Loso sat down with Waffle from Lodestar Finance to chat about the transition from Lodestar V0 to V1, the launch of $LODE staking, and their security audit with Halborn. In this alpha report we will include the full AMA and a summary.

First off, if you’re unaware of Lodestar or simply need a refresher, you can find Loso’s first Alpha Report on them here. Lodestar recently went live with their V1 iteration as what their team has envisioned as Arbitrum’s native money market.

Lodestar allows users to lend or borrow different assets on Arbitrum. Ranging from ETH, USDC, FRAX, to ARB, MAGIC, DPX, and GMX, Lodestar aims to have a market for all popular Arbitrum assets. At the time of writing this summary, Lodestar has $25.38M in assets supplied, and $13.84M in assets borrowed.

V0 was a prototype based off of Compound aimed at Arbitrum assets. With V1, Lodestar aims to bring the whole vision for a money market by Arbitrum users, for Arbitrum users. V1 is still a Compound fork, but on top of the DPX, MAGIC, and ARB markets they had listed in V1, they’ve added markets for GMX, wstETH, and native USDC. V1 enables the full power of $LODE staking.

In V0, the protocol was taking a share of interest paid by borrowers and kept it in their reserves. At the time of the AMA, the protocol has accumulated between $72,000 and $75,000 over three months. Now with V1, the protocol will distribute half of the revenue from interest to $LODE stakers. $LODE stakers will now receive real yield in the form of ETH!

On top of real yield coming from V1, Lodestar is also introducing weekly emissions gauges on lending markets. Every week, $LODE stakers can vote on which markets they would like to direct 50% of $LODE emissions towards.

$LODE can be staked and unstaked freely, but Lodestar does incentivize locking. By locking, users receive a staking multiplier. To reward long term commitments + stakers, whenever your stake is relocked, you will get a second compounding multiplier. These multipliers will greatly increase governance power to users who decide to lock and in turn more power in deciding where emissions are directed. This would be the first gauge system for any lending market!

The protocol takes a share of the interest paid by the users. Each market has a reserve factor that the protocol takes from interest paid, 50% of it stays in the reserves as protocol owned liquidity, and the other 50% goes to $LODE stakers. Reserve factors are a parameter that is customizable per money market by governance.

The full audit by Halborn on Lodestar’s money markets can be found here. Halborn is also auditing Lodestar’s staking contracts. $LODE staking should be going live within a few days from this article being posted!

Waffle stated in the AMA that working with Halborn was a pleasure. Halborn looked very deep and paid attention to all details to ensure security. Lodestar is working with Halborn for not only an audit, but a security as a service package that would involve Halborn monitoring everything happening on Lodestar over the next few months.

This was just a brief summary of the main points of the AMA. If you’re interested in learning more about Lodestar V1, the assets that were added, 1-click looping, and some alpha on Lodestar V2, we recommend listening to the AMA!

Article posted @July 29, 2023