The BarnBridge DAO has proposed combining forces with the contributors and community of FIAT DAO. Should this proposal go through, the goals, contributors, and resources of both organizations would all be brought under one figurative roof. The combined organization would then look to prioritize the development of the FIAT II stablecoin protocol while continuing to scale the Smart Yield application. The aspiration of the contributors involved is that BarnBridge comes to serve as an end-to-end, on-chain banking solution capable of offering credit and sustainable savings. The cost of this proposal spans a range culminating in 6.84% of BOND supply.
Both BarnBridge and FIAT DAO have existing governance structures and deployed applications in production on Ethereum mainnet.
BarnBridge first launched its DAO in November of 2020, with initial product launches for SMART Yield and SMART Alpha coming in March and September of 2021, respectively. BarnBridge has undergone changes in talent over the past year and saw its new contributors ship Smart Yield v2 in Q3 2022. The DAO itself is well-capitalized and its governance token is actively listed on leading centralized exchanges.
Its short-term roadmap is focused on the onboarding of capital to Smart Yield and the development of integrations into further yield originators. Further effort is being dedicated to the launch of a new DAO smart contract architecture, to be deployed on Arbitrum.
FIAT DAO launched in November of 2021 with the initial launch of its collateralized debt stablecoin, $FIAT, in April of 2022. Between April and November 2021, its contributors built out an optimistic oracle solution, a governance architecture based off of Curve Finance and Element Finance’s previous work, and integrations into four fixed income asset-issuing protocols (Element Finance, Notional Finance, Yield Protocol, Sense Finance). Its runway is limited, as is the liquidity of its governance token.
Its short-term roadmap is focused on the development of the FIAT II protocol, a collateralized debt stablecoin backed by a permissionless credit marketplace. This represents a pivot in narrative from its original focus on fixed income assets, but one that technologically will be implemented as an extension to its existing architecture.
While both DeFi projects, BarnBridge and FIAT DAO have operated in separate sectors within the category.
Smart Yield utilizes protocol-owned liquidity to participate in interest rate swaps against external users. It is an epoch-based system in which the variable yield generated by both protocol and user deposits into a specific originator is passed on to the user deposits in the subsequent epoch as fixed income. Each epoch, the protocol takes a cut of the yield earned such that protocol-owned liquidity can grow over time and accommodate larger amounts of user deposits.
BarnBridge has piloted Smart Yield with month-long epochs since September 2022. To reduce the risk of loss of funds, this pilot has only allowed for deposits into Aave lending markets despite limited yield generation. It is expected that total value locked within the system will stand between three and five million by year’s end.
Beyond just building out further integrations for new yield originators, development effort will also be focused on generalizing Smart Yield as a solution for other DAO treasuries.
FIAT II is an extended collateralized debt position-based (CDP) stablecoin protocol. FIAT II maintains protocol solvency through the use of delegated minting capacity for the liquidation of at-risk debt positions. Minting capacity delegation occurs between an elected set of high quality liquid reserve assets **and a permissionless set of borrowing vaults **such that “bad” debt can fall back on “good” collateral. Credit delegation is coordinated by delegators seeking out the highest risk-adjusted returns in exchange for underwriting liquidations. The protocol then determines the interest rates charged of borrowing vault positions as a function of the utilization of the delegated credit.
It is expected that FIAT II will ship toward the end of Q1 2023. Its primary highlights are its capacity for unsecured or semi-secured lending; ability to rehypothecate leading DeFi interest-bearing position for reserves; and offer vertically integrated liquidity through its optimistic convertibility mechanism.