Deri Protocol & Mendi Finance AMA

Deri Protocol
8 min readNov 29, 2023

On November 28th, Deri Protocol & Mendi Finance jointly launched an AMA. Let’s watch the detailed & complete AMA recap below:

The AMA Entrance: https://discord.gg/dQyuBkBKBe

Deri Protocol: Gm Borna | Mendi Finance Welcome to the Deri Protocol dc!

Mendi Finance: Gm everyone. Happy to be here!

Deri Protocol: Let’s start off with a quick intro about your crypto history!

Mendi Finance: Sure thing, I have been in crypto for a while and had the chance to work with many different projects before Mendi Finance.
I worked with decentralized storage protocols, L1 blockchains, decentralized identity protocols. Before that I worked in VC for a little bit.
The rest of the team is also coming into Mendi Finance with a rich experience, some of them worked with CEXs, MPC wallet solutions, Security Tokonization, and Layer 1 Blockchains, DeFi protocols and even TradFi experience.

So to sum up we have a strong team to be the number 1 native lending protocol on Linea.

Deri Protocol: That’s amazing, been all over DeFi!
Let’s get into Mendi then
Can you give us a brief overview of Mendi Finance and its mission in the DeFi space?

Mendi Finance: Absolutely!

Mendi Finance is a decentralized lending protocol and it is the go to choice for users on Linea. Our goal is to provide deep liquidity as a native lending protocol for the Linea users. Our long-term growth plan leverages a couple of different pillars, once we achieved this goal. We observed that there is an issue of liquidity fragmentation especially on the new L2s. So we are planning to expand to new chains, but we will keep one global unified liquidity for the protocol. This is possible after we built up our lending pools on Linea first, and it is necessary for the Dencun upgrade to happen, otherwise users will face too large gas costs.

Secondly we are looking to leverage the liquidity to attract institutional DeFi clients, to generate more value to the community during the next bull run.

On the end user experience side, we are looking to leverage account abstraction to create better customer experience. AA is still quite a new technology and the existing tech stack still lacking in tools, but we have a couple of promising potential partnerships and pilot projects coming up leveraging this.

Deri Protocol: Crypto definitely needs a “global unified liquidity”

Let’s talk security. How does Mendi Finance ensure the security and safety of its users’ assets?

Mendi Finance: Mendi has been audited by Scalebit (link to audit report: https://docs.mendi.finance/protocol/audit) and our codebase is based on Sonne Finance and Compound V2. Both have been battle tested protocols and the Sonne team also provides us with tech support and they are advisors on the project.

We won’t release new functions in the future without auditing the smart contracts behind them to ensure that they won’t have exploits.
We have a clarified risk assessment framework that ensure that the lending protocol does not face risk from bad debt or price manipulation.

On the Oracle side most of our markets are secured by the Pyth oracle, but the newest market wstETH is secured by Chainlink, as they have launched on Linea recently and became available as an option.

Deri Protocol: Awesome. What sets Mendi Finance apart from other lending protocols in the market?

Mendi Finance: I would highlight a couple of points:

1.Real yield protocol — We share 100% of the protocol revenue as staking rewards.

2. No VC investors. Our protocol was bootstrapped by the core team.

3. Our unique tokenomics with Velocore. Velocore is a ve33 DEX that we use to bootstrap liquidity behind our native token. The initital LP deposited there was created with the community during our Liquidity Generation Event, and it is owned by the protocol. We use 20% of the emissions to bribe the veLVC holders to vote for the MENDI/USDC pair, which generates yield to the protocol. This revenue is then shared to the stakers 100% of it. This also creates a unique flywheel opportunity for Mendi stakers with Velocore. As they receive LVC tokens as staking rewards they can swap it to veLVC and vote on the MENDI/USDC pair to generate further emissions. These are redistributed to the stakers. This unique architecture has a very famous example with Velodrome (the largest ve33 DEX) and Sonne Finance.

4. Cross-chain deposit function. Users coming from other chains to a new chain like Linea need bridge their assets for deposits. We integrated Squid and the Axelar Network for this purpose, and on our cross-chain deposit page, they are able to directly deposit from any Axelar supported chain, with any asset. Squid and the Axelar Network handles that securely in the backend, abstracting away the issue from the depositors and they can easily onboard to Mendi Finance without the need to worry about bridging and swapping.

Deri Protocol: Plethora of alpha here guys! Love the breakdown — let’s look into the future now.

What are the future plans or upcoming features that users can look forward to in Mendi Finance?

Mendi Finance: Couple of features coming up:

1.Expanding our cross-chain deposit function with further assets, we are exploring enabling withdrawals to different chains too.

2. Our team is constantly monitoring two large opportunities that we identified for lending protocols. RWA backed assets and LP tokens. We don’t have any ETA on when we are going to be able to leverage this technology, as we haven’t found the solution that will help us ensure the security of the assets.

3. We are looking to expand our partnership with Omni Network to focus on providing our markets with a unified liquidity on mutiple L2s. This is dependent on having deep pools of liquidity in the protocol otherwise we have no USP compared to smaller native protocols on other chains.

4. Leveraging AA for user acquisition and retention. We have two product partnerships that we are working on to leverage AA technology in these aspect during 2024.

Deri Protocol: Liquidators. Getting towards the end, can you explain to the community how the Mendi Cross-chain deposit works?

Mendi Finance: Absolutely.

We have integrated a solution provided by Squid and secured by Axelar.

Squid is coming from the grant program of Axelar and the solution is going to replace Satellite, which will be sunset in the future. Axelar is also a strategic partner in the project due to the strategic importance of cross-chain swaps.

This was a great letter of recommandation by the most secure bridge in web3, for us to partner with Squid very early on.

They built the Squid router that enables cross-chain swaps for users from any Axelar supported chain to other chains.

When the user wants to bridge USDC from one-chain to another Squid first swaps the assets from USDC to axUSDC on a secure DEX like Curve on-chain.
The Axelar Network then enables moving that axUSDC from one chain to another, where another supported DEX is used to swap it back USDC, or to another asset if the user also wanted to swap it to ETH for example.

Squid built an SDK on top of this that enables routing on the destination chain from the LP to the Mendi Finance Lending Pools, and it is directly deposited without any user interaction.

So as you can see many different steps are happening, but these are abstracted away from the users and handled by the Squid Router contracts and secured by the Axelar network cross-chain.

We were looking for a bridge partnership that provides us a secure arhitecture to do this, we had offers from other projects that enables us monetization of this traffic, but that is simple not in our DNA.

Deri Protocol: This is very very cool. Linea is in good hands! I’ll open the floor for 2–3 mins to anyone that has any questions directed towards Borna & Mendi

Q: Just wondering, are there any promotional events going on right now?

A: Thanks for the question, that is a great one.

So we are participating in the Linea Voyage and we are running an Airdrop! campaign to celebrate that.

We are distributing 500k $MENDI and 1000 $USDC for participants.

To be eligible you must complete the Linea Voyage Lending and borrowing core task on Mendi Finance.
We are distributing the rewards to the top borrowers.

More details here: https://twitter.com/MendiFinance/status/1729115051263512709

Make sure to grab a spot, rewards are high in this airdrop.

Q: How Deri protocol will interact with yours?

A: Deri protocol deposits the Deri pool on Linea to the Mendi Finance lending pools to generate further yield.

This deepens our liquidity and raises the the competitivness of Deri protocol at the same time.

This partnership is definitely my favorite so far for Mendi Finance.

Q: How to start liquidating bad debt in the protocol? Do you have any guide?

A: We don’t have a guide to start liquidating but there are a ton of guides how to do it on Compound. Mechanism are similar, that is where I would start the research.

Q: Will you guys list DERI token on Mendi?

A: We will analyze the Deri token along the same framework as any other token.

Listing DERI token might introduce other economical risk due to the intertwined archtiecture of Mendi and Deri. We would proceed very carefully but if its possible to do, we would list it. Minimizing protocol risk (for both) would be a very crucial factor.

Q: Can LPs on Mendi also add LP tokens to Deri to earn real yield?

A: That is a good question. Since Deri directly deposits the assets from the pool to Mendi, that would save the protocol fees. But Deri would need to enable this in the protocol. You should ask the Deri team about this.

Q: Or can traders use Mendi token to trade futures?

A: Not yet sir, I am afraid our token is too small for that as of now. But maybe in a couple of years.

Q: I thought the oposite , that you would deploy some of your assets on Deri pools.

A: Current architecture of Mendi does not enable withdrawing liqudity without providing collateral to the protocol. But interesting idea for sure.

Mendi Finance: Thank you for all the questions from the Deri community.
Thank you for the Deri team for having us.

And if you have any further questions don’t be a stranger and just jump in to the Mendi Discord. Our team is always there to answer questions.

About Deri Protocol

Deri, your option, your future!

Deri is the DeFi way to trade derivatives: to hedge, to speculate, to arbitrage, all on chain. With Deri Protocol, trades are executed under AMM paradigm and positions are tokenized as NFTs, highly composable with other DeFi projects. Having provided an on-chain mechanism to exchange risk exposures precisely and capital-efficiently, Deri Protocol has minted one of the most important blocks of the DeFi infrastructure.

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Deri Protocol

Deri Protocol = (Perpetual Futures + Everlasting Options) x Decentralized.