Proposal: Create a ySNX vault to stake on Mintr

Summary:

Create a ySNX vault with integration into Mintr and Curve to maximize return on investment and save on gas costs.

Abstract:

Should this proposal be implemented, a ySNX vault will be created. Users would deposit their SNX to the vault for deployment into both Mintr for the weekly claims and Curve with the generated sUSD. With the proposed strategy, the current APY is roughly 60% for users. Deployment of this vault would act symbiotically to improve the value of yearn, Synthetix, and Curve ecosystems together.

Motivation:

The entire Synthetix ecosystem relies on the staking of SNX into Mintr to provide the liquidity for the generation of their synthetic derivatives. Depositors are given a weekly distribution of inflation in the form of SNX and sUSD from user trading fees. However, with the current high gas costs this is not capital efficient for smaller SNX holders, and the gas cost for their weekly claims may be greater than the claimed value. If users do not execute the claim, this reward is lost to them and paid out to other holders the following week. Furthermore, the sUSD that is generated by the minting process is instrumental for the rest of the ecosystem. This sUSD is theoretically pegged to the USD, but it is frequently valued at less than other stablecoins like USDC. By deploying the generated sUSD to Curve, this would improve the health of the sUSD peg and deliver value to all three ecosystems. Value would also be driven to YFI holders in terms of increasing governance share in Curve and Synthetix as the vault matures.

Specification:

The strategy for this vault at its heart centers on Mintr. When users deposit SNX to the vault, they are given ySNX tokens in return. From here, the value will be split into two distributions: 90% as gSNX (the share deployed in the Mintr/Curve loop per the graphic), and 10% as sUSD. The SNX in gSNX would be deployed to Mintr, and sUSD would be generated which in turn would be deposited to the sUSD Curve pool and staked in their DAO. Every week, the contract would claim the SNX and sUSD from Mintr, which will be reinvested in Mintr and Curve respectively. By deploying the sUSD into Curve, users will extract swap fees, SNX from Synthetix, and CRV from the Curve DAO. CRV tokens will be staked in the DAO up until the maximum boost is achieved - afterwards, all CRV will be sold for SNX and redeployed into Mintr. This core loop will generate notable returns for the vault’s users.

The 10% sUSD held outside the gSNX loop serves a few key functions. The first function is to ensure that the vault is overcollateralized. Since sUSD is essentially worth 6x SNX in terms of collateralization (through it’s burning power), this would give the vault approximately 1000% collateralization ratio. If the vault needs to burn sUSD either to unlock SNX for a user’s withdrawal or to fix the collateralization ratio, it will come from this pool first. The second function the sUSD serves is to account for the valuation of the SNX that is timelocked from the weekly claims. Each week, when the contract claims the SNX, the value of gSNX will increase accordingly - therefore, more value would be moved to this 10% sUSD partition to balance the ratio. In effect this means that the average depositor will not need to wait a full year to withdraw the value of their claimed SNX. This sUSD will also be deployed to Curve and will follow the same logic as the gSNX. The CRV and SNX tokens generated will be staked in Mintr and will become part of the gSNX wrapper.

The main risk for this strategy would be in the case of a run on the vault. Should an overwhelming majority of the value of the vault be withdrawn, the timelocked SNX will become an increasing percentage of the value of the vault. At a certain point, the withdraw transactions would end up failing, as there would not be any unlocked value that could be withdrawn. The value of this vault would not be lost, it would merely be time gated. Those vault holders would in effect have their withdrawals frozen until more money is deposited into the vault, or until more SNX is vested. This risk is largest during the first year of the vault’s life, and will be drastically reduced following, as there will be a weekly cadence of unlocking SNX.

At current rates, the APY on this strategy is approximately 60%. This strategy should unlock significant value in all three protocols it interfaces with.

snx vault

For: Create a ySNX vault with the attached strategy

Against: No change

Poll:

  • For
  • Against

0 voters

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Thanks for the link. I had heard of the ySNX vote, but I hadn’t seen any news on it in quite some time. I was afraid that it had died.

Still, I feel the strategy proposed here is of value and can be used with the vault approved with YIP 34.

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It’s in the works. According to Andre, “ySNX testing takes a week at a time due to the nature of how claim works. The strategy will be promoted to prod when testing is finished.”

Although I’m not sure of the specifics about how the vault is going to obtain yield outside of claiming on Mintr and bundling gas costs.

Does anyone have the details on the upcoming SNX vault, and how it’s going to work exactly?

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I’d also love to see it! I’m super curious how the existing strategy differs from this one.

One of the main concerns I had regarding a SNX vault strategy would be the semi-illiquidity of the funds - especially in regards to the weekly claims. I wanted to find a solution where an early withdrawer wouldn’t lose their claimed SNX, and I wanted to make sure a whale couldn’t dump their bags 51 weeks after the vault generation to scoop up all the return from the other investors.

I think the 10% sUSD reserve solves both problems, by having a fund that increases in value each week when the Mintr claims are harvested - providing immediate liquidity for those time-locked tokens.

I like the leverage of rebuying and restaking SNX - overall seems great. Abstraction of staking strategies like these are amazing for funds for tax and operational purposes.

I think @andre.cronje was working on a SNX strategy but if you’ve got the implementation propose it for a YIP. The run on the vault point is fair but I think if disclosed well it’s fine.

This looks crazy awesome. I have been doing this strategy personally (staking SNX in mintr, and depositing sUSD to Curve), and the gas fees are killing my profitability. Would really love to see yearn vaults to automate this.

Also love the fact that SNX interest from the strategy does not have to be locked up for a year.
As long as the strategy is deemed safe, going to vote yes if this goes to on-chain YIP

Interesting proposal.

Before moving forward, I think it’s prudent to discuss how the vault is going to pay off the debt that the staked SNX on mintr will accrue as Synths appreciate in value. Without paying off the debts, the fund won’t be able to unlock some amount of staked SNX.

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I think this is explained in the description. By keeping reserve sUSD at all times, there will always be sUSD around to unlock SNX as needed.

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I think this is a great idea, but there’s a good chance it is already what is being planned for the previously-passed ySNX YIP. Andre and banteg said the SNX vault requires a little extra work and testing because of the lockup periods, but if they haven’t considered this strategy already then I think it’s a good idea.

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Well it sounds like we need to summon @andre.cronje or @banteg then :wink:

:upside_down_face:

Thank you

I don’t understand how the usd debt is hedged If the total debt in the system is increasing a lot.

When generating sUSD on Mintr, it’s done at a 1:6 sUSD:SNX ratio currently. The more sUSD you mint, the more debt you accrue. However, the 10% sUSD kept in reserve is based on the math of the entire vault. When SNX is generated by claiming, an amount of sUSD would move into the 10% reserve to ensure the 90:10 value peg.

The vault would do this rebalance whenever someone added or withdrew from the vault, or whenever the weekly claims occur. The vault will in essence pay the sUSD reserve before anything else.

Thanks for the discussions, all! Given the high FOR vote percentage here, I pushed a vote to Snapshot.

https://yearn.snapshot.page/#/yearn/proposal/QmZt6KiD8yFfaP7bVdS4rkyn7772UVhM6UZkFvyztmHiKJ

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Hm, looks like my Snapshot was delisted by a moderator. I’m following up with @banteg to see what’s up.

Any update from the team on the ySNX vault?

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Nope. I’ve tried to ping @banteg in Discord, but no response yet. Maybe summoning @andre.cronje or @milkyklim might work?

I’ll keep trying! I really want to help out where I can.

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They have already passed the proposal and are working on an SNX vault.

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Thanks for the comment. This was addressed with the first few replies. At this point I’m more proposing this as a vault strategy for the ySNX vault.

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