State of Seamless: March 2024

5 min readMar 6, 2024

February rode January’s coattails, ending with a bang as Seamless Protocol launched a game-changer feature.

Let’s dive into what this means and more in this month’s updates.

Protocol Performance

Despite facing challenges in February, including a -65.95% decline in Total Value Locked (TVL) and losing its spot as the #1 Lending Protocol on BASE to Compound Finance, Seamless still stands strong as the 3rd largest Lending Protocol and the 8th largest protocol on BASE, with a TVL of $19.34 million.

WTF are ILMs and How do they work?

Seamless Protocol has officially rolled out its much-anticipated Integrated Liquidity Markets (ILMs), ushering in a new era of borrowing efficiency and strategy in DeFi. Integrated Liquidity Markets (ILMs) are the Seamless Protocol’s latest brainchild, revolutionizing how borrowing looks in the decentralized finance (DeFi) space. At their core, ILMs are about boosting capital efficiency, ensuring continual rebalancing, and providing a seamless experience for users. Let’s break down this mouthful into something digestible.

The Essence of ILMs: Think of ILMs as your financial strategist in the DeFi realm. They utilize your collateral to execute growth strategies automatically — like a set-it-and-forget-it for your crypto assets. The debut strategy? A wstETH/ETH looping maneuver designed to multiply your wstETH position through strategic borrowing and swapping on decentralized exchanges (DEXs).

How It Works: Imagine depositing wstETH into an ILM. You get an LP Token, representing your stake in this financial adventure. The protocol borrows ETH against your deposit, swaps it for more wstETH, and voila, you’re now leveraging a 3x position on your original stake. But here’s where it gets interesting: as wstETH accumulates staking fee rewards and its value increases, the ILM automatically borrows more ETH to keep your leverage at the golden 3x. This cycle of borrowing, swapping, and rebalancing is the heartbeat of ILMs, ensuring your position grows efficiently without manual tinkering.

The Benefits: With ILMs, you’re signing up for auto-compounding rewards from day one, meaning your gains start growing immediately. The smart contracts behind ILMs handle all the rebalancing, freeing you from the worry of managing debt positions. Moreover, ILM fees are shared across participants, keeping your costs low and not eating into your profits. Plus, because these strategies are baked right into Seamless’ lending pool, they offer preferential rates for borrowing, leading to more lucrative outcomes.

Dive Deeper with some of these resources:

ILM Specification: https://github.com/seamless-protocol/ilm/blob/main/SPECS.md
Gitbook: https://docs.seamlessprotocol.com/innovative-opportunities/integrated-liquidity-markets-ilms

Governance Proposals

PGP-1: Seamless Protocol Platform Rewards Refresh

Following last month’s update, PGP-1 garnered overwhelming support, successfully executed on February 9th, 2024, with over 1.59 million votes IN FAVOR. Users can now stake their Soswap SEAM/USDC and SushiSwap SEAM/WETH LP tokens in return for eSEAM (escrowed-SEAM), introducing esSEAM to foster community alignment.

GP-2 Addressing Urgency: Unveiling the Fast-Track Procedure

Once again, the Seamless Protocol community showed up in numbers, with over 541,000 SEAM votes cast IN FAVOR of GP-2, signaling a strong community consensus towards enhancing the DAO’s decision-making agility through the introduction of a ‘fast-track procedure.’ This move addresses the critical need for a more responsive governance framework, especially highlighted by the urgency experienced during the Seamless Protocol Platform Rewards Refresh. The necessity for a procedure that allows the DAO to act swiftly in times of need was clear, as sticking to the conventional process could have compromised the protocol’s sustainability.

The fast-track procedure outlines specific scenarios for its initiation: firstly, at the beginning of the governance process with the backing of a majority of Trust Level 2 users, and secondly, at any point thereafter, provided certain conditions such as a majority of delegated voting power support are met. This flexible yet structured approach ensures that urgent matters can be expedited through the governance process, maintaining the DAO’s integrity and functionality without being bogged down by procedural delays.

By adopting GP-2, the Seamless Protocol community has taken a significant step towards reinforcing its governance infrastructure, demonstrating a commitment to adaptability and efficient governance. This initiative not only streamlines the process for urgent decision-making but also sets a precedent for proactive and responsive governance, ensuring the DAO remains resilient and capable of navigating unforeseen challenges with agility and transparency.

SIP-4: Market Parameter Adjustments and Introduction of Custom wstETH

Passing with an overwhelming majority of over 1.78 million votes and officially executed on February 21st, SIP-4 marks a significant milestone for the Seamless Protocol by introducing the groundbreaking Integrated Liquidity Markets (ILMs), starting with the wstETH/ETH looping strategy. This initiative represents a major leap towards enhancing capital efficiency across the DeFi spectrum, showcasing Seamless Protocol’s innovative approach to optimizing borrowing and lending dynamics. The proposal meticulously adjusts market parameters, including the supply and borrow caps for critical assets such as USDbC, ETH, and cbETH, based on comprehensive feedback from the community and insights from industry experts like Chaos Labs. These adjustments are pivotal in ensuring the protocol remains agile, responsive to market conditions, and continues its trajectory of growth, reinforcing its position as a leading DeFi platform.

At the core of SIP-4 is the introduction of a custom wstETH market, a strategic move designed to support the seamless operation and launch of ILMs. This specialized market is engineered to facilitate the wstETH/ETH looping strategy by optimizing key collateral parameters, such as setting an 80% Loan-to-Value (LTV) ratio and a heightened 15% liquidation bonus, which together enhance the capital efficiency and risk mitigation framework for participants. Unique to this market, borrowing is disabled to prevent saturation, and it’s directly accessible only to governance-approved ILM contracts, ensuring a focused and efficient ecosystem for the ILM strategies to perform.

On-Chain Proposal: https://www.tally.xyz/gov/seamless-protocol/proposal/83164930664931193677437173792027992105367739768892445149240433838471065610770?chart=timeline

See you next month!

That’s a wrap on this month’s edition of “State of Seamless.” It’s been a big month, and there’s plenty more where that came from. We’re all set to keep these monthly updates coming your way, so make sure you’re tuning in for the latest scoop on Seamless.

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