[1RC] Toaster Finance Network Development Grant proposal

2.1 General Proposals
1

Simple Summary

Toaster Finance aims to significantly increase the volume of fusion mode by becoming a representative use case for 1inch fusion mode, making liquidity providing process of Defi gasless and one-click. We would like a grant to help cover the costs of doing this quickly.

Abstract

Currently, 1inch fusion has a customization process to perform preInteraction and postInteraction, which allows additional functionality to be performed by the resolver. However, there is no use case that uses this. In the following mile stones, we will make Toaster Finance a representative use case for 1inch fusion mode. For each mile stone, we hope to get a grant to help with the implementation costs.

  • Milestone 1. Support LP of double side liquidity protocol with Fusion Mode: 60K USDC
  • Milestone 2. Support Various Defi & Applied Strategies with Fusion mode : 60K USDC
  • Milestone 3. Toaster Treasury Design: 100K USDC

Motivation

1inch fusion has a structure that allows more functions to be performed by the resolver than just swapping to another token via customization. However, there are currently no use cases that use 1inch fusion to provide functionality beyond swaps. By fully utilizing it’s functionality, the fusion mode can lead the the intent based transaction paradigm as a highly scalable infrastructure. To become the first project to showcase the scalability of the fusion mode, the Toaster Finance team plans to create a service which effectively utilizes the fusion mode. Through the integration, it would be possible to invest in DeFi investments with a total TVL of $54B, with a gasless and single click process.Through the support of the grant, we would be able to realize this proposal, contributing to the expansion of the 1inch network.

Specification

Currently, when processing orders on the 1inch limit orders contract, it is possible to call preInteraction/postInteraction functions on a specific contract via customization when creating an order.

Below is an illustration of adding 2.5 call fillOrderPreInteraction() and 11.5 call fillOrderPostInteraction() in the illustration describing the fusion mode process taken from 1inch blog.

1inch fusion
1inch fusion5280Ă—1822 452 KB

For example, if a user wants to provide liquidity at a certain price range in the USDC/ETH pool of Uniswap V3 and only has 1 WBTC, the user will calculate the ratio of the token amount, swap the token amount, and finally provide liquidity. However, if the user uses the toaster contract, which utilizes the 1inch fusion, the swap is performed by the resolver and the “liquidity providing of Defi” is performed gaslessly and with a single click.

Milestone 1. Support LP of double side liquidity protocol with Fusion Mode

  • Fusion mode integration to the Invest Feature

    • Implement the Gasless Liquidity Providing by adding custom logic to 1inch fusion preInteraction/postInteraction.

    • The Toaster Finance Team is developing a contract to optimize and simplify the process of investing in Uniswap V3. The development and security audit of this contract is needed.

    • fusion toaster(smart contract used for 1inch fusion mode customization)’s sequence diagram

      fusion toaster
      fusion toaster2727Ă—4124 473 KB

  • Fusion mode integration to the Exchange Feature

    • Integrate the 1inch infrastructure(1inch fusion mode api & 1inch swap api) to the swap process required for our exchange feature.

Milestone 2. Support Various Defi & Applied Strategies with Fusion mode

  • Single side Liquidity Protocol (a protocol that can provide liquidity with a single token): Curve, Balancer, Lending Protocol (Compound V2,V3 AAVE V2/V3 and their forked versions) are also supported.
  • With these protocols connected to Toaster Finance, we want to add the following new features with 1inch fusion mode.
    • Impermanent loss(IL) is a big problem in double-side liquidity protocols because you are always exposed to both tokens, but with lending protocols like Compound and AAVE, you can invest in these protocols with being exposed to only a single token, which greatly reduces IL. So investing in a double sided liquidity protocol with a lending protocol is a meaningful solution. However, it is complicated for users to calculate which DeFi to deposit and lend to. But, we can provide a more comfortable UX by using the 1inch fusion mode.
    • Using the restaking protocols of Curve and Balancer together, such as Convex and Aura Finance, is complicated and requires periodic management, so we make it so that users’s positions are managed by the 1inch resolver without a separate vault.
  • This will require a contract audit.

Milestone 3. Toaster Treasury Design

  • Using 1inch for postInteraction/preInteraction will increase the gas cost that the resolver is paying for processing.
  • Therefore, there is a high probability that orders created using toaster finance will not be processed and a reward system is needed to prevent this.
  • For this purpose, we will design a treasury that will provide rewards just like 1inch’s feebank. We would like to have a consulting team consult on what kind of reward structure is reasonable to create for contract audits and resolvers and 1inch token holders.

Rationale

  • The potential volume increase that this integration could bring is quite significant. As of now, Toaster Finance integrated 7 chains that have a total TVL of $54B in terms of DEX, Lending, Liquid Staking Protocols. The liquidity provided in these protocols need active management, for compounding or withdrawing, causing a huge volume, especially in times of a highly volatile market such as now. As Toaster Finance provides services that simplifies the management process and interactions with the protocols, it has the potential to create significant volume. This in turn, would be able to add to the volume of the 1inch fusion.

    2024.01.12 DEX Lending Liquid Staking
    Ethereum $6.4775B $10.947B $31.02313B
    Polygon $0.2863B $0.4553B -
    Arbitrum $0.5717B $0.38211B -
    Optimism $0.23B $0.1273B -
    BSC $1.698B $1.2B $0.43737B
    Base $0.161B $0.146B -
    zksync era $0.08B $0.013B -

  • As our team is based in Seoul, the capital of South Korea, we believe that Toaster Finance can help 1inch expand into the South Korean market. South Korea has the highest volume of central exchange, but in contrast, the number of users actively participating in decentralized finance is significantly lower. This would mean a huge potential in the South Korean market. As of the first half of 2023, South Korean exchanges had a cryptocurrency market capitalization of approximately $21.9 billion and 9.5 million registered users. With around 90% market share in South Korea, Upbit accounts for around 10% of global exchange spot trading volume, ranking second only to Binance. South Koreans have a high per capita investment, and given the current market situation, their use of CEX is likely to grow even more. There is also a potential demand to diversify their portfolio and strategy using staking services and defi, but is in its early stages, and no localized entry point for these opportunities. By taking these characteristics into account and using our localization advantage, we plan to coordinate with the 1inch team to effectively utilize the Korean market. If successful, this will potentially increase the market cap by $5B.

Consideration

Here’s an additional consideration

  • Currently, in order to make the service sustainable, we plan to capture fees for the Liquidity Providing process done using fusion mode. The fee will be used to reward the resolvers, and the Toaster team for further maintenance and development.
  • We prioritize security, to ensure that the 1inch network is not compromised or create any point of failures, which is the reason for the high cost for security checks.
  • Until MileStone 3, we will return the fees used by users to the 1inch DAO Treasury. However, after MileStone 3, when the treasury system is properly established, we plan to return the fees to the resolver and the Toaster team as rewards for further maintenance, after consulting with the 1inch DAO. As a result, holders who stack 1INCH tokens with the resolver will be rewarded.

About Us

  • Chosen startup of the first cohort of the Consensys Fellowship Program
  • Toaster Finance Hackathon Awards
    • ETHGlobal Istanbul(2023.11.17~2023.11.19)
      • 1inch Network - Most Innovative Application on top of 1inch Network’s Fusion API 1st Place
      • Polygon, Polygon zkEVM DeFi Challenge
    • ETHGlobal New York(2023.09.22~2023.09.24)
      • Linea, Best Account Abstraction Dapp
      • Biconomy, Best DeFi Recipe
    • Ethcon Korea(2023.09.01~2023.09.03)
    • 0x Decreasing Frictions in DeFi(2023.07.08-2023.07.10)
      • Grand Prize 1st
    • Polygon DevX Global tour Hackathon APAC(2023.05.01 ~ 2023.06.04)
      • Application Layer Track Winner
    • **ETH Seoul 2023 (**2023.06.02~2023.06.04)
      • Financial Application, 1st Prize
      • The Graph: Best Use Of Existing Subgraph(s), 1st Prize

We established our team in May and have been quick on execution, as an ever evolving team to bring impact on the DeFi space, by enhancing its usability. We have been constantly designing and experimenting with features to solve the UX problems prevalent in the defi space. As a result, we have win prizes in various hackathons. In 2023 ETH-istanbul, we were captivated by the potential of the 1inch fusion mode and found that we could significantly improve our UX with it, as it directly aligned with our vision. Therefore, we developed a similar product on the polygon chain and proved its validity and potential. Consequently, we won 1st place for the Most Innovative Application on top of 1inch Network’s Fusion API 1st Place. We believe that with the support of the 1inch DAO, we will be able to realize this vision much faster, bringing an impact for both the 1inch network and the defi space.

Funding allocation

Total: $220K

Milestone based unlock

Milestone 1: 60K

  • Contract Audit: 50K
  • Design: 10K

Milestone 2: 60K

  • Contract Audit: 50K
  • Design: 10K

Milestone 3: 100K

  • Contract Audit: 40K
  • Operational costs(legal, treasury consulting): 60K

We ask for an initial payment of Milestone 1, to quickly start the process.

We are currently planning to execute Milestone 1 and ask for an initial funding of 60K, and the remaining payments be executed after the completion of each respective milestone. We ask for 60K USDC to 0x30CAEb399186E087668e85F4424ea39Baf4981aD to fulfill the first milestone.

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