itself as the second chain in all the most relevant metrics, ending the year with a TVL market share of almost 10% across chains, having started the year at 6%. This strength has made it clear that both projects are in high demand, so we believe the time is right to collaborate more closely.

BNB is the second chain with the most TVL, at the time of writing these lines, more than $5.2B, holding a market share of more than 9%. The success of Venus proves the demand that there is in the chain for solid lending projects and the capital available in it. BNBChain is the native chain of projects such as Pancakeswap or Alpaca, with which any project deployed on the chain can generate interesting synergies. This is the background that we believe Euler’s governance must take into account when assessing this proposal.

On top of this background, we want to add some more color to our value proposition for Euler. BNBChain is completely EVM so the deployment in the chain would be easier, in addition, the BNB team remains at the disposal of Euler DAO and its contributors to make the development and deployment as smooth as possible, either with their means or by contacting them with the relevant teams of our ecosystem.

Additionally, we believe that one of the most important points is the user base of BNBChain, considerably different from that of Ethereum or its various scalability solutions. BNB is the reference chain for retail, Euler would have access to a totally different pool of users and capital that he could capture with his deployment. This user base combined with a permissionless listing protocol could generate some interesting activity. BNB would also add an extra degree of geographic diversification of both users and capital to its existing offering. Lastly, Euler could use both BNB and BUSD, two of the most demanded assets with the highest volume and liquidity in circulation.

We believe that this set of facts justifies our proposition, as well as what is the value proposition and USP of BNBChain. For our chain, the benefit of bringing in Euler is clear. Being able to offer our users one of the lending projects that has not only been consistently delivering in recent months but has also managed to solve various inefficiencies in the lending market. Euler has focused a large part of its development not only on improvements in financial design (for example, the two-sided risk-adjusted borrowing capacity) but has given great importance to the protection and security of its users, from their depositors or debtors to their customers. liquidators, implementing an innovative model of MEV-resistance liquidations. BNB users would greatly benefit from Euler. The landing of a new player of Euler’s level would also encourage competition in the ecosystem, which will bring us one step closer to the path of efficiency and increased security.

Implementation

The Euler deployment on BNBChain would be a full deployment of all Euler functionalities. It is up to DAO to propose which assets would be the first to be used in the lending market. We invite Euler governance to discuss this topic on this channel.

Collaboration

To ensure the success of Euler on BNBChain, BNBChain could carry out a series of initiatives and promotions. These initiatives range from joint promotion (once the minimum requirements for security and other parameters are met), AMA, and joint-twitter spaces to putting the Euler Labs team in contact with ecosystem partners. Any initiative that the Euler community believes can strengthen the position of the protocol in BNB is more than welcome to be discussed in the forum.

Conclusion

In this proposal, we have tried to present as clearly as possible what BNBChain’s value proposition is for Euler and how we believe that a collaboration between both projects could generate a more than positive impact on both ecosystems. We have addressed the most relevant information as well as concerns that we have encountered in the past. Even so, we remain at the disposal of the governance to discuss possible issues or proposals that may appear by kicking off this discussion. We hope this is the first step in a fruitful and long collaboration.

Voting

Should this proposal pass the temperature check, we suggest voting in two ways:

Yes: deploy Euler to BNB Chain

No: make no changes

5 Likes

Documentation and relevant links

Website

Documentation

Github

Twitter, Discord, Telegram

1 Like

You guys made my day, I will be voting in favor of this proposal.

2 Likes

There could only be one collateral asset with enough liquidity (BNB) given that BUSD, ETH, BTC and other stablecoins rely on the BNB bridge/Binance admins. This means the latter assets have strong trustful assumptions built in and could be cross-collateral assets at best.

Take Venus as a proxy: overall utilization has been at <10% (source: Venus Lending Analysis - BNBChain) since the Luna collapse in May, suggesting there is not a strong borrower activity on BNB overall. Also, BUSD is the most borrowed asset on Venus but there is not a great precedent for BUSD on BNB chain given that Binance itself has admitted the bridged asset has been undercollateralized at times.

All in all it seems the benefit for Euler is too marginal for the implied risks (centralization and bridged assets).

4 Likes

OK so here’s a very important issue: split liquidity.

Are we prepared for this?

Deploy to Any EVM chain(not ETH roll-up/l2/l3) would suffer from split liquidity. Of course if there’s any compensation from BNB eco-system then let’s talk and here.

I personally still prefer ETH’s L2/L3 solution.

1 Like

I’m agnostic on this, but here are some questions that would need to be addressed:

  • Who governs the BNBChain deployment of Euler? If it is this DAO through its tokenholders, how does Euler incentivize borrowers on BNBChain with EUL, through BEP-20 bridged EUL? (same issues as @stechastic mentions)

  • Would a separate gauge system be deployed for the BNBChain deployment, or should the gauges communicate with one another? (there are protocols with tooling for cross-chain data processing like Meter Passport and Multichain)

  • Does the DAO recommend deployments on a first-come, first-served basis, or should there be a strategic plan for multi-chain deployment that weighs liquidity fracturing, expansion of the user base, and security/infra/tooling of the various chains?

That said, if this goes to a vote, even with these questions answered, I am likely an abstain.

2 Likes
  • Would a separate gauge system be deployed for the BNBChain deployment, or should the gauges communicate with one another? (there are protocols with tooling for cross-chain data processing like Meter Passport and Multichain)

Aren’t the borrowing incentives distributions calculated off-chain anyways?
I feel like then it should be easy to enable them cross chain.

Question for EULER team on the non ETH L1 deployment. What type of oracle that will be used? Are you guys still gonna allow permissionless listing for borrowed asset?

I’m not that familiar with the BNB ecosystem, and I think that’s not just for Euler Labs to decide, but on a technical level, my guess is oracles would need to based on some kind of BNB-native solution. A quick google shows they have Binance Oracle, which I assume is the de facto oracle of choice there for now.

As far as I’m aware there’s no DEX on BNB yet that would enable permissionless listing. PancakeSwap is a Uni v2 fork and doesn’t provide the right type of oracles to enable this. So I guess it would have to be more of a governance-listing process.

In that case i would vote no.

Kinda pointless to spare resources for limited deployment on BNBchain. I think the last thing that Euler governance want to do is discussing every single asset to be listed on the platform

Note that this will be true for all L1 and L2 future deployments in all likelihood. Even on networks where there’s a Uni v3 deployment, it most likely won’t have enough liquidity to justify being used as an oracle.

I think the easiest solution is to start with an initial set that is pretty comprehensive, and then add/remove assets later on an ad hoc basis. Basically the same as how Aave and Compound do it.

Then i guess we need to be very selective on the deployment. My other concern would be most high volume asset on binance coming from binance wrapped asset. Having euler listing those asset is essentially transferring wrapped asset risk into euler.

would prefer arbitrum deployment as of now and revisit bnb deployment after eulerswap

Is this making any sense?

Some thoughts from me:

I support this RFC because it would bring a whole new range of users that Ethereum mainnet lacks: retail, particularly from APAC and LATAM. While it’s true that Euler would face stiff competition from Venus and that utilisation there tends to be low, Euler would bring innovation that could change that.

Products

Namely, apart from an initial launch with the top assets like BNB, BUSD, USDT, BTCB and ETH, Euler should consider adding staked BNB products as collateral to enable levered basis trades similar to stETH/ETH. This has the potential to foster lots of activity and fees for the DAO.

These products already exist and developed by guys like Stader Labs and Persistence.

While permissionless-ness would be great, activity would likely stem from top assets that tend to have a Chainlink oracle. This would make deployment easier and help reduce oracle risks for users.

Deployment

Some fair points were brought up, namely governance and rewards. Given how different the eco-systems are, I would prefer to rely on more specialised delegates responsible for that particular chain than have everyone vote on every single parameter change. Basically, I think a more “local” government would make sense for this.

Rewards should be given only if it can tangibly increase activity and excitement amongst the BNB user base. I will need to think about this a bit more, but leaning towards it.

Overall, I don’t think this deployment would prevent Euler from pursuing other deployments like Arbitrum. We would have to figure out how to operate Euler multi-chain at some point anyway, so might as well start now.

4 Likes

For what it’s worth, Uni V3 is in disucssions to be deployed there as we discuss this post. Their first temperature check is overwhelmingly in favour. Snapshot

This is the necessary infra that would allow permissionless listing. It may take some months though.

4 Likes

It seems like there is a lot to work out on this:

-Listings and who will control them
-Oracles
-EUL rewards
-Borrow appetite from retail

Tapping into a new market is a bold move (I like it) but does that mean we will start pushing marketing resources in that direction too? Algo sobre lo que pensar.

1 Like

Hello everyone!

I will be happy to address some of the questions of the community!

Liquidity wise there are more assets than just BNB that could be used as collateral, ETH, BTC, BUSD, USDT, USDC, and probably even CAKE to name a few.
I was not able to access the link that you shared as a source, and not sure what you mean by utilization has been at <10%?
Venus is doing quite well to my knowledge and given their TVL, looking at absolute value is a good indicator of the benefits if Euler deploys in BNB Chain !
Addressing also the concerns for the implied risks, this is to my knowledge the safest way to bridge assets (totally open to hearing alternatives here)

Thank you @chainguys for raising this point!

Actually, we do not wish to split the existing liquidity and this is why LM incentive will be the least favorite promotion tool in my view (open to community opinion).
The reason why we are excited to publish this proposal is that a lot of capital holders on the BNB Chain are showing strong interest in diversifying their investments.
We expect that fresh liquidity brought by our marketing & communication effort will be the main source of capital and we will be aiming at reaching 100M$ one the first weeks after launch. Additionally, it will be inevitable to have some cannibalism towards existing lending protocol but in a longer-term view, it will be mutually beneficial for all.

On top of @river0x hints, Chainlink, Pyth, BAND, API 3 are oracles available on the BNB Chain. We as you can see are very committed to supporting TWAP Oracles ASAP and enabling permissionless listing!

3 Likes

If there is a need to prioritise what chain Euler should be deployed first, I would definitely opt for BNB.

Although I share concerns expressed by other members above, imo BNB chain could bring a brand new liquidity to Euler, unlike L2 solutions that are mainly focused on the Ethereum ecosystem.

Despite being highly centralised, BNB ecosystem nevertheless has proved its viability and strength. Im note sure that most of L2 will next year as popular as they are now.

1 Like

On “local government” of deployments outside of ethereum, there is definitely room to innovate on this, but at the same time probably not worth significant effort from Labs relative to other priorities.

That said, in terms of existing models for chain-local vs cross-chain governance, I can name one model that I dislike a lot and one that I dislike less:

  • When bZx went multichain (BNBChain [BSC at the time] and Polygon), they deployed new governance tokens for each chain. They even had the brazenness/gall to give them the tickers BGOV and PGOV. These tokens were aggressively farmed and dumped on AMMs, making the tokens practically worthless; meanwhile, with no external demand, governance on those chains remained highly centralized.
  • Hundred Finance started as a Compound V2 fork but now has cross-chain deployments and cross-chain message-passing capabilities through Multichain’s anyCall. Their governance is mediated by an anyCall-wrapped version of their HND token called “mirrored vote-escrow HND” or mveHND. Basically this lets holders govern cross-chain with mveHND and vote for gauges on different chains, without having to shuttle the raw governance token across chains when they want to change their gauge vote. I am not a fan of veTokenomics in general, but I do think Hundred’s cross-chain gauge model is the “harder” solution to this cross-chain governance problem that Hundred seems to have already worked out.

I think this is a good time to get a temperature check on this. Clearly a lot of interest at this stage.

Deploy Euler to BNB Chain
  • Yes, in favor of the proposal
  • No, against the proposal
  • Modify the proposal

0 voters

2 Likes

Thank you for proposal. Being multi-chain I think is the big feature for lending protocols.
But:

  1. It’d be pleasure to see more other numbers about BSC chain usage, lending markets.
    Unfortunately, I heard some stories how usage on BSC chain was manipulated.

  2. Euler Labs will have to dedicate a lot of its resources to another EVM Chain. While the team is still small, it might be better to pay attention to L2, right? I mean, it would require much less resources.

  3. BNBChain Foundation offers not enough resources for Euler successful launch.

Venus have been supporting by Binance team since launch (Launchpad; I suppose, liquidity). It has 90% of lending TVL on BSC. It looks like a not competitive game even after Venus was hacked. I ain’t sure that Euler can compete by simple launch, because even on Ethereum it has ~5% market share with incentivised markets.

1 Like