Thala V2 Explained: Introducing New Components and Features Leveraging CDP, AMM, and Launchpad

Thala is a decentralized finance protocol powered by the Move language that seamlessly lends and borrows decentralized, over-collateralized stablecoins through Move Dollar and provides capital-efficient liquidity provision through rebalanced AMMs on the Aptos blockchain .

Since its launch in early April of this year, Thala has continued to grow and evolve as a protocol, becoming the largest native protocol on Aptos with a peak TVL of $30 million and transaction volume of $50 million. Since then, Thala has released many features and updates, enhancing the existing product suite and introducing new protocol partnerships. Today, the Thala V2 launch is imminent. Given the scope of the protocol changes and upgrades, the V2 rollout will take place in three phases over the next month.

Phase 1

MOD Anchor Stability Mod

To facilitate recursive strategies and further strengthen Move Dollar's peg, Thala has introduced the Pegged Stability Module (PSM), which is effectively a non-interest-bearing vault that enables users to move between MOD and whitelisted stablecoins. 1 to 1 exchange with less fees. Initially, Thala's PSM will support Wormhole and LayerZero bridging USDC.

The launch of the PSM will not only strengthen the Move Dollar (MOD) against the USD 1 peg, but also create a new revenue stream for the project treasury. In the future, PSM assets can also be deployed into low-risk, highly liquid, interest-bearing real-world assets (RWA) through governance.

CDP Incentives

Since its launch, Thala has continued to differentiate itself from other CDP protocols by offering Vaults with special collateral types. Thala is the only protocol on Aptos where users can borrow and borrow in LST like tAPT, and it is also the first protocol to provide retail leveraged RWA exposure on the chain.

With the introduction of PSMs and more unique vault products in the future, CDPs can be used to source more exotic collateral types, offering unique value propositions to their holders. Protocols with yield-generating assets such as liquid collateral tokens, LPT, RWA, and deposit receipts can use some of the fees to incentivize borrowing and lending against their assets.

By supporting vault mining, Thala can better facilitate and shape its future collateral backing through incentives, and users can earn additional benefits from more specialized collateral types through vault incentives.

(Note: Special collateral refers to deposit receipt tokens, physical assets, LP tokens, etc.)

Flash Loan

Flash loan is an important financial primitive, and Thala has incorporated it into RWA's one-click leverage design. Other applications of Flash Loans allow users to do vault collateral swaps; liquidators can also obtain large amounts of funds through Flash Loans, providing a more seamless user experience on Thala.

• A comprehensive overview of how flash loans are executed can now be found in the protocol document;
• The protocol charges a fixed fee of 1 basis point for all flash loans, which is accumulated to the protocol fee address.

As of publication time, all Phase 1 features are now live on mainnet, and Ottersec has completed a comprehensive security overview of Phase 1 V2 contracts. Audit reports can be found in the protocol documentation.

Phase 2

veTHL

Thala's voting escrow model has undergone additional changes during development. The initial veTHL implementation will only support locked LPT (80 THL-20 MOD) and will force users to provide liquidity with no other options. To encourage all users to participate in Thala's governance, our updated voting escrow tokenomics now supports 1-sided THL and 80 THL-20 MOD liquidity pool tokens.

veTHL can be obtained in one of two ways:

• Unilateral THL locked for 2-52 weeks;
• 80 – 20 THL-MOD ThalaSwap LPT locked for 2 – 52 weeks.

Users can lock either of the two to get veTHL, which represents the user's voting weight. This can be calculated from the notional amount of veTHL and the total lock duration. In order to reward and compensate liquidity providers for potential impermanent losses and higher capital costs, LPT lockers will receive a multiplier of voting weight.

A user's veTHL balance represents their voting weight in DAO governance relative to the total veTHL minted. veTHL marks the beginning of Thala's transition to a DAO governance protocol, empowering stakeholders to manage aspects of the protocol such as treasuries, collateral whitelists, treasury swaps, THL releases, and more.

veTHL marks the beginning of Thala's transition to a DAO. This means ThalaDAO members will be able to vote on important protocol matters, including treasury management, collateral whitelisting, protocol integration, emissions, and more.

Token Economics Retrofit and Custody THL

High THL inflation enables Thala to bring new users and TVL to the Aptos ecosystem, successfully bootstrapping over $30M in TVL on both Vault and ThalaSwap at its peak. However, there was a strong need for Thala to adopt a more sustainable and user-aligned model. To address this, Thala has made significant changes to its emissions model. All $THL emissions, including Stability Pool Providers and Liquidity Providers, will receive escrowed $THL ($esTHL), which is the illiquid version of accrued $THL rewards.

To convert $esTHL to liquid $THL, users must vest their $esTHL for 30 days. However, users can exit their vesting period early, at the cost of a dynamic penalty on their accrued rewards. A portion of the fines will be redirected to reward veTHL holders for their long-term cooperation, while the rest will be returned to the treasury. The calculation and other details of the dynamic exit penalty will be announced closer to the launch of Phase 2.

Phase 3

Parliament

As the largest native protocol on Aptos, one missing piece of the Aptos ecosystem that Thala aims to support is the launch of new tokens (other than $THL). Thala currently has ThalaLaunch to facilitate mechanical processes, but for new protocols (including Thala), there is no governance platform that supports token voting.

Thala has already delivered new features to Aptos Explorer, Surf, and a host of open source development tools, but Parliament is Thala's biggest move yet.

Parliament is a DAO governance platform built for and supported by Aptos, allowing protocols and NFT communities to participate in token governance. Soon, protocols will be able to seamlessly and permission-free create their own highly customizable community spaces.

At launch, Thala will integrate parliament for DAO governance, allowing veTHL holders to vote on related protocol matters. Thala will be the first country to use a parliament for DAO governance, and other Aptos-native protocols could follow.

Batch Auctions

Based on feedback following Thala's own token generation event, Thala realized that it needed to provide projects with a more flexible way of distributing tokens. For Thala V2, the protocol’s launchpad product will support batch auctions as well as liquidity bootstrap pools (LBPs).

In a lot auction, there is a fixed period and users can stake funds to participate at a pre-determined valuation. Once that period ends, all commitments are batched and executed at a single liquidation price. If the overcommit exceeds the cap, all participants will receive their tokens and auction refunds proportionally. The batch auction model is very similar to the LBP model, with its advantages and disadvantages. With this new offering, protocols can better evaluate their token launch strategy by adding a bulk auction option on Thala Launch.

Real World Assets (RWA)

We've been preparing to release a new vault product that is far more scalable than our existing wTBT and MOD vault functionality. Based on feedback and existing integrations, we recognize that a seamless user experience is critical to extending the RWA offering.

Thala announced plans for a product launch at the end of July. The enhanced RWA product aims to make RWA's DeFi applications more user-friendly. This improved product has several key features:

• Refined user interface for easy navigation.
• Yield is expressed in USDC, providing a uniform and accessible metric.
• One-click recursive cycle through MOD-USDC LP and PSM.
• Secure cross-chain messaging enables seamless, automated user processes and clearing without requiring users to manually bridge assets. *RWA redemption is distributed back to users in USDC on Aptos.
• Advance and easy-to-understand yield display, including expected leverage cycle yield, to help users make informed decisions.

The overarching goal here is to provide a simple yet powerful interface that enables users to easily leverage DeFi for RWA. Due to DeFi’s highly liquid and efficient markets, users’ debt costs are significantly lower compared to traditional alternatives such as banks. We firmly believe that this innovative product will set a new standard in the DeFi and RWA space and highlight the tangible application of DeFi in practical solutions.

Deposit module for Thala's next RWA integration

future plan

In addition to these core features, Thala V2 will also launch a number of quality-of-life updates, bringing UI/UX upgrades, gas optimization, and more. Also, all of the above front-end previews are work in progress and Thala will be open to community feedback and discussion prior to release.

Since its launch, Thala has continued to update and improve its existing product suite, and V2 introduces several new components and features leveraging CDP, AMM and Launchpad. Given Thala's success in the following verticals within the Aptos ecosystem, the protocol will soon expand to another yet-to-be-tapped DeFi primitive. With Aptos unlocking $APT for the first time in October, the protocol will look to expand its product suite and launch its liquid staking token, $thAPT, later this year.