AMA with Benqi
On the 10th of November, 2021 at 17:00 UTC, Decentralized Club had the honor of hosting JD Gagnon the CEO of BENQI for an Ask-Me-Anything session on their Telegram page with a community of over 70,000 people. It was hosted by DC Host, Alvis.
The session was divided into four segments. Introductions were made in Segment 1, questions from the Twitter and website community were answered in Segment 2 and 3 respectively, and live questions from the community members in attendance were answered in Segment 4.
If you missed this event and would like to know what BENQI is all about, you can find a recap of the interview here. Information here should be researched and should not be taken as investment or financial advice. Also note that slight edits have been made for clarity, and links in this recap lead to images, documents, or other media.
Segment 1 - Introduction
Hello, 大家好, नमस्ते, สวัสดี, Selamat!
I am Alviss, your host for the BENQI Finance AMA.
I'll be interviewing a guest from the BENQI Team today, JD Gagnon, the CEO of BENQI.
Hey guys! Thank you for having us!
You're welcome to the Decentralized Club and it's great to have you with us.
First of all, What is the creation story of the BENQI project?
We have been in the space in varying capacities for quite some time and have also been working on other products and services for the space.
Primarily, we have a focus on DeFi products with some of us having come from Tradfi backgrounds. With that being said, we had been watching closely for what we believed to be the L1 (or L0) infrastructure that would scale to financial products adoption, and when Avalanche was announced, we jumped on board immediately.
We had been working in the background with the Ava Labs team for some time as we knew that one of the core foundational pieces of DeFi is a lending protocol from which many other DeFi platforms can build.
We had to work on getting the supporting systems in place (an incredible bridge, Chainlink, etc) before our launch, but when all was ready, we launched in August.
What innovative features is BENQI bringing to topple its competitors with similar offerings in the liquidity market protocol sector?
Great question. First, it's worth noting that we don’t generally see competition as a zero-sum environment where either we or they win. We are still so early in the evolution of DeFi that in most cases, solid teams building and iterating on transformative and secure technologies will all find success in their respective areas of expertise.
Our focus is on not only being a lending platform but a DeFi platform of financial products. There are many reasons for this, as I am sure we will cover in subsequent questions, but the core focus here is to create a DeFi destination that is completely compostable within itself that will offer the users multiple options of product and risk categories for different assets such that they can develop risk-managed yield curves in ways that you would see in traditional markets (at least from a risk management perspective). We are also doing this from an absolute stance on risk mitigation at the protocol level, data science entirely driving decision making, and an unwavering commitment to security.
It's worth noting here that competition generally breeds innovation, and we are excited to see the expansion of so many amazing projects and teams into the DeFi space on many networks.
How do we acquire the $QI token and what are the utilities?
The Qi token can be acquired from multiple DEX in the Avalanche ecosystem, namely, Pangolin has the deepest liquidity at the moment. You can also check on the CEX list that is on Coingecko or CMC that shows who is supporting us from that perspective. Notably, at the moment Kucoin, Gate, and Bitmart are options.
As for utilities, building value into the token is of course one of our main focuses over time. First of all the token is a governance first token that provides the opportunity as the protocol evolves to participate in the direction and decision making of the platform. Additionally, we have created single-sided and pool 2 staking opportunities to create additional value in the short/mid-term. As we roll out our additional products, there will be a focus on adding utility to the token through the participation and use of these products.
Are there staking or yield farming incentives on BENQI? If yes, please walk us through them.
Absolutely. Currently, we are participating in the Avalanche Rush program where we are offering not only $QI emissions for staking and farming activities but also $AVAX emissions at least through the end of November for many assets as well.
All deposit assets have a lend emission and many a borrow emission that is in addition to the natural yield/cost of using the platform.
We also have single-sided $QI staking that has a very attractive yield structure at the moment in both Qi and AVAX and lastly we have a pool 2 incentive structure that many have thought is also quite attractive.
Okay. That's lovely
Last question for this segment
What are the major plans on track for completion this year by the BENQI team?
We have a liquid staking product that is currently in Audit. This will of course open up and add a lot of capital efficiency in the Avalanche network, and lead to a lot more freedom of assets for many community participants. We are working diligently to get this product to market as soon as possible.
Additionally, we are launching another product that provides additional security to the platform similar to a “safety module” on other platforms. We have adapted it to our multi-product approach but it allows QI holders to protect the platform through a slashing mechanism, and in return for this risk adoption they are rewarded in Qi tokens that are purchased from protocol revenues of the product suite and paid to these stakers. This creates constant buy pressure from protocol revenues to the Qi token and allows Qi stakers to receive a generous yield that is driven by platform utilization.
Very impressive answers! BENQI Finance is a solid project as it is!
Let's now take some questions from our Twitter community.
Segment 2 - Twitter Questions
How is Benqi planning to minimize the liquidation and smart contract risks?
Twitter Username: @static_current
Great question. Liquidation risk is something that has to be managed by the user depending on their tolerance, experience, and need for the borrowed assets. We have created a simple to understand Dashboard with a focus on clarity for the users so that they can actively monitor their health factors and the associated risk. We always suggest managing this with a careful eye as the crypto markets can move quickly and there are adverse costs to being liquidated of course that nobody wants to incur.
We are also working on an ongoing basis with Gauntlet to assist us in assessing the protocol and the relative asset risks in the ecosystem. As a consequence, all of our collateralization factors, borrow limits, and related protocol controls are monitored and managed with their recommendations. This is of course more from a protocol solvency perspective, but as a secondary benefit helps to protect the users from risks in the best way we can possibly forecast.
As always, people are encouraged to DYOR here as lending is new for many people, and the strategies you see on Twitter are not ideal for everyone.
Smart contract risks are something that our team with many years of smart contract development has an incredible focus on. We have partnered in an ongoing capacity with Halborn who not only audits and monitors our smart contracts but our entire technical capacity for any new vulnerabilities. We work also with Immunifi for a bounty program and have other partnerships to announce soon that monitor our smart contracts for all new deployments, but also assess our existing infrastructure as new risks emerge in the space
Thought we lost you for a second 😆
A satisfying reply
haha, I’m still here. Just want to make sure I give thorough answers here
The second product will be a liquid staking protocol that will allow you to earn staking rewards on Avalanche and unlock greater capital efficiency. This will be launching soon. What are the greater features it plans on bringing on the scene for investors?
Twitter Username: @AbayomiNathani2
Another great question.
So liquid staking allows users that would otherwise use their AVAX for securing the network through delegation or node validation to use the benqi platform to a) still secure the network and receive the associated yield with that activity - good for decentralization and scalability of Avalanche and 2) access that value through a liquid representative asset.
This leads to significantly increased capital efficiency for the network and allows those users to use that equity value in their staked AVAX to now participate in other DeFi activities if they wish.
Of course, this leads to greater locked value in the network as a multiplier effect but allows users to not have to decide between securing the network and using that value to its greatest extent.
It can also support many individuals' tax planning situations depending on the jurisdiction you are in and how that jurisdiction chooses to address this activity.
There are some interesting value adds here for the Qi token, but we haven't released that information publicly yet 😉
The last one for this segment
I read that to use your protocol users should deposit preferred assets that are accepted by the protocol. Can you tell us what and how do you determine the preferred assets? Is it determined by $QI token holders? Can the deposited assets be used as collateral? How does it work?
Twitter Username: @Albertjaison2
Eventually, governance will determine when and how assets are added to the platform.
At the current point, we would love to support all assets that meet certain criteria, and add to the effectiveness of the platform but with some VERY important considerations first:
1) There has to be chainlink support and AB bridge support for the asset if it is not native to the avalanche ecosystem. It is possible to support assets that don't have AV bridge support, but they have additional layers of complexity that have to be addressed. This is critical for the security of the platform.
2) The token contracts and the associated bridging parameters have to be assessed thoroughly by our internal team and by our auditors to ensure that we don't have undefined risk vectors
3) Gauntlet does a full analysis on the asset to determine if and how the asset may be listed and if the liquidity and volume of the asset are sufficient in the avalanche ecosystem to protect users and the protocol from insolvency and market risks.
Most assets can be used as collateral at the moment. As we saw with the QI token though, most new assets go through a guarded launch in that they are first added as a deposit asset only to build up liquidity on the platform and as that accumulates then gauntlet begins to give us the green light to either enable borrowing and/or collateralize it
Now for the website questions
Segment 3 - Website Questions
I read this statement in your Document about BENQI, “The first Liquidity Mining Initiative, LMI-0, will be available to the Borrowing Pool, Lending Pool, and Liquidity Providers for an initial period of 90 days.” I think this will benefit the early adopter of BENQI, so is there any benefit for early adopters apart from it? and what is the most killer benefit that you give to all your users even if they're an early or late joiner?
Telegram Username: @MinxOxyde
So this initiative is to provide an additional yield to the lending and borrowing activities to support their growth as the platform and ecosystem grow.
Anyone can participate in this, as it is currently still active as you can see on app.benqi.fi/overview
This initiative will continue for the foreseeable future but has been broken down into 90-day sprints so we can commit to emission rates for those periods but also work with our data science partners to adapt and iterate the emissions for the long-term benefit of the platform and its users. The space changes at a rapid pace, so we always want to provide our users with confident projections while at the same time remaining able to make adjustments to our schedules at predetermined intervals as the environment changes. We have an article on this in more detail on our medium.
What current token pools are permissible on BENQI and will there be further additions?
Telegram Username: @yuuriti
There are the current token pools on the platform. Of course, we are working on assessing additional pools, and there are a few under consideration and going through Due Diligence at the moment. We will make announcements about additional assets as we have confirmed them of course. You can watch our TG channels, announcement channel, and Twitter for any mention of additional assets here.
Worth noting, we are keenly focused on both macro and multi-chain assets AS WELL as Avalanche ecosystem assets as they begin to meet the criteria. We want to ensure that not only is it safe for the protocol and our users but that there is also a sufficient use case for the asset to be utilized properly.
Can you tell us about the collateral factor and also the liquidation incentive that is given to users?
Telegram Username: @danWickerjil
The collateral factor is the percentage of your deposit asset that you may borrow against it. Important to note, that if you get to the MAX borrow given the collateral factor, even accumulated interest could cause you to be liquidated as you are right at the limit. All of this to say, manage this carefully. The liquidation incentive is not actually given to users, but rather liquidators so that they have an incentive to purchase the assets to be liquidated at a discount and then manage the swap and return of their original capital in profit. This amount can change over time depending on the market conditions but is an immediate cost to the user that has been liquidated —> no Bueno for the user.
The liquidation incentive is key to platform solvency and the protection of other depositors' assets.
A final note on the item above, Gauntlet is instrumental in modeling and advising on safe collateral factors and liquidation incentives for the protection of the platform. The decisions around those items are rooted deeply in the data, modeling, and risk mitigation of the platform
Thanks a lot @alvissandorr
So much for the community to digest
They are always welcome to visit us on our Twitter or in our telegram or discord if they want to chat further about any of these items. The core team is often around for interaction!
Now it's time for the live questions segment
Now it's time for the live questions segment
In this 4th segment, I will open the group for some seconds for the live community to shoot you some pressing questions.
Try to ignore generic, vague, and copy-paste questions 😊
As a measure to deter bots and reward hunters, could you please pick one emoji that will be included in the questions so you can tell original questions apart?
Please use 💎
Unmuting in 3...2....1
---Chat was then opened for the live community to send in their questions---
Segment 4 - Live Questions
Please pick four original questions to answer.
[Yuuri Tielemans Archraf]
incentivizing both borrowing and lending pools is a great way of ensuring the utilization of the BENQI protocol. under what conditions will the already laid down incentives change? 💎
This is a good question. Many circumstances warrant a change of these parameters. Namely: Competitive environment, inflationary pressures on our token, liquidity needs, utilization rates, etc.
All of this is assessed with a keen eye on the data and modeling multitudes of scenarios. We also use this to help us manage risk as well as solvency concerns with the other items that we can toggle
Benqi wants to close the gap between decentralized finance and traditional finances in terms of security, usability, availability, stability, etc. But why did you choose the Avalanche network? Will you support cross-chain interoperability too?💎
Another good one here.
We chose the avalanche for a lot of reasons. Much of it had to do with the consensus mechanism and scalability of the blockchain. In our opinion, Avalanche is very well suited for the adoption of many financial products and related platforms, and in our estimation will be seeing a lot of this development in the coming months/years as the technology works in some unique ways (we can save this for another discussion). In addition to that, the subnet infrastructure allows for permissioned access to protocols but also permissioned validation while still remaining scalable and decentralized. This is critical for us as we plan to add services for traditional financial institutions that require the end-to-end process to be KYC and AML compliant from a regulatory standpoint.
As far as multichain, we have said openly that we are not going to consider multiple networks unless there is a significant value add for our users and for the value proposition of the platform to be fulfilled. We will not be chasing liquidity mining incentives at this time to add a presence on a bunch of networks, but will not entirely rule out additional network support if there is a substantiated reason for it.
How easy is it to use the platform for deposits and withdrawals? 💎
One of the major hurdles that we were wanting to address with a DeFi platform on avalanche was the barriers to entry on the traditional ETH protocols via complex UIs and incredibly high fees to participate. For this reason, we had a lot of expert analysis and input on our UX/UI development and designs such that the process is as clear and simple for the user as possible (while allowing us to continue to build on the functionality of the platform). The speed and cost of the Avalanche network make participating in our platform very smooth and pleasant and is one of the main causes for people trying and remaining on benqi and more broadly Avalanche.
I suggest you give it a try at app.benqi.fi
One more question left 😊
Partnership & collaborations are the backbones in making every project more widespread. Can you list some of your partners with us? 💎
Great question, and we totally agree here. To list a few (not a complete list)💎
Our VC list and Cap table are wonderful and amazing partners
I see familiar names! That's awesome.
Do you have time for one more?
Sure! Pick one last one for us, please!
Okay. Scrolling, so many wonderful questions from the community
Ouu. I want to know about the gauntlet too.
Please what is the main purpose of working with Gauntlet as well as Sushiswap onboard and is this the first lending platform/protocol on Avalanche? 💎
Do you also have any bug bounty challenge on your platform for hackers?
I did cover many of the things that gauntlet does and is responsible for in the initial AMA questions, but totally worth a separate answer here as they are absolutely critical to the platform. I am not sure where Sushi comes in, as we don't work directly with them (gauntlet does though).
Gauntlet is a risk mitigation and data science firm. They model and run simulations for us on all of the assets that we support, and want to support, on the platform. Their primary focus is to assess how that asset will react to a ton of potential scenarios and market conditions, with a specific amount of attention on the avalanche ecosystem as a whole.
We are working with them to ensure that the protocol parameters are set with data to substantiate all adjustments and changes, additions, or deletions.
To give an example of this:
Asset A may have a lot of liquidity on Binance smart chain for example, but be relatively new on avalanche. If we offer support for the asset, but there is not deep enough liquidity on the DEX in the ecosystem or other use cases for the asset, most of it lives on benqi. If the market takes an unexpected or drastic turn, then many users may be in a liquidation position. In this event, we need to know that we can liquidate the asset comfortably and that the liquidation bonus is sufficient enough to manage the risk of the liquidators inside of the ecosystem. As a result of this, Gauntlet will tell us that we shouldn't list the asset, or they may tell us that we can but with very specific restrictions. These are always managed on an ongoing basis which is why you see us make frequent adjustments to the collateral factors, borrowing limits, and whether new assets can be listed or borrowed at first.
Gauntlet also works with us to determine the appropriate levels of emissions for our relative assets and helps us determine and manage our interest rate algos to ensure the platform is protected, our users can be confident in our decisions, and solvency is managed to the best possible extent.
What a journey. We've come to the end.
Thank you so much for taking time out to talk with us today.
It was an absolute pleasure. Thank you so much guys for hosting us!
Any closing remarks for our community?
My poor fingers are running out of juice here, but as I mentioned, we always love to see engagement on our discord and our Telegram channels. So please join us with any questions or just to check out the platform!
Thanks so much, everyone for your time and attention.
Our warm regards to the rest of the team at the HQ working to make BENQI Finance a success!
Until next time, do enjoy the rest of your day.
The AMA with BENQI Finance is now over.