Retail credit: FlexiFi Risk Management for Ajna Users

Grant Proposals
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Retail credit: FlexiFi Risk Management for Ajna Users

Request

Receiving Address: FlexiFi.eth (0xDc7bA8f7fFA067208ecE163853b4D7105F7428a9)
AJNA Amount: 10,000 € (about 1,500,000 AJNA tokens at current market rate)

Applicant and Team Information

Applicant Name: FlexiFi.xyz
Email: ajna-grant@FlexiFi.xyz
About you and/or the team:
We are prgm.dev, a trio of engineers, specialized in building software products. We help companies build software they need end-to-end, and occasionally enjoy building software ventures of our own. We are the team behind FlexiFi and own it 100%.

Additional Links:

Project Information

1. What is it?

FlexiFi is a 100% on-chain risk management solution for borrowers.

It provides an interface for users to easily protect their existing borrow positions through automated mitigation strategies, like:

  • adding collateral using wallet funds
  • repaying debt using wallet funds
  • selling collateral to repay debt (partial liquidation)
  • rebalancing positions on DeFi protocol to balance risk

Additionally, FlexiFi aims to introduce tools that will enhance borrower’s user experience, like notifications for important events and repayment planning.

2. What problem is being solved, how?

FlexiFi addresses issues for two types of borrowers:

  1. For existing Ajna users: Many rely on a set of manual systems and tasks to manage their risk. FlexiFi enhances their experience by automating and streamlining risk management processes.
  2. For potential new users: The mental load of managing collateralized borrowing deters many from participating. FlexiFi aims to make DeFi borrowing more accessible by offering a user experience comparable to traditional finance.

Key benefit: FlexiFi’s approach is particularly valuable for users of DeFi-based debit cards, such as Gnosis Pay or Holyheld. By pairing with Ajna, FlexiFi can effectively transform these debit cards into credit cards, opening up new possibilities like buy-now-pay-later schemes in the DeFi space.

3. How will this project be a source of growth or success for Ajna? Please include a step-by-step summary of how you imagine the completed project will affect Ajna.

FlexiFi will contribute to Ajna’s growth and success in the following ways:

  1. Improved borrower experience: While Ajna faces usability challenges primarily on the lending side, FlexiFi addresses the borrower experience. This approach helps overcome the chicken-and-egg problem where a) new pool requirements discourage lenders, and b) automated management solutions are not spontaneously developed by lenders as they would not be profitable enough to be worth the upfront dev cost. While we wait on solutions like ARK to solve the usability issues on the lending side for everyone, FlexiFi will take care of making borrowing effortless, automating away most advanced features to provide a one-click borrow experience to newcomers.
  2. Reduced liquidation risk: FlexiFi users are protected from sudden liquidations through proactive risk management. This results in smoother, more gradual liquidations over time, preventing cascading effects and making Ajna safer and more cost-effective for borrowers.
  3. Enhanced lender security: Less ongoing liquidations means increased deposit availablity. Along with decreased bad debt, FlexiFi indirectly benefits the lending side of Ajna.
  4. Liquidation guarantee: As a secondary revenue stream, FlexiFi will operate an arbitrage bot to monitor pools and liquidate unhealthy positions, providing additional security for lenders’ yields.
  5. Retail credit innovation: By leveraging Gnosis Chain’s focus on everyday retail users (with features like sponsored transactions and compatibility-layer services like GnosisPay and Monerium), FlexiFi positions Ajna to pioneer retail credit solutions in DeFi. This could lead to the development of true DeFi credit cards and competitive financing options that traditional banks may struggle to match.

4. What is/are the objective(s)?

The goal of this grant would be two-folds:

  1. Extend FlexiFi’s risk management capabilities to Ajna users on Base & Gnosis
  2. Implement new advanced mitigation strategies for users

5. What is/are the deliverable(s)?

  • A fully deployed borrower protection smart contract on Base & Gnosis networks, capable of executing the following mitigation strategies:
    • Automated collateral funding from user’s wallet
    • Automated debt repayment through wallet funding
    • Automated debt repayment via partial liquidation of collateral
  • A user-friendly web interface for setting up and managing these risk management strategies

6. What is the timeline for completing the deliverables?

We aim to complete and deliver these features by the last week of December 2024.

7. What level of support do you anticipate needing through the duration of the project?

While we expect most development to be straightforward using Ajna’s open-source contracts, we may require occasional technical support. We would also greatly appreciate assistance from the AJNA community in beta testing to refine our development and UI/UX.

8. How often will progress reports be published to the forum?

We commit to publishing progress reports at least monthly, or more frequently when significant milestones are reached.

9. What are the estimated costs associated with the full completion of this project?

Development of the deliverables outlined in this grant has already commenced, primarily self-funded by prgm. This grant will support ongoing engineering costs and facilitate FlexiFi’s integration with AJNA.

Future considerations: To fully realize FlexiFi’s potential, we anticipate needing additional features and a comprehensive smart contract audit. While not included in this current proposal, we may submit a follow-up grant request if this initial partnership proves successful for both AJNA and FlexiFi.

10. If applicable, How will the project be maintained after completion of the grant?

Post-grant, FlexiFi’s ongoing development and maintenance will be supported by its fee structure, which is designed to be both user-funded and user-incentivized.

Additional Information

11. How will you handle a delay in your project timeline?

While we don’t anticipate significant delays in FlexiFi’s development, we acknowledge that we depend on external factors and rely on third parties, such as Mangrove, which FlexiFi uses as the execution layer, to be deployed.

In the event of delays, we commit to promptly communicating the issue to the community through the AJNA forums and providing a revised timeline and detailed explanation of the delay’s cause.

12. How will you handle a scenario where the original scope can’t be completed due to insufficient funding or other factors (Deficit of funds, or other)?

If we identify early that funding is insufficient, we will send the AJNA tokens back. Otherwise, we will seek for help in the community to prioritize on features.

13. How will you handle a scenario where the project is completed, but significantly under budget (surplus of funds left over)?

If we complete the project under budget, we commit to returning any surplus funds to the AJNA treasury. We believe in transparent and responsible use of grant funding.

1 Like
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Hi Prgm team,

Thanks for the proposal!

Initial Thoughts

Our challenge is to attract lenders, not so much borrowers. Though improved borrower UX is attractive, the Ajna Protocol is struggling with limited resources and very thin AJNA liquidity. Flexfi is a nice to have but I don’t think it’s wise to support this integration right now. Afterall, summer.fi already offers a very easy borrowing experience with additional features on Base, though not on Gnosis Chain.

I suppose the question is “should we invest resources into Gnosis Chain?” I haven’t seen much evidence pointing to retail adoption of this chain, though I have seen some interesting experiments on the credit/debit card front. Currently, Ajna usage on Gnosis Chain is non existent except for one pool that is participating in the aforementioned experiment. So we have essentially one borrower on Gnosis Chain at the moment, and they are not a typical retail user. If we did this would it attract borrowers? I am not certain about that.

:point_up: This is worth doing, grant or not, since we need more participants in the liquidation side of Ajna and your company would benefit from an additional source of revenue; win-win.

Ideally, I would like this to be built by an existing provider like DefiSaver.com who have a track record of building exactly this kind of product. In our talks with them, they required a higher TVL before considering an integration. Though once they are able to include us, they already have a ton of the foundational work done on the UI front and network connectivity.

For 1.5m AJNA, your team will be taking on a lot of the expense out of pocket due to the very thin AJNA liquidity. Making this grant would add additional sell pressure to an already bottomed out market.

Questions

  1. How does what your building plug into the Gnosis pay & Holyheld credit/debit card systems?
  2. How much of the UI work is already done for Flexfi?
  3. What other protocols and networks are you integrated with?

Conclusion

I am not certain that this is a good expenditure of resources at this time.

3

Hello David!

Thank you for your feedback on our proposal.

First, to answer your questions:

The mid-term goal is to build a full end-to-end automated lending experience: buy something with your card, and FlexiFi handles payment by taking a loan for you and protecting that loan using its risk management strategies. (See illustration below)

flexifi-payments@2x
flexifi-payments@2x2400×1350 238 KB

That said, building this vision will take more time, especially as we start without pre-existing integrations on Gnosis. For the initial phase that would run over the first few months (with support from a first grant), we plan to focus on integrating with Ajna. This will allow early adopters to manually access credit on our platform while benefiting from FlexiFi’s loan protection features.

Right now we’re integrated with Morpho on Base and running tests with a handful of users. Since FlexiFi operates fully on-chain, unlike other platforms like DeFi Saver and Summer.fi, this testing phase is crucial for refining our product and iterating on features. In terms of UI, we’ve already built an interface that allows a user to list credit lines they have already opened, and guides them through setting-up a protection strategy consisting of the partial liquidation strategy.

Moving forward, we plan to evolve this UI into a simpler “borrow X against Y” form that automatically sets-up mitigation strategies using a pre-defined risk profile that the user chooses. Fortunately, our experience in building Web 2 applications allows us to rapidly iterate and deploy a production-ready UI.

I’d like to address your concerns regarding Ajna’s current challenges and priorities, and highlight how FlexiFi could contribute to Ajna’s growth.

Regarding resource prioritisation

I appreciate that Ajna’s current priorities are lenders, and not borrowers. It was my understanding that ARK was being worked on, but I would like to highlight that implementation of FlexiFi would further benefit lenders in the following ways:

  • By reducing the frequency and severity of liquidations of borrowers borrowing through it, FlexiFi creates a more stable environment, making Ajna more attractive to potential lenders.
  • Automated risk management decreases the likelihood of bad debt, directly protecting lenders’ liquidity.
  • FlexiFi’s self-liquidation mechanism would directly decrease the number of auctions Ajna has to kick off, thus freeing up lender liquidity more efficiently.

We see FlexiFi as complementary to ARK and other lender tools, focusing on making borrowers non-adversarial, making Ajna safer and more efficient, while ARK addresses lender needs. This parallel development could create a more robust and appealing ecosystem for all users.

Regarding Gnosis Chain Strategy

The emergence of services like Gnosis Pay and Holyheld indicates growing interest in DeFi-based payment solutions. While it’s largely speculative at this point, if we look at traditional finance, retail credit eventually followed suit and captured most of the value from everyday payments.

At prgm we believe this shift will happen here, but in the composable Web3 fashion.

We’ve held this belief for some time, and many companies have since announced payment products — Metamask, Mastercard and 1Inch being notable examples. Now, even lending protocols like Exactly are rolling out their very own credit card, signalling a growing trend that Ajna could lead with the right tools in place.

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I don’t have the initial opposition to this proposal that @Davidutro has shared. I think there’s a lot of value in supporting new teams in the ecosystem that can help extend Ajna’s reach and visibility. While Gnosis Chain may not be the best source of users, Base is quickly becoming the pre-emptive ETH L2, and focusing some development efforts there could be valuable. While it’s true Ajna is a little short of lenders at the moment, the protocol may be in a chicken or egg scenario around collateral and ease of use on both sides of the market. I’d support any new tools that will improve UX for either side of the book.

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I like your perspective @brianmcmichael. I gave it my vote, let’s see what the FlexFi team can do :sunglasses: