Create a yDPI v2 vault with integrations into MakerDAO
Should this proposal be implemented, a yDPI vault will be created and used to deposit DPI into MakerDAO to mint DAI and delegate to yDAI vault, basically cloning the yETH vault functionality. The generated fees would be used to mint new DPI.
Index funds have a significant benefit in that they have lower volatility than individual tokens, and downside protection in case of the failure of a single token. This makes them attractive to both passive holders and protocols looking for robust collateral types.
So far $DPI is the most widely used and integrated crypto index with over $20M in TVL at the time of this post (with liquidity mining rewards for INDEX but a couple million is not staking LP which alone makes it the biggest DeFi index). After INDEX rewards end, DPI holders will be looking for their next yield and Yearn should be the next stop for that $15M. As a long-term motivation, indexes are some of the best long term investment strategies and in TradFi 30% of all equities are held in indexes. If Yearn can capture the assets of these crypto index funds we will have a huge revenue stream going forward that will require less building, integrating, and maintaining than chasing each new token individually. Moreover index products are generally held by long term investors - family offices, retail investors, etc. - so by giving yield opportunities it makes DPI a more attractive asset for hodlers and so increase the AUV for INDEXcoop, MakerDAO and Yearn
Should this proposal be enacted, a yDPI vault would be created with a strategy based on the yETH strategy using MakerDAO. This vault would accept DPI tokens from users, place them into a community CDP for DPI, mint DAI at a suitable (e.g. 300%) collateral ratio, and then delegate this DAI to the current yDAI vault. Periodically the accrued DAI stability fee will be paid back with yDAI vault earnings and the remaining profits will be used to buy DPI tokens via Uniswap (or issue from the index contract) and added to the yvault.
The yvault will need to be white listed for access to the MakerDAO price oracle to allow active management and prevention of liquidations. As such whitelisting has been given for ETH, this is assumed to be possible.
Each month the DPI fund is rebalanced by INDEXcoop. This happens inside the DPI contract linked above and requires no action on the part of DPI token holders so the yvault and CDP can keep all DPI positions open in yield opportunities.
Alternative strategies based on lending platforms (AAVE, Compound etc) have been considered. However compared to a Maker vault, they could introduce constraints on the $DPI treasury which we would prefer to avoid.
For: Create a yDPI vault with the attached strategy based on MakerDAO
Against: No change
- For: Create yDPI vault
- Against: No change