Add some Uniswap LP tokens as Collateral Asset

Hi there,

Should we consider adding certain Uniswap LP tokens as collateral assets?
I think it would make sense to support any pair that comprise two assets already usable as collateral on Compound:

  • WBTC / ETH
  • ETH / USDT
  • USDC / ETH
  • DAI / ETH

In term of collateral factor, I would suggest a 50/50 blended average based on the collateral factor of each underlying token. I would also understand if people argue that the collateral factor should be lower to account for the added risk of having exposure to the Uniswap V2 smart contract.

MakerDAO has been successfully accepting those for a while now, I can’t think of a reason Compound would not do the same. Would appreciate people thoughts.

Thanks

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If the community is interested in pursuing this, I’ve handled risk evaluations for Maker’s UNI LP vault types and am happy to consult :slight_smile: Also all of our work product is open source, available in the MakerDAO forums.

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I think if there is a good candidate in adding assets to Compound, than LP tokens are indeed that. However there are some obvious issues with oracle, as highly doubtful they going to be reported by coinbase anytime soon. And borrow side is also questionable, unless borrow CAP is going to be zero for them. That’s a good idea i think, but likely very far shot.

As for Maker accepting them, it’s a bit of exxageration. From 2,300 M Of collateral at maker total 21 M combined dedicated for all 7 UNILP tokens together (3M each) is more like a test mode than any sort of actual usage as collateral.

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Thanks Monet-supply, I have seen your work on Maker, very helpful! Your insight here would definitely be valuable if the community ever decide to move forward with that idea.

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Hi Sirokko, all fair points.

With regard to the Oracle, I think what they ended up doing on Maker is to use a custom smart contract utilising Uniswap primitives and liquidity reserves to calculate the price of the LP tokens (with prices of each underlying asset based on the median of 6 different exchanges). I don’t know what would be an acceptable solution for Compound though.

With regard to borrowing, it would make sense to me to have the borrow cap at 0, the idea being purely to use the LP tokens as (non-interest bearing) collateral for lending purpose.

I’m sure @monet-supply can probably speak more to this, but I think that $3M limit is contingent on some security audits passing for their LP oracles. Otherwise I’m sure the usage would be far higher as they have been pretty successful.

Regardless, I think it’s a great idea to get this discussion started, as I picture LP collateral becoming a bigger part of the DeFi lending ecosystem and we’ll want to keep this in mind as we fix/improve our oracle infrastructure.

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