Isolated pools on Vires

Hi, this is basically a repost from Telegram. :slight_smile:

I would like to see Isolated pools before Vires onboard new tokens thru governance.

Right now I feel safe with tokens currently available on Vires, but who knows what kind of tokens will governance bring to the table. It could be really nice to have the possibility to opt-out from some of them.

True. that’s why that’s why the recent development update discussed this in “Adding New Assets” section. X-post here:

Let’s call liquid, efficiently tradeable assets(even in large amounts) “Big assets” (Every listed asset is considered “big”). Now, we’ll call the assets which only live within waves blockchain or are not actively traded “Small assets.”

Onboarding small assets is a headache: it’s hard to get unexploitable price feed, it’s hard to set the collateral factor right without making the “small asset” useless as collateral, finally, borrowing “big” assets against “small” ones rightfully scares “big asset” liquidity providers(e.g., what if liquidators fail due to dry market?).

Nevertheless, sticking with “big assets” only quickly becomes a scaling problem for every lending protocol. Therefore the risks of “small assets” should be transparent and limited. Here’s how they can be addressed:

  • Price feed for small assets: “AMM is an oracle” approach might be the only solution,
  • Borrow/Supply caps for small assets: based on the on-chain AMM availability,
  • Isolation of risks;

Let’s discuss Isolation .

Approach 1: All against USDN . Depositing or borrowing a small asset denies you from interacting with any markets except USDN. You can only borrow “small asset” against USDN, and you can only borrow USDN against one “small asset” for every account.

Approach 2: Isolated markets . A new market is created for every pair of supply-borrow tokens. If you step in, you understand the risks, and no one else(except those in the market) is subject to it.

The Isolated markets approach is more principled: unless you are in it, its problems can never be yours. However, it creates a fragmentation: one can create as many pairs, and the same asset, say USDT, can be supplied for VIRES in VIRES-USDT isolated market as well as in the current big pool of WAVES-USDT-USDN-USDC-EURN-BTC-ETH.