Proposal: MKR/LEND/YFI - DFG: Governance Investing

User Transaction Summary on DeFi Gov (DFG)

The strategy manages a 3-asset pool of MKR, LEND and YFI. The strategy market-makes with, sells, and buys MKR, LEND and YFI such that the value of MKR always represents 33%, LEND 33% and YFI 33% of the total pool value in USD terms.

Weekly, the generated profit will be used to buy, in proportion, the Gov Tokens above.
A portion of 1% will be kept as DAI by the protocol, and will be one more liquid option to our investors to withdraw their funds, if needed.

Standard practices in other vaults, such as gas subsidy slush fund, 5% performance fee on USD (DAI) and a 1% withdraw fee are applied in this strategy as well.

Abstract

Users deposit MKR, LEND and/or YFI. If a deposit changes the 33:33:33 MKR:LEND:YFI USD value of the pool, some MKR, LEND or YFI are swapped to restore the invariant.

A 5% USD margin on USD value should be enough to avoid excessive balancing and GAS FEES.

50% of the AUM is put to productive use mainly on Aave and Maker themselves to use it as collateral to get DAI and invest into YEarn own vault.

Capital Allocation:
50%: Collateral
50%: Risk Managing/high liquidity

Risk Check

The pools checks on the health of DFG vault’s collateral in Aave/Maker after each interaction. If the vault is at extreme risk, implying DFG vault was unable to deleverage due to a Dai liquidity crunch, sufficient amount of Tokens are transferred to the Aave/Maker vault to avoid it getting liquidated.
Capital will be insured at YFI own project, if needed.

Overview

Nowadays, NEVER has been so easy to gather and store information, knowledge, money, power…
Who would not want to buy Pepsi or Coca-Cola Co. at it’s beggining? Deutsche Bank? Bank of America? Visa? Santander? Itaú?
We live in a singular moment of Crypto’s history.

Aave LEND and Maker MKR protocols are like one of those Rock Stars of DeFi, would you rather have a portion of it or not? Would I? Absolutely.

But we still have to do some balancing on our Governance Tokens portfolio to keep up with this brand new world called DeFi. Imagine doing this and earn some more tokens via YFI protocols?
Why should we have the trouble of balancing our GOVERNANCE portfolio when we can use a YFI protocol to do so? And making MONEY!

Our own YFI growth will open windows to accumulate even more MKR and LEND tokens, and when it crashes, the system will do it’s awesome job on getting us more YFI.

Rationale:

Symbiosis. That’s quite simple.
We already have a good portion of our business on Curve and we also hold some CRV Governance tokens as well.
If we are using Aave and Maker, why not invest in this incredible relashionship by building a “Holding” for those specific tokens/protocols.

Also, this is one more big potential demand for those tokens, which ends up in prices raising by free market law.

Risks:

Black Swan;
ExitScam of any parties;
Protocol breachs on any parties.

For:

The strategy is implemented.

Against:

The strategy is not implemented.

Copyright

The creator does not “believe” in intellectual property.
If something is good, use it and improve it.

Andre Cronje

If this goes through, I’d like to share half (1/2; 50%; 0,5) of the earnings that are rewarded to the creator of the strategy (myself) to our liberator, Andre Cronje.

1 Like

I am against this proposal:

  • It’s unclear what assets users deposit/withdraw. (If I deposit YFI, do I get back a mix of MKR/LEND/YFI?)
  • Overall, this seems similar to the yETH-YFI-BULL strategy, which has several criticisms about reducing one’s exposure to high growth of any of the underlying assets (due to rebalancing).
2 Likes

Yeah, this proposal just doesn’t really jump out at me. It also seems very vague. How does the strategy market-make? That is not a trivial thing, unless you’re simply talking about locking up in a Uniswap LP– in which case you would need another asset like ETH (unless you’re saying to do this in a balancer pool).

Realistically, I think people would be much better served separately using the new yYFI vault, and the delegated aLEND/aAAVE vault whenever it is released. I’m sure a similar one could be created for Maker– but this doesn’t really seem to need to be together in one pool together.

2 Likes

I don’t really see how the end result is different from a YFI/MKR/LEND balancer pool. yVaults currently guarantee protection for the principal invested (in terms of token amount) and this would be counter to that narrative.

5 Likes

The “Rationale” section does not hold any information / actual rationale as to why having vault that keeps MKR:LEND:YFI at 33% each is a good, profitable strategy.

1 Like