From the Composable Finance team, the purpose of this post is to prompt discussion and collect community feedback before proceeding with an on-chain proposal. 

The proposal is summarised below and is co-authored by the founder and head of product at Composable Finance, 0xBrainjar.


**Summary**

Provide a $ 5 million KSM loan to lending protocols to kick-start the money market activity on the Kusama ecosystem.


**Context**

Kusama needs a structured incentive program to attract customers and showcase its unlimited scalability, efficiency, and cross-chain interoperability potential. However, incentives should be wisely directed towards activities that, if adequately rewarded, create a positive feedback loop with a resulting exponential increase in liquidity gathered from outside. Lending is one of the essential pillars in a well-functioning DeFi ecosystem because it allows customers to capture opportunities without compromising capital efficiency.

Other chains are skewing funds towards lending too. The Avalanche Rush program has allocated the highest incentive tranche to AAVE ($ 20 million). AAVE Total Value Locked (TVL) on the Avalanche chain has gone from $ 622 million to $ 3.46 billion in just two months. Benqi, the Avalanche native lending protocol, has obtained $ 10 million from the Avalanche Rush incentive program. Its TVL has gone from $ 112 million at the Avalanche Rush announcement date to the current $ 1.85 billion.

**Problem Statement**

The lending activity on Kusama is currently anemic and, without lending/money market opportunities, there’s little room for onboarding foreign assets on the ecosystem. Projects like Angular Finance, an isolated lending pair pallet built on top of Composable Picasso, could help mitigate such a gap by enabling loans on Kusama.

**Proposal**

Unlock $ 5 million KSM from the Kusama treasury in the form of a loan to Angular Finance or other lending projects aimed at kick-starting usage of DeFi applications.

**The rationale behind the loan**

While these incentive programs are standard for other networks, we know that this is a new step for Kusama. Therefore, we use this proposal to pursue a loan rather than direct liquidity incentives. We feel that this aligns incentives with the participating protocols to use the loan as a proof of concept to illustrate the potential effectiveness of such a program in the future.



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**[For further details please view the proposal on our Github](https://github.com/ComposableFi/KTFPs/blob/master/Proposals/Loan_Incentive_Proposal.md). We look forward to the discussion that this creates, and following up with a firm on-chain proposal for the council to evaluate.** 





- The Composable Finance team wants to get feedback on a proposal before making a decision.
- They want to provide a $5 million loan to lending protocols on the Kusama ecosystem.
- They think this will help attract customers and increase liquidity on Kusama.
- Other chains have had success with similar programs.
- They want to use the loan as a proof of concept for future programs.

#1216 Treasury loan for kick-starting money market activity on Kusama