**[Proposal]** UniswapV2 LP in MKRVault

Proposals Vaults
1

Summary

Use UNI-V2-WBTC-ETH LP, UniswapV2 USDC-ETH LP & UniswapV2 DAI-ETH LP as collateral in Maker and draw DAI for the yDAI vault.

Background

MakerDAO now accepts some Uniswap LP Tokens as collateral. This Strategy should draw DAI using the LP Tokens from Uniswap and put them into the yDAI vault. This is very similar to the yETH/yWETH vault.

Proposed LPs:

UNI-V2-WBTC-ETH LP
Stability Fee: 2%
Liquidation Ratio: 150%
Debt Ceiling: 3 million DAI
Yield: 0.75 * (yDai vault yield - 2% stability fee) + LP fees

UniswapV2 USDC-ETH LP
Stability Fee: 1%
Liquidation Ratio: 125%
Debt Ceiling: 3 million DAI
Yield: 0.8 * (yDai vault yield - 1% stability fee) + LP fees

UniswapV2 DAI-ETH LP
Stability Fee: 1%
Liquidation Ratio: 125%
Debt Ceiling: 3 million DAI
Yield: 0.8 * (yDai vault yield - 1% stability fee) + LP fees

Current yDai vault hovers around 10% I think, but this can change with new Strategies for Dai.

Motivation

From an investing standpoint this is very interesting. One can earn fees from Uniswap being a liquidity provider and on top of that draw DAI from the provided liquidity to farm some additional yield. The proposed LPs have a relatively low stability fee and still a very low debt ceiling. I anticipate that this will grow, since LP tokens are a much better collateral from a stability perspective than some other alternatives that Maker uses.

At least for me:
Combining these different protocols makes my DeFi heart beat higher :wink: Gogo money lego.

Specification

The mechanics can be copied over from the yWETH vault (did this change with v2?), but instead of WETH we use the LP Tokens and we need to consider the new parameter (stability fee, liquidation ration and debt ceiling). The drawn Dai is deposited into the v2 Dai vault.

yWETH vault v1: 0xe1237aA7f535b0CC33Fd973D66cBf830354D16c7
StrategyMKRVaultDAIDelegate: 0x932fc4fd0eEe66F22f1E23fBA74D7058391c0b15

LFG:

  • This is DeFi!

Against:

  • Debt Ceiling very low at the moment
  • Makes Uniswap more competitive against Sushiswap which is part of Yearn ecosystem.
  • You need to lock in LP tokens

Poll:

Ape strong?
  • LFG
  • I don’t like it

0 voters

3 Likes
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Utilization rate is a constant 100%.

It’s cool, but I’m worried about the RR of time spent vs. value add

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Fair enough.
As a counter argument:
Developing & testing a strategy takes quite some time. I feel that if we start implementing it now, we will be ready for the rising of the debt ceiling.

Also we should probably already get a template for vaults for any other LP tokens that might get accepted in the future. They are also considering Balancer LP tokens. Value add would come from the work which could then be used in the future and not only for these particular ones…

And another thought. It shows that there is demand for this type of vault too :slight_smile:

4 Likes
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I can’t really speak for @orbxball but I would guess this strategy would be fairly simple to implement as a copy-paste from the WETH strategy (v2 is done, just waiting for keeper updates); the big holdup would be getting Yearn whitelisted on the respective OSM oracles over at Maker (and of course, needing a high enough debt ceiling). @gspoosi perhaps you could help lead the charge on that?

1 Like
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You mean on the OSM Oracle whitelisting or on proposing to raise the debt ceiling?

For the debt ceiling it’s a bit early. They use a new kind of oracle to get the price of Uniswap LP tokens, so they are still a bit cautious. Hence the low debt ceiling, I guess.

On the Oracle I’m going to push the whitelisting over at MakerDao.

4 Likes
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Maker can extend a lime of credit for this, organize a declaration of intent for approval for the OSM whitelist

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yes but first we need an orace contract they can whitelist. I’m not sure it looks the same with the new UNI LP token oracles :confused:

1 Like
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