Highlights from the Atlendis Labs Community Call & AMA: Introducing Atlendis V2
Atlendis Labs recently hosted a community call and AMA about the Atlendis protocol V2 that has just been released and what it brings to both borrowers and lenders.
We discussed with the community about the direction that this V2 is showing for the protocol, the new products available for lenders and borrowers, and tackled questions on security and regulation.
Let’s start with a brief overview, Alexis, you are no stranger to the Atlendis community, but for those who are new community members, could you tell us a bit about yourself?
Alexis: Yes, Hi everyone. I’m Alexis Co-Founder & CEO, I have been in blockchain and DeFi for quite some time, mostly overseeing the strategy and business of Atlendis Labs.
Thank you Alexis! Glad that you can participate in the call. Our next speaker is Stéphane, Co-Founder & CTO at Atlendis Labs. So hello Stephane, it’s been a little while since we’ve had you as our guest! Last time was back in October with ZigZag. Can you tell the community a bit about yourself?
Stéphane: Sure! As you said, I’m the CTO of Atlendis, and I have spent these past few months building the V2. I personally worked on the smart contracts, and helped the team develop the dApp around them. It has been quite a journey!
Thank you and welcome Stéphane! First question for Alexis, can you share the milestones and some figures for the V1 of the protocol?
Alexis: Yes, V1 was launched less than a year ago in June. At the time, the context was different, and we had a lot of success in the early days. We managed to have more than $6M total in loans issued on the protocol with around 11,000 LPs worldwide. We onboarded multiple borrowers, a bit less than 10, and it has been an incredible journey. V1 has been a success, allowing us to get feedback from borrowers and lenders, to get a better idea of where we needed to go to better assess the needs from both sides and, that’s what the V2 is all about. We have taken the learnings from V1 and built a more capital efficient product which is V2.
Can you tell us when the idea for a V2 emerged and how the development took place?
Alexis: When we launched the V1 of the protocol, the context was quite different at the time, it was a bull market and filling pools was easier. For example, when we launched the ZigZag pool, within 24 hours, we had over one million in the pool without any connections to big LPs, it was pure organic growth. Things shifted afterwards with 3AC that defaulted just a few days after we launched, and the market changed drastically as you know. Then after that everyone was impacted by FTX plummeting the market even more. We got feedback from LPs who wanted more risk management and risk assessment, more transparency in the way they were interacting with protocols, more safety, and more flexibility in terms of interaction with loan cycles. As a team we realized that the market was changing, and we needed to adapt taking into consideration the feedback from both LPs and borrowers who wanted a more flexible product. We took all the feedback from the various actors, put them on a board, and brainstormed around how we could move forward by priority, and tackle them efficiently in a way that would make sense as a product in 6-8 months.
Thank you Alexis! Stéphane, very briefly, can you list V2 features that were not present in the V1 contracts?
Stéphane: The main feature of our V2 is all about its flexibility. In V1 we released an order book structure that allows borrowers to follow loans from a succession of little loans, and for V2 we kept this, but expanded it to be more capital-efficient for everyone. For borrowers, because they can borrow funds that were deposited even during the loan cycle. For lenders, because they can exit the pool during a loan if there is enough liquidity. And there is also more flexibility for developers, because the architecture of the Atlendis protocol is modular and can evolve much easier.
Thanks! Stéphane, not all V2 features are released all at once, is that right?
Stéphane: Yes that’s right! At launch, we will only allow for simple actions, like deposit and withdraw your positions, and borrow and repay for lenders. In a few weeks, we will release new actions for lenders that allow them to interact with their positions when they are borrowed. After that, we will release the rollover feature that allows borrowers to extend their loan for a new cycle. Next will come positions staking. We have been very hard at work these last few months, and we have a lot of stuff to show you, I can’t list everything right now!
Alexis, how does the rollover feature work?
Alexis: Sure. The idea with the roll over feature is to mimic what exists in TradFi, and when there is a rollover of a loan, what you can do is repay only part of the loan at maturity and usually repay only the interest and keep the premium. What it means for companies is whenever you start to borrow a substantial amount, operations-wise it becomes tricky to move all the capital and repay for short maturities. So the rollover feature is really great for such cases because companies have the flexibility to rollover the loan, pay interest, borrow and repay in the same block, which is super capital efficient. It streamlines their operations. As we are targeting Fintechs we have to take into account a factor on and off ramping that obviously costs a lot. There are fees taken by a third-party that the borrower has to absorb. Paying only interest and not having to onramp the premium makes it more capital efficient, but there are some caveats to that, we need to put guards in place as you could argue this is dangerous, a borrower could be rolling their loan indefinitely. This is something we will not allow, a borrower could rollover a couple of times, but not more.
How are Atlendis V2 Revolving Credit Lines similar to what borrowers find in traditional finance Alexis? And how do they differ?
Alexis: Sure, in TradFi you have access to a credit line and there is more friction in the way the product works, with less transparency overall. Usually, the engine behind that is called the credit facility. Fintechs are not going to traditional banks to access these products, but private debt credit instead. The way those credit lines are negotiated with private debt credit is very opaque. The product is not liquid and it’s hard for companies to have access to good terms. For private debt credit this market is insanely big, trillions of dollars, and there are more facilities going there as it is more lucrative. There is a huge amount in terms of interest rates, if you lend to the right actors, and today interest rates are very high, and there is high demand on the borrowing side, you can be picky and find great actors to lend to. It’s a lucrative space, but borrowers are not on the weak side. We open that, bring transparency, enable borrowers to get better terms with the order book. The order book feature is something that does not exist anywhere else. We’ve built it from the ground up, and it’s particular to Atlendis. V2 is an improvement over V1.
Why did you decide to launch on Polygon? What are your thoughts regarding blockchain expansion, especially when thinking of the V2?
Stéphane: Our decision to launch on Polygon was a pragmatic one at first. We needed a blockchain that is fast, secure, and has a lot of DeFi integrations already available. Polygon was thus a natural choice. The space has evolved a lot since we first released V1, but Polygon remains a very strong choice. That’s why we decided to stick with it for V2. We are extremely grateful for all of the support we have received from the Polygon team.
What is the status of the staking program Stéphane? How does/will it differ from V1?
Stéphane: For now our rewards program remains the same for V1 pools (that’s just Fluna for now). We have developed an improved set of staking contracts that allow us to build complex rewards programs for V2 pools. In particular, in addition to V1 rewards that were fixed term, it also introduces continuous rewards that are similar to regular liquidity mining. We also introduced new mechanisms in which the rewards lenders get depend on the rate of their position. As I said before, we have a lot to release in the next few months, and staking will be one of those things.
Stéphane, Atlendis V1 did not make it possible for lenders to exit a lending round once their position was borrowed. How did Atlendis make it possible in the V2?
Stéphane: Atlendis V1 proposed some interesting features around our order book structure, NFT positions, and the interaction between lenders and borrowers during a loan cycle. It was great, but at times all the liquidity from the pools was not used, either because it was deposited too late in the loan cycle, or the borrower did not borrow it. On the other side, we had lenders that wanted to get their funds early, and not wait for the loan to end. It was a natural evolution for V2 to make that happen, hence the exit feature.
Regarding compliance, what does Atlendis V2 bring compared to the V1? Do you already have borrowing use cases for the permissioned pools that Stéphane mentioned?
Alexis: Yes, so this was also a feature requested by our borrowers, that became even more important to ship as we switched to working with more off-chain companies. These companies have strict AML requirements and have to prove that the funds they borrow are not coming from certain restricted geographies in the world. To onboard those more robust and mature companies, we need to be able to open permissioned pools and implement gating in the pools. What we did with KYC inside the pools, is whenever you interact with a borrower, you KYC yourself that allows you to access the pool, the data room with documents such as business plans and financial reports by our underwriter partners. There is a lot of data available with KYC, we can put more sensitive data in the data room that can help users make decisions more wisely. Having sensitive data gated is a win/win for everyone and a way for us to onboard more institutional partners, as they are bound to the same restrictions and regulations. This is a first step toward having a more compliant protocol overall.
A new pool was opened on Atlendis earlier this week. How is it going so far and what’s next in the pipeline of borrowers for the V2?
Alexis: We opened a pool with Banxa, an on and off ramp company that also has the same requirements I mentioned before. They can’t borrow from a permissionless pool, and therefore it’s mandatory to have KYC gating in place. We are very pleased to open their pool to help their business grow and process more volume, and to get even more traction.
What is the fee structure like in V2 compared to V1?
Stéphane: It is very similar. Atlendis will take fees on every action, both from lenders and borrowers. The fee structure will be completely transparent, so users will know what to expect from the get go. A notable feature of our fee structure is the exit fees rate, which evolves with time.
Can you explain the rationale behind the lenders’ exit fee increasing closer to maturity?
Stéphane: As a lender, exiting means letting another lender replace you for the remainder of the loan. That also means removing all exposure to the borrower's default risk and transferring it all to the new lender. For that reason, we want to discourage lenders from exiting close to maturity, while leaving the action possible. That’s why exit fees for lenders increase as we get closer to maturity.
What credit scoring and borrower information are available in the V2 Alexis?
Alexis: We’re still working with our usual partners, so we mostly have a Credora score, but we’re also onboarding third-party underwriters that write reports on every opportunity we open that are more detailed. There is a much more deep financial analysis being done before opening a pool now. We’ve been putting a lot of emphasis on that.
Is the interest rate order book the same in V2 than in V1 Stéphane?
Stéphane: Yes this mechanism worked great for V1, so we decided to keep a similar structure for V2. Both lenders and borrowers found their mark, and discovered why our order book structure works great for uncollateralized lending.
Stéphane, can you talk to us about the security practices at Atlendis Labs? How have V2 smart contracts audits been going?
Stéphane: Security is still at the heart of our development practices at Atlendis Labs. We have been even more focused on security than V1 during the whole development cycle of V2. In particular, we spent a tremendous amount of time testing our code with a variety of techniques, including simulating the behavior of our smart contracts under a huge load of transactions. We also naturally wanted to have our code audited to ensure that all parties feel comfortable interacting with the protocol. We have made the code audited by 2 companies, Trail of Bits and Nethermind, before deploying the code. These audits are in a finalization stage, and the reports as well as articles from Atlendis Labs will be released shortly.
How does Atlendis’ V2 set the direction for the Atlendis protocol?
Stéphane: Our goal remains the same, to serve our lenders and borrowers the best way possible, without compromise on flexibility or security. We want to be at the forefront of the uncollateralized lending market, sourcing real-world business debt from crypto markets. We believe that our V2 is the best product possible for that, and I’m confident that users will love it!
What’s next for Atlendis? Any V3 in perspective?
Stéphane: V2 is modular, so we will probably never need a V3. However, a V2.1 might be in the cards… We already have ideas for new features we are working on, but this will be for another time!
Thank you very much to all of our guests today! Stay tuned for more exciting announcements about the V2 of the Atlendis protocol. Don’t forget to check out Atlendis’ Discord if you have any feedback or questions. We are always happy to talk. Thank you Alexis and Stephane for joining us!