Since our launch earlier this April, Thala as a protocol has continued to grow and evolve, becoming the largest native protocol on Aptos with $30M TVL at its peak and $50M in trading volume. Since then, we’ve shipped numerous features and updates, strengthening the existing product suite and introducing new protocol partnerships. With the release of Thala V2 now in sight, we’re excited to unveil the upcoming changes to the protocol. Given the sheer breadth of protocol changes and upgrades, V2 rollout will occur in 3 phases over the next month.
MOD Peg Stability Module
In order to facilitate recursive strategies and further strengthen Move Dollar’s peg, Thala is introducing its Peg Stability Module (PSM), which are effectively interest-free vaults that enable users to swap 1-to-1 between MOD and whitelisted stablecoins less fees. Initially, Thala’s PSM will support Wormhole and LayerZero bridged USDC.
The introduction of the PSM not only solidifies Move Dollar’s $1 peg, but also creates a new revenue source for the treasury. In the future, PSM assets can also be deployed into low-risk, highly-liquid and interest-bearing RWAs via governance.
Since its launch, Thala has continued to differentiate itself from other CDP protocols by offering vaults with exotic collateral types. We are the only protocol on Aptos where users can borrow against LST’s like tAPT as well as the first to offer retail leveraged RWA exposure on-chain.
With the introduction of the PSM and more unique vault offerings in the future, the CDP can be utilized to source more exotic collateral types that offer a unique value proposition to its holders. Protocols with yield-bearing assets such as liquid staking tokens, LPTs, RWAs, and deposit receipts can route portion of their fees to incentivize borrowing against their assets.
By enabling vault farming, Thala can better facilitate and shape its future collateral backing through incentives, and users can earn additional yield on more exotic collateral types through vault incentives.
Flashloans are an important primitive and we’re already incorporating it into a 1 click leverage design for RWAs. Other applications of flashloans allow users to conduct vault collateral swaps; liquidators can also access large amounts of capital through flash loans, providing a more seamless UX on Thala.
- A comprehensive overview of how to execute flashloans can now be found in the protocol documentation: https://docs.thala.fi/thala-protocol-design/thalaswap/flash-loans
- The protocol charges a flat 1bp fee for all flashloans, which accumulates to the protocol fee address.
We’re excited to share that, as of publishing, all phase 1 features are now live on mainnet! Ottersec has completed a comprehensive security overview of phase 1 V2 contracts. The audit report can be found in the protocol documentation.
Thala’s vote-escrow model has gone through additional changes during development. The initial veTHL implementation, which only supported locked LPT (80THL-20MOD), would force users into providing liquidity without an alternative. In order to encourage all users to participate in Thala’s governance, our updated vote-escrow tokenomics now supports both single-sided THL and 80THL-20MOD liquidity pool tokens.
veTHL can be obtained in one of two ways:
- Single-sided THL locked for 2–52 weeks
- 80–20 THL-MOD ThalaSwap LPT locked for 2–52 weeks
Users can lock either of the two to obtain veTHL, which represents a user’s voting weight. This can be calculated by the notional amount of veTHL and the total lock duration. To reward and compensate liquidity providers for potential impermanent loss and higher cost of capital, LPT lockers will receive a multiplier on their voting weight.
A user’s veTHL balance represents their voting weight in DAO governance relative to the total amount of veTHL minted. veTHL marks the beginning of Thala’s transition into a DAO. This means that members of ThalaDAO will be able to vote on important protocol matters, including treasury management, collateral whitelisting, protocol integrations, emissions, and more.
Tokenomics Revamp & escrow THL
High THL inflation allowed Thala to bring new users and TVL to the Aptos ecosystem, successfully bootstrapping over $30m TVL across vaults and ThalaSwap at its peak. However, there is a strong need for Thala to adopt a more sustainable model that also aligns with users. To remedy this, Thala is introducing a major change to its emission model. All $THL emissions, including the stability pool providers and liquidity providers, will earn escrowed $THL ($esTHL), which is an illiquid version of accrued $THL rewards.
To convert $esTHL to the liquid $THL, users must vest their $esTHL for 30 days. However, users have the ability to exit their vesting period early at the cost of a dynamic penalty on their accrued rewards. A portion of the penalty will be redirected to reward veTHL holders for their long-term alignment, while the remainder of the penalty will be returned back to the treasury. Calculations for the dynamic exit penalty and other details will be unveiled closer to phase 2 rollout.
As the largest native protocol on Aptos, we recognize the importance of building up the ecosystem. A missing piece of the Aptos ecosystem we aim to support is new token launches (other than $THL). We currently have ThalaLaunch to facilitate the mechanical process, but for new protocols (including Thala), there are no governance platforms that enable token voting.
Parliament is a DAO governance platform built for and backed by Aptos, allowing protocols and NFT communities to participate in token governance. Soon, protocols will be able to seamlessly and permissionlessly create their own highly-customizable community spaces.
At launch, Thala will integrate Parliament for its DAO governance, allowing veTHL holders to vote on pertinent protocol matters. Thala will be the first to use Parliament for DAO governance, and we hope that other Aptos-native protocols will follow.
Based on feedback following Thala’s own token generation event, we realized the need to provide projects more flexibility in how they wanted to distribute their tokens. For Thala V2, the protocol’s launchpad product will support batch auctions alongside liquidity bootstrapping pools (LBPs).
In batch auctions, there is a set period where users can commit their capital to participate at a pre-fixed valuation. Once this period ends, all commitments are batched and executed at a single clearing price. If there is an overcommitment beyond the cap, all participants will receive their tokens and auction refunds pro rata. The batch auction model, much like the LBP model, has its advantages and disadvantages. With this new product, protocols can better evaluate their token launch strategies with the added option of batch auctions on Thala Launch.
Real World Assets
We’ve been hinting at the release of a new vault product that is far more scalable than our existing capabilities with wTBT and MOD vaults. Based on feedback and existing integrations, we recognize that seamless UX is crucial for scaling RWA products.
With this in mind, we are excited to announce a planned product launch for the end of July. The enhanced RWA product aims to make DeFi applications for RWAs more user-friendly. This improved product boasts several key features:
- A refined user interface for easy navigation.
- Yield is expressed in USDC, providing a uniform and accessible metric.
- One-click recursive looping through the MOD-USDC LP and PSM.
- Secure cross-chain messaging for a seamless, automated user flow and liquidations without manual bridging of assets by the user.
- RWA redemptions distributed back to users as USDC on Aptos.
- Upfront and comprehensible display of yields, including the anticipated leveraged loop yields, to help users make informed decisions.
The overarching objective here is to deliver a simple, yet powerful interface that enables users to harness DeFi for RWAs with ease. Thanks to high liquidity and efficient markets in DeFi, users obtain a significantly reduced cost of debt when compared to conventional alternatives like banks. We strongly believe this innovative product will set a new standard in the realm of DeFi and RWAs and highlight tangible applications of DeFi in real-world solutions.
A sneak peek at the deposit module of Thala’s next RWA integration:
In addition to these core features, Thala V2 will also introduce several quality of life updates, bringing UI/UX upgrades, gas optimizations, among others. Please note that all frontend previews above are a work in progress, and we are open to community feedback and discourse leading up to launch.
Since launch, Thala has continued to ship updates and improvements to its existing product suite, and V2 introduces several new components and features that leverage on the CDP, AMM and launchpad. Given Thala’s success in the following verticals within the Aptos ecosystem, the protocol will soon expand to another untapped DeFi primitive. With Aptos’ first major $APT unlock in October, the protocol will look to expand its product suite and launch its liquid staking token $thAPT later this year. We’re incredibly excited to continue building on Aptos, and look forward to sharing more about the upcoming LST product and other initiatives for the rest of 2023.
Thala is a decentralized finance protocol powered by the Move language, enabling seamless borrowing of a decentralized, over-collateralized stablecoin in Move Dollar and capital-efficient liquidity provisioning via a rebalancing AMM on the Aptos blockchain.
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