Forum Link: https://forum.inverse.finance/t/proposal-to-add-dola-usr-yearn-lp-market-to-firm/545

Summary

This proposal seeks to introduce the DOLA/USR Liquidity Pool Token (LPT) from Curve Finance as a collateral option on FiRM, Inverse Finance’s fixed-rate lending protocol. The DOLA/USR LP offers unique advantages due to its stable composition and points program, providing a unique opportunity for capital efficient lending by offering stable liquidity positions that include DOLA as collateral. USR is an ETH-hedged stablecoin developed by Resolv Labs, employing delta-neutral futures positions and an overcollateralization fund (OCF) for peg stability. We plan to deploy two distinct markets; one that adheres to the convex strategy and a market which, utilizing the same underlying LPT, aligns with Yearn’s autocompound strategy. This proposal pertains to the Yearn-aligned DOLA/USR LP market on FiRM.

Background

USR is backed by ETH and a delta-neutral hedging strategy that uses short perp futures to mitigate price volatility. Resolv’s OCF mechanism, partial T-Bill collateralization, and RLP insurance layer offer a sturdy foundation for USR’s peg, while the staked variant (stUSR, or wstUSR) captures daily yields. In this proposal, we focus on the Yearn-based DOLA/USR LP, which auto-compounds rewards and fosters deeper liquidity through yield reinvestment.

By leveraging the DOLA/USR LP as collateral, FiRM offers its users the opportunity to capitalize on stable liquidity positions while bolstering our ecosystem’s efficiency and DOLA liquidity depth. Providing stable liquidity positions that include DOLA as collateral allows for cost-efficient lending on behalf of Inverse Finance. Typically, borrowers sell DOLA to buy other assets, impacting DOLA liquidity. Conversely, a borrower collateralizing with a DOLA LP position is likely to add the other stablecoin/s to the liquidity pool initially to obtain the LPT. They may then loop the borrowed DOLA into the LP position repeatedly to increase their reward, benefiting DOLA liquidity as it does not remove other stablecoins. This results in a 150% improvement in lending capital efficiency, as only 1 DOLA needs to be contracted by our AMM Feds for each DOLA added to the liquidity position, compared to 2.5 DOLAs for each DOLA sold.

Risk Assessment

Complete Risk Assessment – USR Collaterals on FiRM

Key points from the assessment include:

1. Governance: Resolv Labs currently oversees USR minting and redemption parameters through an administrative multisig. Though the protocol plans to transition to a $RESOLV governance token, whitelisted addresses still hold exclusive permission to mint or redeem. Users must rely on Resolv’s operational integrity and roadmap commitments until permissionless minting is fully realized.
2. Security: Audits of USR, RLP, staking contracts (including wstUSR), and related Request Manager logic were conducted by reputable firms such as MixBytes, Pessimistic, and Pashov. No critical vulnerabilities remain unresolved. However, partial reliance on off-exchange custody (Fireblocks, Ceffu) for hedging entails some exposure to exchange or custodian compromise. A bug bounty program (expected post-$RESOLV launch) will provide a secondary security layer.
3. Regulatory Risks: USR’s design mixes crypto-collateralization (ETH, stETH) and T-Bill–backed assets (via MakerDAO’s USDS). Future regulatory actions against stablecoins, tokenized securities (RWA), or off-exchange custodians could disrupt Resolv’s mint/redeem flows. Regional compliance changes or centralized exchange constraints might also hamper the delta-neutral hedging strategy.
4. Collateral & Liquidity: Because USR is hedged against ETH price movements, its peg remains stable so long as derivatives markets remain liquid. Large-scale USR redemptions still rely on whitelisted participants, but secondary liquidity pools (Uniswap, Curve, Aerodrome) and an on-chain bridging mechanism (LayerZero’s Stargate) help maintain healthy liquidity.
5. Competitive Edge: Unlike purely crypto-backed stablecoins, USR incorporates T-Bill yields via partial MakerDAO integration while leveraging a delta-neutral approach. This structure appeals to users seeking a stable, yield-enriched asset with robust risk mitigations.
6. Oracle & Price Feeds: FiRM will implement a pessimistic LP token oracle for accurate valuation of the DOLA/USR LP. This process uses Chainlink price feeds for USR and the virtual price from the Curve pool’s smart contract and ensures a conservative and reliable estimate of the LP token's USD value. Real-time monitoring will further support price accuracy and integrity.
7. Liquidation Mechanisms: The liquidation factor and incentive are optimized to encourage active liquidator participation. Arbitrage opportunities with other DOLA or USR LPs will ensure that large liquidations do not lead to a liquidation cascade. The liquidation process will pull vault tokens, convert them to LP tokens, and then allow liquidators to realize value through balanced withdrawals, ensuring efficient liquidation routes.

Continuous monitoring of the DOLA/USR LP’s performance, yields, and liquidity conditions will be maintained by the RWG. Should any material changes or newly identified risks emerge, parameter adjustments or additional mitigations will be proposed via governance.

On-Chain Actions

1. Add DOLA/USR LP Yearn Market to DBR Contract
2. Set borrowController of Market to FiRM BorrowController
3. Set Market Supply Ceiling to 10,000,000 DOLA
4. Set Daily Limit in BorrowController to 2,000,000 DOLA
5. Set Collateral Factor to 90%
6. Set Liquidation Factor to 100%
7. Set Liquidation Incentive to 5%
8. Approve DOLA/USR LP Yearn Market on the DBR Helper
9. Set Minimum Debt Amount in BorrowController to 3,000 DOLA
10. Set stalenessThreshold for DOLA/USR Yearn LP market to 86460 (24 hours)
11. Set FiRM Oracle Price Feed for DOLA/USR Yearn LP to the deployed custom tokenPriceFeed contract
12. Add DOLA/USR LP Yearn Market to ALE
13. Add DOLA/USR LP Yearn Market to CurveDolaLPHelper