Proposal Summary

Question posed to DAO members:

"Do you approve of the process for the permanent closure of RMM v2 as proposed by RealT, including the liquidation without penalty of healthy positions (HF > 1), the expulsion of RealTokens and xDai to the holding addresses, and the complete withdrawal of the interface?"

Voting Options:

• FOR: I approve the permanent closure of RMM v2 according to the process described
• AGAINST: I reject the permanent closure of RMM v2 at this stage

Background and Motivation

Current Status

RMM v2 (RealToken Money Market version 2), based on the Aave v2 protocol and launched in April 2022, is currently undergoing a phased shutdown since the deployment of v3 on February 8th 2024. The migration to v3 was carried out in a structured manner, with deposits and borrowing limited on v2, while withdrawals and repayments remained active. After more than a year and a half of transition, v2 now contains only inactive liquidity, which poses operational problems, particularly in the event of property detokenization.

Current Liquidity Status on RMM v2:

• 22,000 xDai borrowed in total
• 14,000 xDai represents protocol fees not collected by RealT
• 14,000 xDai held by inactive or low-activity users
• Deposits and borrowing have been disabled since February 2024
• The reserve requirement has been raised to 100%, eliminating all interest on deposits

Reasons for Closure

• Technical Issues: RMM v2 creates complications during the real estate detokenization process. When RealTokens need to be destroyed (detokenization, loss of wallet access), this can cause malfunctions if these RealTokens are used to secure loans on RMM.
• Dead Liquidity: The remaining funds primarily represent protocol fees and positions held by inactive users who did not migrate to v3 despite numerous incentives and communications.
• Technological Evolution: v3, based on Aave v3, offers superior features, including over 700 collateralizable properties (compared to the initial 54), improved LTVs, and more advanced decentralized governance mechanisms.
• Ownership and Transparency: Although RMM v2 is wholly owned by RealT and is not decentralized, the team wishes to proceed with this closure in a spirit of collaboration and transparency with the DAO.

Process proposed by RealT

RealT proposes that the DAO approve the following final closure process:

1. DAO Governance Vote

Submission of a formal proposal via the DAO's governance tools (Tally) to obtain approval from REG (RealToken Ecosystem Governance token) holders.

2. Modification of RMM v2 Smart Contracts

Objective: To allow the liquidation of all remaining active positions with a loan.

Proposed Liquidation Mechanism:

• For positions with a Health Factor > 1: Liquidation without penalty
  • Sole objective: to repay loans to allow the protocol to close
  • No liquidation bonus will be applied to liquidators
  • Fair process for users with healthy positions
• For positions with a Health Factor ≤ 1: Application of the standard Aave v2 protocol liquidation rules
  • Liquidation up to 50% of the debt
  • Standard liquidation bonus based on the risk parameters of each asset
  • Then application of the rules from the previous point, with the Health Factor now > 1

Technical Justification: In DeFi protocols like Aave, the Health Factor measures the safety of a loan position. An Health Factor > 1 indicates an over-collateralized and healthy position. Liquidating these positions without penalty is an exceptional approach justified by the protocol's closure, thus protecting users while allowing debt repayment.

3. RealToken Expulsion

Liquidation: Execute liquidations for debt-backed RealTokens.

Action: Automatically return all RealTokens deposited as collateral to the holder addresses that are not debt-backed.

Verification: Ensure that all loans associated with these collaterals have been repaid or liquidated.

4. xDai Expulsion

Action: Return all deposited xDai (including protocol fees) to the holder addresses.

Distribution:

• User deposits (approximately 14,000 xDai) returned to their owners
• Protocol fees (approximately 14,000 xDai): to be decided by the DAO (retention by RealT, redistribution, or other use according to governance)

5. Interface Removal and Service Shutdown

Complete deactivation of the RMM v2 interface on the rmm.realtoken.network website

Shutdown of the liquidation interface dedicated to v2

Clear communication with the community regarding the completion of the process

Documentation: Archiving of historical data for transparency and future reference

Advantages and Disadvantages

Advantages

• Resolution of detokenization issues: Eliminates technical roadblocks during the RealToken destruction process.
•  Infrastructure simplification: Reduces maintenance and operational costs associated with maintaining an obsolete protocol.
•  User protection: Liquidation without penalty for healthy positions (HF > 1) is a fair measure that protects users who have not migrated.
•  Recovery of Locked Funds: Allows inactive users to recover their assets without having to manually interact with the protocol.
•  Clarity and Transparency: Democratic process via the DAO, despite RealT's centralized ownership of RMM v2.
•  Focus on v3: Allows the team to focus all resources on the continuous improvement of RMM v3.

Participants

• DAO Members: Participation in preliminary discussions on the Forum, then voting,
• Proposal: Submission of the proposal on Tally,
• RealT: Proposal, then implementation of the voted proposal.

Budget

This proposal does not require any budget from the DAO.

Next Steps

1. Formal submission of the proposal on Tally for voting
2. Implementation according to the voting results and the established timeline

Conclusion

The permanent closure of RMM v2 represents a natural and necessary step in the evolution of the RealT ecosystem. After more than a year of successful transition to v3, which offers superior features and better integration with decentralized governance, maintaining RMM v2 is no longer operationally justified.

The proposed process prioritizes transparency and fairness for all participants, with particular attention paid to protecting users through the penalty-free liquidation of healthy positions. This approach demonstrates RealT's commitment to its community and sets a positive precedent for collaboration between the core team and the DAO.

The final decision rests with the REG holders, who will be able to democratically express their views on this major evolution of RealT's technical infrastructure.

Key Terms:

• RMM: RealT token deposit and lending application.
• AAVE: Application that served as a model for building the RMM solution.
• HF: Health Factor, which triggers the user's liquidation if its value falls below 1. The value of the tokens deposited as collateral then becomes insufficient relative to the loan amount.
• Liquidation: A third party partially repays the liquidated user's loans and receives in exchange tokens deposited as collateral at a reduced price ("Bonus" from the liquidator's perspective, "Penalty" from the liquidated user's perspective).
• Interface: Web application providing access to RMM services.
• Protocol fees: RMM v2 collected fees during its operation, which were accumulated as xDai deposited on RMM v2 in a specific wallet.
• Detokenization: When a (tokenized) property is sold, the holders of the corresponding RealTokens are reimbursed, and the tokens are destroyed. If the detokenized token was deposited on RMM and is used as collateral for a loan, the corresponding loan must be repaid before the token is destroyed; otherwise, RMM will malfunction.

Forum : https://forum.realtoken.community/d/94