SLURP-48 | Proposal to Establish a Strategic Partnership with Folks Finance for LST Integration

SLURPs
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Abstract

This proposal outlines a strategic partnership between Folks Finance and stake.link to integrate a suite of stake.link Liquid Staking Tokens, starting with wstLINK and future LSTs like wstPOL, into the Folks Finance cross-chain lending protocol. The fundamental first step of this collaboration is enabling the Avalanche CCIP lane, a technical prerequisite for onboarding these assets. The proposal details the strategic benefits, initial risk parameters, and a concrete co-incentive structure to stimulate liquidity and adoption.

Motivation & Rationale

Introduction to Folks Finance

Folks Finance is a cross-chain Decentralized Finance (DeFi) protocol addressing liquidity fragmentation by enabling cross-chain lending markets. Utilizing Folks xChain technology, users can seamlessly deposit assets on one blockchain and borrow on another without manual bridging or asset wrapping. Currently operational across 8 chains (Algorand, Avalanche, Base, Ethereum, BNB Chain, Arbitrum, Polygon and Monad), Folks Finance provides comprehensive DeFi services including lending, trading, and liquid staking.

All cross-chain operations and liquidity routes are coordinated through Avalanche, allowing users to interact across multiple blockchains seamlessly.

Importance of Enabling Avalanche CCIP Lane

Avalanche is the core hub of Folks Finance’s architecture, so setting up a dedicated CCIP lane for each LST is key to integrating them into our protocol. Without a lane for each token, it’s not technically possible to onboard LSTs like wstLINK or wstPOL and connect them to the broader Folks Finance cross-chain ecosystem.

The CCIP lane enables the transfer of stake.link assets across different chains, expanding their utility, supporting new DeFi use cases, and improving capital efficiency for both ecosystems.

Definition - CCIP: Chainlink’s Cross-Chain Interoperability Protocol (CCIP) enables secure communication and asset transfers across different blockchain networks. It employs robust, defense-in-depth security measures, significantly reducing risks commonly associated with traditional blockchain bridges.

Specification / Proposal Details

Cross-Chain Integration:

  • Implementation: Establish the initial Avalanche CCIP lane specifically for wstLINK. This process will serve as the template for enabling future lanes for other stake.link LSTs.
  • Supported Tokens: Initially supporting wstLINK, subsequently expanded to other stake.link LSTs, including but not limited to wstPOL, each requiring its own CCIP lane.

Proposed Risk Parameters

Definitions:

  • Optimal Utilization Rate (Uopt): Target utilization rate at which the pool’s capital efficiency and returns are optimized.
  • Interest Rate Parameters (RV0, RV1, RV2, RS0, RS1, RS2): Define how interest rates adjust according to utilization rates to incentivize optimal asset use.
  • Collateral Factor: Maximum borrowing limit relative to collateral deposited.
  • Borrow Factor: Factor that is applied to the amount borrowed to increase (or decrease) its effective weight in the calculation of liquidation margin.(i.e., BF=110%, then $1 of borrowed value counts as $1.10 in the liquidation margin calculation)
  • Liquidation Bonus: Additional incentive paid to liquidators to ensure timely liquidation.
  • Liquidation Fee: Fee applied to the liquidation bonus.
  • Collateral Cap: Maximum amount of collateral permitted.
  • Borrow Cap: Maximum borrowing limit per asset.

The initial risk parameters for wstLINK listing, subject to ongoing review and adjustments:

Pool Parameters:

RR (Uopt) (RV0) (RV1) (RV2) (RS0) (RS1) (RS2)
10% 50% 0.00% 6.00% 200% 1% 1% 200%

General Mode

Collateral Factor Borrow Factor Liquidation Bonus Liquidation Fee Collateral Cap ($) Borrow Cap ($)
65% 100% 10% 10% 1,500,000 1,500,000

LINK Efficiency Mode

Collateral Factor Borrow Factor Liquidation Bonus Liquidation Fee Collateral Cap ($) Borrow Cap ($)
Link 85% 100% 4.0% 10% 0 1,500,000
wstLINK 85% 100% 4.0% 10% 1,500,000 0

Incentivization Structure

To catalyze initial liquidity and promote usage, we propose a co-incentive program in line with stake.link’s approved budget (SLURP-42). We suggest launching a pilot program with the following parameters:

Pilot Phase Overview

  • Initial Liquidity Target: $300,000 in Total Value Locked (TVL)
  • Duration: 1–2 months
  • Incentives from stake.link: Estimated 3–5% APY in SDL tokens
  • Matched Incentives from Folks Finance: 3–5% APY in AVAX tokens and via the Folks Points system

Points Distribution:

Folks Points are distributed to users for on-chain actions, including:

  • Deposits (both simple and collateral)
  • Borrowing
  • Repaying interests

Milestone-Based Expansion Plan

Upon reaching key milestones, the program will be reviewed and updated. At each milestone, we propose to:

  • Assess protocol performance and usage metrics
  • Adjust or extend incentive structures as needed
  • Define new targets to maintain positive growth momentum

Strategic Benefits

  • Enhanced Token Utility: Increased use cases for LSTs (wstLINK, wstPOL), improving capital efficiency.
  • Yield Opportunities: Additional passive yield streams from Folks Finance lending and staking opportunities.
  • Capital Efficiency (Looping): A leveraged strategy involving repeated cycles of depositing collateral (such as wstLINK), borrowing against it, minting additional liquid staking tokens, and redepositing them to maximize yields from both staking and lending. This strategy increases the total amount of tokens staked, thereby enhancing the security and participation within the staking network. Leveraged strategies enabling users to amplify yields and simultaneously secure greater LINK network participation.

Next Steps / Call to Action

We invite the stake.link community to:

  • Discuss and provide detailed feedback on this proposal.

If the response is positive, we will collaborate with the stake.link and Chainlink teams for the technical implementation of the CCIP lane on Avalanche.

We are convinced that this integration represents a fundamental strategic step for both protocols, creating significant value and strengthening interoperability and composability.

2 Likes
3

Hey guys

Thank you for your interest in our DAO and time writing out such a detailed proposal.

Following viewpoints are my own

Previous wstLINK deployments on arbitrum and optimism did not manage to drive volume or interest beyond what was subsidized to LPers.

Each deployment fragments liquidity. While there are synergies between avalanche and chainlink I don’t see a market made up of avalanche users who are desperatly looking for ways to stake their LINK, who already are not staking.

Without clear utility for another pool on another chain, liquidity will be mercenary, and will dry up once incentives are removed. Which history shows us has already happened twice.

Why is xChain different, and what can users do here that they cannot on eth or ethL2s?

I am very concerned about pouring out SDL incentives to a non product-market fit. Without a clear demand for staked LINK specifically on avalanche I look at these SDL incentives as a net outflow for the DAO without clear gain.

The cost structure is too vague. Who is paying for what?

CCIP lanes, audits, gas and developer time.

Is this a 50/50 split or a “we at FF do everything”?

FF’s contribution to the work and incentives should be at least equal or higher to that of stake.link.

Folks point system I imagine is as uninteresting to me as anyone else who doesn’t use FF regulary.
Incentives to be matched by FF should be exclusively in AVAX.

If this is approved by the stake.link DAO, what is a successfull pilot phase and what revenue would it bring?

Thank you for reading and I look forward to your response.

Best regards,

1 Like
4

I’m all for new places to deposit and use wstlink, enhance defi composability and toy around with new ccip usecase.

I don’t realy see any downside except the liquidity mining program, the loop opportunity itself should be enough don’t you think?

5

I have generally been against expansion to other L2s and protocols given the cost both financially and in developer time. However, in this case it may be a good option given that the work from SDL’s side appears to be minimal and the proposed incentives seem to be relatively limited. What’s the maximum amount of SDL that would be expended? We have 23.2m SDL in the Treasury so don’t think it’s much of an expenditure given the exposure we will gain through an established blockchain in Avalanche and via Folks Finance.

One concern I do have is that the cross-chain lending from Folks Finance is provided by Wormhole and CCIP. Can I just confirm that all wstLINK cross-chain transactions will occur via CCIP?

There is some reputational risk to SDL if there are any issues as this SLURP gives official support rather than Folks Finance listing wstLINK independently. Their protocol is also relatively new and not battle-hardened like protocols such as Aave.

Lastly, is there any cost involved for SDL in activating the new CCIP lane and other lanes in the future?

6

Hey, thanks for your feedback,

Folks Finance is a cross-chain lending protocol that utilizes concentrated liquidity pools. This means that liquidity deposited from any connected chain flows into a single, unified pool. This model improves liquidity efficiency compared to multi-chain protocols (e.g., AAVE, Compound, Morpho) and results in a consistent interest rate across all integrated chains. Another significant benefit is enabling interoperable loans, which allow a user to deposit collateral on one chain (Chain A) and borrow on another (Chain B).

A user is able to collateralize/borrow crosschain tokens such as wstLINK across all supported networks without having to manually bridge yourself. This is achieved by using Chainlink CCIP under-the-hold.

Avalanche is used by Folks Finance as the main chain to concentrate liquidity. It won’t have an effect of fragmenting liquidity, indeed, it will concentrate the liquidity into a single pool. Meanwhile the liquidity remains accessible in all the supported chains so you get the benefit of both the capital efficiency and accessibility.

Regarding incentives, for the same rationale mentioned above incentivizing on a crosschain lending is much more efficient than the standard multichain model, as there is one single pool with one single APY across multiple networks. The goal is that once users experience the benefits of cross chain lending, the pool will become self-sufficient on its own.

Our model is also designed for weekly adjustments. This allows us to allocate rewards dynamically according to demand.

Folks Finance does not ask listing costs. Indeed, we support freely with co-incentives, marketing, and liquidity provider outreach.

The technical workload for integration is very low; it takes a developer approximately 30 minutes to open an Avalanche Lane. Folks Finance will provide full support and guidance throughout the entire process. The associated costs are negligible.

As is common for projects in a pre-TGE phase, we are running a points campaign. This campaign includes all assets listed on our protocol, with each asset assigned a specific multiplier. As a cross-chain native token, wstLINK will receive a higher multiplier. These points are an additional layer of rewards on top of the existing AVAX incentives.

Allowing one more utility and use case to a token such as being listed in a lending protocol is very important in DeFi. This brings first and foremost more value to wstLINK and to its holders as they are able to borrow against it.

A successful pilot will be determined by achieving strong pool TVL and traction.

2 Likes
7

Hey, fully agree on the value of increasing composability, exploring new CCIP use cases, and expanding wstLINK integrations.

That said, I see the liquidity mining program not as a way to force the strategy to work, but rather as a strategic tool to bootstrap initial liquidity and reward participants who validate this new use case.

It’s less about making the loop attractive on its own, and more about driving adoption, generating awareness, and incentivizing genuine usage during the critical first phase. Once the pool reaches a certain level of organic demand, sustainability should follow naturally.

1 Like
8

Hey, appreciate the concern, totally valid. That said, this is a low-cost, high-upside opportunity.

Yes it will be done through CCIP. The technical work is minimal (30 minutes dev time), and Folks Finance provides full support. The incentives are flexible, adjusted weekly based on demand, so we avoid unnecessary SDL spend.

Importantly, Folks uses unified cross-chain liquidity, so any SDL incentives benefit a single shared pool, unlike fragmented models (e.g., Aave, Compound).

The costs of opening a lane are negligible.

1 Like