summary: Inverse Finance (launched December 2020) is a DAO launched in 2020.
content: Inverse Finance is a community of cryptocurrency enthusiasts organized as a Decentralized Autonomous Organization (DAO), started on the 26th of December 2020. Inverse DAO governs and develops a suite of permissionless and decentralized financial tools using blockchain smart contract technology. The code base is open source and maintained by the community. Overview Inverse Finance is a protocol that offers passive no-loss investment in any token by following a Dollar-Cost Averaging plan using stablecoin yield. This is governed by its community of token holders (over 2000 holders) and elected delegates. Inverse Finance was created by a sole developer in December 2020, and since then has grown to include more than a hundred DAO members voting on the direction of the Organization. This project partnered with leading cryptocurrency and DeFi protocols. This is a suite of banking tools for the DeFi generation. The Inverse Finance price is also part of the Crypto.com Price Index that features price history, price ticker, market cap, and live charts for the top cryptocurrencies. This project acquired Tonic Finance for $1.6M on Apr 30, 2021. History In 2020, Inverse Finance was founded by Nour Haridy. On February 24, 2021, Inverse Finance revealed the Anchor Protocol, a money market built around DOLA. Inverse Finance founder Nour Haridy compared Anchor to Synthetix and saw these models as providing the same utility: “Lending and synthetic protocols both offer the same service: credit. Anchor brings the gap between them by combining them into a unified borrowing protocol.” On October 31, 2022, whitepaper "FiRM: The Fixed Rate Money Market Protocol" was released and the lending market FiRM and token $DBR were launched aiming to offer fixed rate lending service. Governance Inverse finance is a product that is administered by DAO (decentralized autonomous organization) which is named Inverse DAO. The Inverse DAO is a decentralized organization that works on Ethereum and it also controls the application of on-chain choosing of Ethereum. The INV token purchasers can authorize their voting for any representative or himself (the owner). The Inverse DAO guides a quantity of a particular Inverse Finance universe and products. Risk Working Group (RWG) The Risk Working Group supports all functions of Inverse Finance, including DOLA expansion, providing sound risk analysis, risk management, and risk monitoring for existing products and for the efforts of the working groups. For example, before Inverse Finance DAO announces a new lending partner, the RWG provides an extensive analysis of the risk involved in extending a DOLA lending facility to that partner. Compared to traditional finance, significantly more risks are present in DeFi for individual users and protocols such as malicious actors, esoteric smart contract risks, unknown correlations between tokens and projects, short track records, unproven and experimental economic theories, and the irreversibility of transactions to name just a few. In practice, the RWG identifies and then assigns scores to various types of risk in a given project. This scoring framework will be paired with recommended risk prevention and mitigation strategies that are then implemented when launching the project. Inverse Finance formalized its risk management responsibilities into the Risk Working Group (RWG) on April 22, 2022. A significant part of running the RWG involves the extensive use of analytics, alerts, and other tooling that automates otherwise herculean risk management tasks. Products The main Inverse finance products are FiRM, Anchor (Frontier), DOLA, DCA Vaults, INV, and Inverse plus. FiRM (Fixed Rate Market) The Fixed Rate Market or “FiRM,” is Inverse Finance’s new Fixed Rate Market lending protocol that implements a new DeFi primitive called DOLA Borrowing Rights (DBRs), and a novel money market architecture, Personal Collateral Escrows (PCEs). DBRs provide the holder the right to borrow DOLA in FiRM. Simply hold DBR in the users' wallet and they are eligible to borrow DOLA against their collateral. PCEs isolate collateral deposits by individual wallet both by address and by token type. This removes the need for shared collateral pools which carry increased risks, and grants users the ability to use yield bearing collateral tokens and the voting power of governance tokens deposited as collateral, or in DeFi incentives voting schemes such as Convex. Anchor / Frontier Anchor is a synthetic asset and money market system that enables capital-efficient borrowing and lending. Anchor's key differentiator has the ability to issue DOLA. The aim of the Anchor project is to recycle Compound's loan and debt management plumbing for the purpose of synthetic asset creation (Turning Compound into MakerDAO/Synthetix). This is achieved by creating an ERC20 token for each synth, minting it, and supplying it exclusively to the protocol which would be lent to others in exchange for collateral. Frontier launched on 25th February 2021 under the name Anchor and Anchor was rebranded as Frontier on May 25, 2022. DOLA The first synthetic asset supplied by Frontier is DOLA, a debt-based USD stablecoin that can also be used as collateral within the anchor protocol to achieve high capital efficiency, leverage, and native yield. It is a stablecoin token that tracks the price of $1. DOLA can be minted by using other assets on Frontier as collateral and can also be used itself as collateral to borrow other assets on Frontier. DOLA is a natively yield-generating asset. Users can buy DOLA and supply it to Frontier to earn interest from DOLA minters. DBR DBR (DOLA Borrowing Rights) is an ERC20 token that represents the right to borrow DOLA in FiRM. A user with a single DBR has the right to borrow one DOLA stablecoin for up to one year with no interest. The duration is not fixed so the user can borrow two DOLA for six months, four DOLA for three months, and so on. Borrowing one DOLA for one year will gradually consume that DBR token. The liquidation process follows common DeFi practices where a fee (e.g., 10%) is collected by third-party liquidators who successfully repay loans that have become eligible for liquidation due to a breach of a borrower’s collateral factor. DBR solves issues of highly volatile interest rates in traditional variable rate lending and DBR removes many of the constraints of conventional fixed rate interest lending in DeFi. Users benefit from the certainty of fixed-rate loans while gaining both short and long-term optionality and opportunities from DOLA Borrowing Rights. DCA Vaults This helps to invest tokens into yield-bearing strategies while continuously buying the asset of the desired choice will proceed. This allows users to use dollar cost average (DCA) and their stablecoins to yield into chosen assets. When deposited USDC or DAI, it receives a vault token at a 1:1 ratio. As long as the token is held, it continues to earn ETH, WBTC, or YFI. When finally withdrawing the stablecoin, the vault token is burned and received the deposited stable coins back. While initially a very successful product, the DAO decided to focus resources on the growth of DOLA rather than improvements to the DCA Vaults. INV INV is Inverse Finance’s governance token which investors can stake for a hefty yield in Frontier. INV can be used as collateral to borrow assets like DOLA to participate in yield farming opportunities, or to long or short the assets available in Frontier. INV is a positive sum rewards token that gives voting power in the Inverse DAO. Therefore, INV token holders can directly control a number of important parameters and aspects of the Inverse treasury, products and operations. Inverse Finance maintains a close working relationship with Olympus Pro by utilizing their Olympus Pro bond program. This allows users to purchase INV tokens at a discount in return for supplying liquidity pool tokens or DOLA. The amount of INV tokens supplied to the bond program is continually monitored and optimized by the Policy Committee\\.\\ Inverse Plus Inverse plus brings the INV governance token with new revenue sharing and higher staking rewards. It gives users additional INV rewards with each new mined Ethereum block, approximately 6,400 times per day with an APY max of 500%. It also encourages long-term staking INV and so the increase in DOLA circulation, which will ultimately benefit Staker to earn a share of DOLA lending revenue. Additionally, it gives the right to vote on Inverse finance DAO proposals and contribute to governance. Issues Inverse finance has suffered a couple of attacks in Q1 and Q2 of 2022. On April 2nd, 2022, their tweeter handle tweeted manipulation of INV/ETH price oracle on Sushiswap which resulted in the INV token price rise and allowed the attacker to borrow $15.6 million USD in cryptocurrencies including DOLA, ETH, WBTC, & YFI. Just two months later, On June 16, 2022, Inverse Finance’s Frontier money market suffered another attack. The attack carried out a flash loan attack that resulted in a net loss of $5.83 million in DOLA stablecoin. The hacker managed to steal $1.2 million in USD. The hacker executed oracle price manipulation of the AMM LP token to flash-borrow 27k WBTC. Because of the manipulation, the affected crv3 market utilized Chainlink price data instead of the internal exchange rate of the Curve protocol. The hacker managed to manipulate and raise the price of crv3 LP token. Flashloan of 27k WBTC helped the attacker to borrow a larger amount of the protocol’s stablecoin, Dola (DOLA), than 