Add cbLTC Market to Moonwell on Base

Proposals Community Proposal
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Add cbLTC Market to Moonwell on Base

Author(s): SmokinClutch
Related Discussions: https://forum.moonwell.fi/t/new-coinbase-collateral-assets/1708
Submission Date: August 27, 2025

Summary

This proposal seeks to add Coinbase Wrapped Litecoin (cbLTC) to Moonwell’s Base Core Markets. cbLTC, a fully-collateralized ERC-20 token representing Litecoin (LTC), offers a unique opportunity to integrate a safe, blue-chip asset with a long history of liquidity into Moonwell’s lending protocol. As a Litecoin enthusiast, I’ve long awaited DeFi support for LTC, which has been underserved in lending markets. Adding cbLTC will unlock LTC’s value, enhance liquidity on Base, and position Moonwell as the one of the first DeFi protocols to support cbLTC, fostering growth in the Base ecosystem.

Overview

cbLTC is an ERC-20 token issued by Coinbase, backed 1:1 by Litecoin (LTC) held in Coinbase’s custody, ensuring a secure and auditable peg. Litecoin, launched in 2011 by former Coinbase employee Charlie Lee, is a proof-of-work cryptocurrency with a fixed supply of 84 million coins, using the Scrypt algorithm. Often considered a “blue-chip” asset like Bitcoin, LTC boasts a market cap of approximately $7.75 billion (ranked ~#26) and a 24-hour trading volume of ~$705 million, reflecting its deep liquidity and stability over a decade. Moonwell already supports Coinbase-wrapped assets (cbETH, cbBTC, cbXRP, cbDOGE), and cbLTC extends this model, enabling Litecoin holders to participate in DeFi on Base. No other DeFi protocols currently support cbLTC, making Moonwell a pioneer in this space.

Motivation

As an LTC maxi, I’ve always wanted to lend my Litecoin in DeFi, but the lack of support for LTC has been a persistent barrier. cbLTC addresses this by bringing Litecoin’s value to Base, unlocking lending and borrowing opportunities. Adding cbLTC will:

  • Enhance Liquidity: Leverage Litecoin’s proven track record as a liquid, blue-chip asset to boost Moonwell’s TVL and trading volume, similar to cbBTC’s rapid adoption.

  • Attract Users: Draw Litecoin’s dedicated community and institutional holders, increasing protocol revenue.

  • Diversify Collateral: Introduce a proof-of-work asset uncorrelated with Ethereum-based tokens, reducing risk.

  • Lead DeFi Innovation: Position Moonwell as the first DeFi protocol to support cbLTC, strengthening its role in Base’s onchain economy.
    This proposal supports Base’s mission to expand DeFi access while offering LTC holders a long-overdue opportunity to utilize their assets.

Implementation

The implementation involves listing cbLTC as a core market on Moonwell’s Base deployment, following these steps:

  1. Community Approval: Conduct a Snapshot vote for preliminary approval.

  2. Risk Assessment: Engage risk managers (e.g., Gauntlet or Anthias Labs) to finalize parameters.

  3. Onchain MIP: Submit a Moonwell Improvement Proposal to deploy the cbLTC market contract.

Market Risk Assessment

  • Market Cap (cbLTC): Estimated $5-10M initially, based on similar cb asset launches.

  • Min/Max Market Cap (Last 6 months): $0 (pre-launch) / Projected $10M+ post-launch.

  • Circulating Supply: Estimated 50K-100K cbLTC initially.

  • Maximum Supply: Uncapped, limited by Coinbase custody.

  • 24-Hour Trading Volume: Projected $300K+ on DEXs like Aerodrome.

  • Herfindahl Index: ~0.85-0.9, mitigated by Coinbase’s reputation.

Decentralization

  • Ownership: Backed by Coinbase reserves, with administrative roles managed by Coinbase.

  • Governance: Assets subject to Coinbase’s rules.

  • Blacklist Functionality: Contract includes blacklisting for transfers, minting, or burning.

Smart Contract Risks

  • Codebase: cbLTC contract at: 0xcb17c9db87b595717c857a08468793f5bab6445f

  • Security: Upgradeable via Coinbase multisig.

  • Oracle: Chainlink LTC/USD price feed (assumed available, e.g., similar to 0x8422f3d3CAFf15Ca682939310d6A5e619AE08e57 for DOGE).

Swap Size Requirement

cbLTC may not initially meet Moonwell’s $2M liquidity threshold per the Moonwell Asset Listing Framework (MALF). However, since LTC has not been widely accessible in DeFi markets, many holders have not yet wrapped their LTC to bring it onchain. Introducing a new DeFi lending opportunity, especially on Base, is expected to drive significant wrapping activity and liquidity growth, as seen with cbXRP and cbDOGE, further amplified by Aerodrome incentives.

Commercial Viability

Simulations suggest annual interest revenue of $50K+ at moderate utilization, supporting protocol reserves.

Recommended Risk Parameters

(Modelled after cbXRP/cbDOGE, to be refined by risk managers):

  • Collateral Factor: 70%

  • Supply Cap: 1M cbLTC

  • Borrow Cap: 500K cbLTC

  • Protocol Seize Share: 30%

Interest Rate Recommendations

  • Base: 0

  • Kink: 0.45

  • Multiplier: 0.23

  • Jump Multiplier: 5

  • Reserve Factor: 0.3

IR Curves

  • 0% Utilization: Borrow APR 0%, Supply APR 0%

  • 45% Utilization: Borrow APR 10.35%, Supply APR 3.26%

  • 100% Utilization: Borrow APR 285.35%, Supply APR 199.74%

Voting

  • Yay: Supports adding cbLTC to Moonwell on Base with the proposed parameters and proceeding to an onchain MIP.

  • Nay: Opposes the addition of cbLTC.

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