ZULU Finance - a better solution of Stablecoin to facilitate the daily life

Name of Project:

ZULU Finance

Application Type:

Launch + Investment

Mission:

ZULU believes that global economic activity will migrate to crypto in the future. More and more value will be stored on-chain as well. Thus every transaction can be executed by the preset logic and code.

Crypto world has explosive growth these years, especially after 2020 there are some events happened which show the change of mainstream attitude. Listed companies began to buy crypto assets as investment portfolios and some countries consider to use BTC as the national currency. However, it’s still a very minor portion compared to the ’real world‘.

Moreover, every new technology is born to solve the problem and facilitate human’s daily life. So does Bitcoin. However, the attempt to facilitate daily life with blockchain technology is neglected. Only a few teams are working on this, such as Terra, Celo, etc. They have many good attempts to provide a blockchain based payment infrastructure. However, they don’t own or have any impact on those off-chain use cases which may need to use payment service. So it is hard to make merchants or end-users use their payment solution.

Here is ZULU finance, it’s a better approach to utilize the stablecoin to facilitate daily life. This will be a win-win result for crypto and the ’real world‘. It will help to fulfill the goal of blockchain technology which will promote the finance inclusion globally.

Project Summary:

We have designed 3 phases to fulfill this mission.

Phase 1, ZULU will build a stablecoin ecosystem on-chain which is the key factor to bootstrap the system. Compared to any other crypto assets, the stablecoin is the best intermediary which can be well used off-chain.

ZULU Stablecoin will peg to USD at the beginning and it’s a decentralized over-collateralized Stablecoin, called zlUSD. Multiple collateral are accepted to generate the Stablecoin. The collateral ZULU supported are categorized into 3 types:

  • Mainstream tokens, such as ONE, BTC, ETH, etc; The utility and value of these tokens have been proved.

  • Receipt tokens which are used as the proof of ownership or interest accumulating, such as LP token from DEXs, interests bearing tokens, etc; Most of these tokens stay at wallets only.

  • Tokens from neglected but growing projects, the innovation always happens on chain. But for those early adopters, they can only hold the tokens.

ZULU Finance provides different zlUSD use cases for people with different risk tolerance. The conservative ones can participate the Stability Pool and Stablecoin liquidity mining. The risk ones can do the leverage trading. Everyone can find their proper service.

The safety and stabilization of the protocol are very important. ZULU Finance uses the creative liquidation mechanism called Stability Pool. Compared to the traditional auction mode, the zlUSD deposited in the Stability Pool will liquidate the risky troves in a very short time. The zlUSD depositors will earn the liquidation reward. Thus the collateral ratio is lower than any other similar protocol and the capital efficiency is maximized.

Moreover, ZULU uses a soft and hard peg mechanism to maintain the peg of zlUSD. The soft one relies more on the market behaviors and the hard one relies on protocol features by design. We will go deeper on these topics on our Medium.

During Phase 2, we will build a decentralized lending protocol which will issue the loan in zlUSD to the Fintech companies off-chain. The Fintech companies are doing the lending business off-chain. ZULU stablecoin will be distributed to a wider population. During Phase 3, with millions of the zlUSD holders, ZULU will provide a blockchain based payment infrastructure to help the merchants receive the crypto assets, especially ZULU tokens. Details will be discussed in the ‘Long Term Vision’.

Proposal:

Currently, ZULU finance is in Phase 1. We have finished all the development and the audit is ongoing for this Phase. Our long term goal is to make ZULU as a multi-chain protocol. After going through several famous blockchain, we found that Harmony is the most suitable one to start with. The community here is very active and has an open mind and more consensus on decentralized ideas. The growth of the Harmony ecosystem is very fast as well. So we decided to launch Harmony first.

We know well about the value of community, so the distribution of ZULU tokens will be heavily weighted towards the community. In Particular, we will give the additional $ONE reward received in combination with our ZULU token to incentivize the early adopters to bootstrap the system.

The first batch of the collateral asset will be the mainstream assets such as the ONE, ETH, BTC, etc. The ZULU token will be distributed to those early adopters who provide the collateral and generate the stablecoin. At the same time, we will incentivize the users to provide liquidity for our ZULU token and the stablecoin on Dexs such as Defi Kingdoms, Curve, etc. Most of the $ONE reward will be used to incentivize the users who provide liquidity for the stablecoin pair. And ZULU will focus more on the receipt tokens and neglected project tokens in the following batches of collateral, but the final decision will be made by the community. We treat these tokens as a niche market which has huge potential.

In order to reward the early ZULU token stakers, more protocol fees will be distributed to them. Besides this, we will try promotion campaigns to grow the on chain user base, TVL and stablecoin liquidity.

RoadMap Abstract:

Q4 2021

  • Develop the Phase 1 Protocol
  • Conduct the Audit

Q1 2022

  • Launch and test on Harmony Testnet
  • Launch on Harmony Mainnet
  • Stablecoin and ZUL pair Listed on Dexs
  • Find more backers
  • Promotion campaigns

Q2 2022

  • Listed on the CEX

  • Launch more collateral - mainly focus on long tail assets.

  • Launch timelock and governance feature - the core team will grant the community the authority to vote for the configuration change.

  • Partner with more projects to widen the use cases for zlUSD and ZUL

  • Partner with external protocols to accept zlUSD or ZUL as collateral

  • Partner to have more utility for zlUSD and ZUL

Q3 2022

  • Develop and launch the decentralized lending protocol
  • Launch and test on Harmony Testnet
  • Launch on Harmony Mainnet
  • Recruit and educate 1st batch of the underwriter and auditors
  • Conduct the audit

Q4 2022

  • Issue loans to 3 borrowers with the decentralized lending protocol
  • Recruit and educate 2st batch of the underwriter and auditors

Core Team:

Product - Microsoft, CMU alumni, Serial Entrepreneur in Fintech area

Programmer - ex-FB payment platform, Fintech Start-ups

Community - several years blockchain and Defi community manager

Marketing - ex-CMO for several Defi platforms which have more than 100M TVL.

Besides these, ZULU has another 10 members who make contributions to the project as well. Some of them are full time and some are part time selected from the ZULU community.

Most of our team members are programmers and product managers, we lack the marketing and growth experience in the crypto industry. So besides the investment or launch reward, we are requesting the help on marketing, growth from the Harmony community. Talents who are interested in this big idea are warmly welcomed as well.

Metrics for success:

Within the first month:

Active Users 150

Total Collateral Locked $ 5M

Stablecoin Liquidity $ 1M

Within the first year:

Active Users 1500

Total Collateral Locked $ 100M

Stablecoin Liquidity $ 20M

Issue 3 loans off-chain

Proposal Ask:

$50K $ONE Launch Reward

$1M Investment

Long Term Vision:

Here we will discuss more about Phase 2&3.

After we have liquidity for the stablecoin during Phase 1, we will begin another 2 phases.

Phase 2, ZULU will use the stablecoin to facilitate the lending activity off-chain in a decentralized way.

Lending is the basic finance activity and it is a huge market. The size is more than $ 6 trillion and continuously grows these years. However, huge gaps exist among this market, especially in the developing countries. Big numbers of the unbanked population cannot access the lending service. A lot of fintech companies try to solve this problem off-chain, including our core team’s previous start-ups. But it is very hard to get lending capital from the traditional money market. Traditional money markets stay for a long time in a comfortable environment. They have a huge scale and have no motivation for new business with uncertainty. But we believe that this market has big potential. So ZULU will start issuing crypto loans to the Fintech companies who are doing the lending business off-chain.

On the other hand, we can see a trend that no matter the yield on chain or off-chain is decreasing. The smart money is always finding the higher yield. These capital lended to these Fintech will earn a much higher yield because they are still in a fast growth. Based on above beliefs and experience, we have confidence that what we are pursuing to do is well product/market fit.

ZULU will decentralize the underwrite and audit process to replace those capital institutions. The underwriters and auditors will be from our community who may do the job related to these. But they cannot use their professions to make more money. WIth ZULU, they can lend to the specific borrowers they believe in and their fund will be treated as Junior Tranche. Their money will lose first but they can earn extra yield. Most of the protocol participants will be ordinary lenders. They will lend to the borrowers with enough underwrite and audit applied. Their fund will be treated as Senior Tranche.

Moreover, ZULU will have several investor protections, such as investment strategies, risk provision from the fee generated, insurance, etc.

By doing this, ZULU will facilitate the off-chain use cases with blockchain technology and integrate the off-chain yield into the Defi world.

Phase 3, ZULU will provide the crypto payment infrastructure to the off-chain merchants. Then the ZULU stablecoin holders can easily purchase products or services from these merchants. In parallel, ZULU will build an open ecosystem to welcome more participants to join.

As mentioned above, every payment consists of 1 sender, 1 receiver and 1 use case. Other previous projects need to acquire or create them all. So it’s very complicated to make it happen. But our approach is different from others and we first acquire senders or receivers by lending. Then the only thing we need to find is the use case. This will be much easier.

The whole design simulates the process of how the Central Bank issues the money. They work with commercial banks to give out loans and spread the money to the society. Then a lot of end-users will hold the money from the Central Bank and on the other hand the merchants can receive the money because of lots of holders. The difference is that the money from the Central Bank is backed by the government and ZULU is backed by DAO and crypto assets.

In summary, ZULU finance is a better approach to facilitate daily life with blockchain and stablecoin technology. It will help to promote financial inclusion. On the other hand, ZULU will bring more off-chain yield to the crypto world and make up the last piece of Defi lego.

External links

Learn more from ZULU Whitepaper: ZULU Finance Whitepaper v1 - Google Docs

Hi, community,

Contact us if you have any feedback or interested in joining us.

Hi, just forget a very important part:

What benefits ZULU can bring to Harmony?

Different blockchains have very fierce competition with each other for TVL and users. However, the opportunities off-chain has been neglected. ZULU is able to help Harmony to grow in a new way compared to only focusing on-chain.

  1. ZULU can help to bring TVL from the off-chain world because the borrower needs to pay back with cryptos. The lending market is really huge. Only the fintech lending market size was valued at $450 Billion in 2020 and is projected to reach $4957 Billion by 2030, growing at a CAGR of 27%.
  2. Besides the TVL, ZULU can help to acquire millions of new blockchain users. ZULU can spread the crypto tokens to the end-users through the fintech companies off-chain. The potential population is more than 2 Billion around the world. According to our experience, it’s very easy to acquire millions of users for only one fintech company. So we believe that this is a very efficient way to acquire new blockchain users.

Moreover, the yields in developing countries are attractive for both blockchain users and developed country users. With the growing of stablecoin supply, the yield continues to decline on-chain. On the other hand, the bond yield in major developed countries has been declined for years. So both of these users have stronger and stronger willing to find a new source of yields.

  1. ZULU will bring users and TVL from other blockchains as well.

This is a pioneer solution which utilizes the blockchain technology to facilitate the daily life. This will bring more TVL and users from the real world to the crypto world.

This appears to be a fork of Liquity. Can you elucidate here exactly what else is different?

Hi, @papi

Thanks for your question! Let me try to explain.

Basically, ZULU Phase 1 is more like a tool which helps to turn the fluctuating crypto assets into the stablecoin. The crypto assets are fluctuating so they are not proper to use in the real world directly. It is similar to the Central Bank. It issues the money which is backed by the gold, foreign currency, etc. So we need something on-chain to do this as well.

In detail, our Phase 1 has several major differences from Liquity.

1.Multi-collateral, Liquity only accepts ETH as collateral. Our future goal is to bring the crypto value to the real world, so we accept multi assets as collateral which all the crypto holders can utilize their capital. We have 3 categories of the collateral:

  • Mainstream such as BTC, ETH, etc.
  • Receipt Token such as LP tokens, interest bearing tokens, etc.
  • Neglected but valuable projects, such as new product but has potential to grow.

On the other hand, we think 2nd and 3rd of the category is a niche market which help us to bootstrap easily at the beginning. So it’s not only the feature but also the logic and strategy behind the collateral is different from Liquity.

2.Governance. Liquity is governance free protocol. But we think different about this. We don’t think the preset configurations can avoid all the risks and solve all the problems. We believe in the power of community, because community can make best decision when the environment changes a lot. On the other hand, because of our off-chain goals we need an active community to empower some of the process, such as the lending to off-chain, selection of off-chain use cases, etc.

Besides these, we have some minor differences:

  • Protocol may charge interests on some of the collateral based on different situation;
  • The collateral will earn the interests if the community can find the secured source, such as depositing to the biggest money market;
  • Fee sharing model is different, we will keep some portion of the fee to buy back the protocol token.
  • Token incentive, besides incentives to the Stability Pool, ZULU will incentivize the collateral depositor as well. We think that they have made contributions to the protocol because they move the assets from other protocol to us. They deserve this.
  • etc

I am not sure this answers your question. Feel free to leave more comments. Thanks!

Are you forking any of the Olympus DAO smart contracts?

No, we didn’t fork any contract from Olympus. We developed based on the Liquity. But the major logic from single collateral to multi collateral almost changes all the code. On the other hand, we have developed more contracts to support our new features.

By the way, our audit is almost done for the final check. Only some minor problems have been found and we are fixing them.

Here is our code base: https://github.com/zulufi/zulu

Hi, have any updates about the application? Thanks~

Hey Team - apologize for the late reply. We were busy at ETHDenver and other things.

Okay, after close review, I’m afraid we’ll have to pass on this one. Best of luck with everything.