FIP-42 Deposit 2M FEI Into Visor Finance

Proposals
1

Simple Summary

The following is a proposal for a partnership between Fei Protocol and Visor Finance:

  • Treasury management for Fei’s treasury assets using Visor Finance for any of the following pools:
    • FEI-USDC @ 0.05% fee tier on both Mainnet and Arbitrum
    • FEI-ETH @ 0.3% fee tier on both Mainnet and Arbitrum
  • FEI protocol mints Visor Finance 2,000,000 FEI with the express goal of earning yield and providing liquidity however possible
    • FEI will be provided for pools on Ethereum mainnet and / or Arbitrum

Abstract

Visor Finance is an active manager focused on liquidity provisioning strategies on Uniswap v3. Visor currently manages 27 pairs on Uniswap v3 and is currently offering its treasury management services to 3 other protocols, all of which were onboarded in past 3 weeks. It is looking to onboard more protocols for treasury management services as DeFi 2.0 (or liquidity-as-a-service) is becoming more top-of-mind for DeFi protocols.

The proposal aims to generate yield on Fei’s treasury assets using Visor Finance to facilitate the liquidity provisioning process. Concentrated liquidity provisioning on Uniswap v3 involves managing price ranges and manually re-investing earned fees. The advantages to using Visor Finance include active management of price ranges and re-investment of fees. Price range adjustments and fee re-investments are done according to top-of-the-line strategies developed by Gamma Strategies, which is a research organization funded by Visor.

Risks

Providing liquidity in a narrower price range can lead to earning higher fees, but can subject the liquidity provider to greater impermanent loss as prices of the underlying assets diverge. Conversely, providing liquidity in a wider range will earn less fees than a narrower one, but are accordingly at lower risk of suffering impermanent losses when there is price divergence. See here for a calculator that allows you to explore how impermanent loss can be affected by the width of price ranges. https://defi-lab.xyz/uniswapv3simulator

Gamma Strategies aims to reduce the risks of impermanent loss through active range management. This may include widening the ranges during periods of high volatility and narrowing the ranges in periods of low volatility in order to maximize yield taking into consideration impermanent loss.

Specifications

FEI will be sent to the Visor position manager contract called the Hypervisor (hypervisor/Hypervisor.sol at master · VisorFinance/hypervisor · GitHub) , which will mint fungible ERC-20 LP tokens to a whitelisted address provided by FEI.

FEI will be actively managed on the FEI-USDC or FEI-WETH liquidity pools on Uniswap v3 on Mainnet and / or Arbitrum.

Only the whitelisted address provided by FEI will have the right to deposit / withdraw assets to and from the Hypervisors. The position manager contract has the right to a few functions which are to set base ranges, set limit ranges, collect fees, rebalance, and mint/burn LP tokens to the whitelisted address. Therefore, the Hypervisor contract has only management rights and is non-custodial in that only the provided whitelisted address may deposit / withdraw assets into and out of the contract.

Visor Finance takes 10% of earned fees, which get distributed to VISR stakers. 90% of earned fees will be automatically re-invested into the LP positions. Visor Finance will cover all gas fees for rebalancing positions and re-investing earned fees.

Actions

  1. Send FEI to the Mainnet Hypervisor contract and/or Arbitrum Hypervisor contract

  2. Receive ERC-20 LP tokens for LP positions in the whitelisted address provided by Fei

2 Likes
2

I’m in favor! Visor is a great way to take advantage of concentrated liquidity with active strategies. We can outsource that work to earn yield and provide liquidity to Visor. I think the sizing is appropriate, and can consider going up if things go well after a few months.

A couple questions:

  1. How quickly can Fei Protocol withdraw from Arbitrum (or mainnet for that matter)?
  2. What kinds of admin functionality are there, i.e. where are the centralized points of failure?
  3. What risks are there of not being repaid e.g. impermanent loss?
  • In favor as proposed
  • In favor with more aggressive parameters (more FEI)
  • In favor with more conservative parameters (less FEI)
  • Not in favor

0 voters

2 Likes
3

Thanks for the questions Joey! Happy to take them in order.

  1. At any time, Fei can withdraw from the Hypervisor by redeeming / burning LP tokens for the underlying assets in the pool. The assets received will be in proportion to the ratio of assets that were in position. So although, you deposited 100% FEI, the assets you receive will be a mix of FEI & USDC or FEI & ETH.

  2. In terms of admin functionality, by depositing into the vault, Fei is permissioning the position manager to set the initial base range & limit range, rebalance positions in a different price range, collect fees, and re-invest earned fees into the LP positions. The position manager cannot deposit assets into the vault nor can it withdraw assets from the vault. Only Fei’s whitelisted address can do so. The main point of failure would be bad management on our part, which includes failing to rebalance when appropriate, setting wide ranges that do not optimize yields, or setting overly narrow ranges that incur high impermanent loss.

  3. The risks of impermanent loss are heavily diminished in the USDC-FEI pair given the tight price correlation between USDC & FEI. There is potential to be out of fee-earning position, but the impermanent loss will be minimal so long as both USDC & FEI maintain their pegs. For the FEI-ETH pair, we will make sure to determine that the right factors are in place prior to launching that pair on either Ethereum mainnet or Arbitrum, if at all. The factors that we look for are high volume, high fees, and high fees / TVL ratio. If all three factors exist, then we will be confident in launching a FEI-ETH pair (most likely on Arbitrum, given that the FEI-ETH pair on Mainnet is doing very little volume). Only if the fees to TVL ratio is sufficiently high enough, would we launch a FEI-ETH pair in lieu of the FEI-USDC pair because it is mainly the fees which will offset impermanent loss from price divergence. In the case that these factors are present and we do decide to launch the FEI-ETH pair, Fei will be exposed to price risk from ETH. So in the case, that ETH plummets rapidly in price, there likely would be some element of impermanent loss. And if ETH were to gain in price, Fei would have additional gains on top of earning trading fees. However, it is expected that over the long run, with proper management, that the fees will make up for the impermanent loss that occurs.

3 Likes
4

Proposal: FIP-42

Status: Last Call

Summary

The following is a proposal for a partnership between Fei Protocol and Visor Finance.

FEI Optimistic Approval Multisig will send 2,000,000 FEI into Visor Finance for the FEI-USDC Uniswap v3 pool @ 0.05% fee tier on Mainnet.

Motivation

The proposal aims to generate yield on FEI DAO’s treasury assets using Visor Finance to facilitate the liquidity provisioning process. Concentrated liquidity provisioning on Uniswap v3 involves managing price ranges and manually re-investing earned fees. The advantage of using Visor Finance for this deployment is continual re-investment of fees. Price range adjustments and fee re-investments are done according to top-of-the-line strategies developed by Gamma Strategies, which is a research organization funded by Visor.

Risks

Providing liquidity in a narrower price range can lead to earning higher fees, but can subject the liquidity provider to greater impermanent loss as prices of the underlying assets diverge. However, impermanent loss is not a concern for this initial deployment because it is a stable coin pair. Conversely, providing liquidity in a wider range will earn less fees than a narrower one, but are accordingly at lower risk of suffering impermanent losses when there is price divergence. See here for a calculator that allows you to explore how impermanent loss can be affected by the width of price ranges. https://defi-lab.xyz/uniswapv3simulator

Gamma Strategies aims to reduce the risks of impermanent loss through active range management. This may include widening the ranges during periods of high volatility and narrowing the ranges in periods of low volatility in order to maximize yield taking into consideration impermanent loss.

Specification

FEI will be sent to the Visor position manager contract called the Hypervisor (hypervisor/Hypervisor.sol at master · VisorFinance/hypervisor · GitHub ) , which will mint fungible ERC-20 LP tokens to a whitelisted address provided by FEI.

FEI will be actively managed on the FEI-USDC pair on Uniswap v3 on Mainnet by the visor protocol. In the future, when the FEI-ETH pair picks up volume on Uniswap v3 and this pair becomes more profitable to LP, this FEI liquidity can be moved to that pool.

Only the whitelisted Optimistic Approval address provided by FEI will have the right to deposit / withdraw assets to and from the Hypervisors. The position manager contract has the right to a few functions which are to set base ranges, set limit ranges, collect fees, rebalance, and mint/burn LP tokens to the whitelisted address. Therefore, the Hypervisor contract has only management rights and is non-custodial in that only the provided whitelisted address may deposit / withdraw assets into and out of the contract.

Visor Finance takes 10% of earned fees, which get distributed to VISR stakers. 90% of earned fees will be automatically re-invested into the LP positions. Visor Finance will cover all gas fees for rebalancing positions and re-investing earned fees.

This will be an OA action and will not go through the DAO.

OA Actions

  1. Send FEI to the Mainnet Hypervisor contract.
  2. Receive ERC-20 LP tokens for LP positions in the whitelisted Optimistic Approval address.
2 Likes
5

I support this proposal. Just to confirm, FEI-ETH pair was not included on this partnership?

6

Just made an edit that allows moving this FEI from the FEI/USDC pool to the FEI/ETH pool when profitability increases.

1 Like
7

Snapshot is live: Snapshot

1 Like