FIP-50 (cont): Fei Interest Shift for Huge Yield

FIP-XX
Status: Last Call
Author:@Fishy

Summary
Shift 100M USD of ETH from Compound and AAVE PCV Deposits to stETH, all TOKE + equivalent ETH to TOKE-ETH Uniswap Pool, all LUSD to the LUSD stability pool, all RAI + equivalent DAI to Uni v3 LP, and burn all FEI in Kashi.

Motivation
The Curve stETH-ETH pair has 5B worth of liquidity. stETH is a highly liquid asset, and appropriate to add to the treasury. Currently the entire recommended stETH allocation can be sold with <0.08% slippage.

The TOKE-ETH pool on Uniswap is a better strategy decision than single-sided TOKE, as it forces pairing with ETH and has a far higher APY of 160%. Single-sided TOKE is actually at risk as in later Tokemak versions it will be used for TOKE-voted pairings, which are riskier than the TOKE-ETH pairing. We propose to shift our TOKE rewards as well as an equivalent amount of ETH to TOKE-ETH, and slowly phase out the single sided ETH pool.

Moving 90M LUSD to the stability pool grants 13% APY. The stability pool is extremely safe, and grants a high level of yield to our LUSD funds.

Moving 10M LUSD to Fuse Pool 7 allows us to start an LUSD lending market for Fuse, and this also synergizes well with the upcoming Stability Pool + Fuse Product.

The RAI/DAI Uni v3 LP is incentivized by Reflexer Labs with 48% APY. Due to being a stablecoin pair, there is little to no risk of capital loss. The pool offers a far higher APY than Compound DAI deposits. (I’d appreciate if a dev weighed on on the automation of v3)

Lending deployments on Sushiswap’s Kashi makes less than 1.5k per year currently, lower than the capital risk of deploying 8m on a third-party smart contract. Burning the FEI on Kashi eliminates this smart contract risk, with little profit lost.

Specification
Shift 50M USD of ETH from Compound PCV Deposit to stETH
Improvement from 0.10% to 4.92%~ APY

Shift 50M USD of ETH from AAVE PCV Deposit to stETH
Improvement from 0.30% (Including stkAAVE rewards) to 4.92%~ APY

Shift all TOKE Single-sided ETH rewards to TOKE-ETH, as well as an equivalent amount of ETH.
Improvement from 4% to 160% APY.

Move 90M LUSD to the stability pool.
Improvement from 0% to 13% APY.

Move 10M LUSD to Fuse pool 7.

Move all RAI as well as an equivalent amount of DAI to the Uniswap v3 pool.
Improvement from 1.5% APY to 48% APY.

Burn all Kashi FEI

Would you support the stETH allocation?

  • Yes
  • No

0 voters

Would you support the TOKE-ETH plan?

  • Yes
  • No

0 voters

Would you support LUSD in the stability pool?

  • Yes
  • No

0 voters

Would you support LUSD in Fuse Pool 7?

  • Yes
  • No

0 voters

Would you support RAI/DAI on Uni v3?

  • Yes
  • No

0 voters

Would you support burning the Kashi FEI?

  • Yes
  • No

0 voters

2 Likes

In favor of all! I think we can consider this an extension of FIP-50 and go straight to snapshot (possibly after 24h last call). I’d like to keep the existing RAI in Aave and only withdraw the RAI in Fuse but open for both options. Can we make them separate?

Overall, very supportive of all this.

Just one feedback for TOKE : our initial plan was to pair the TOKE we get from OTC with ETH and farm in this TOKE-ETH LP pool for 160% APR. But OTC did not happen since we did not get a TRIBE reactor. I think we should stick to this plan, OTC will be executed eventually, and we’ll farm there eventually.

In the mean-time, with the TOKE we are earning from our ETH deposit (~200k$ and counting), I’d prefer we stake them to vote. APR is lower (~60%), but it’s more in line with our narrative to participate in other protocol’s governance than to only maximize yield. Also we’ll get to vote for our own reactor in the next C.O.R.E. event. And before that, we can vote for protocols which we had partnerships with before (Visor, Fox, Alchemix, Frax), that already have reactors.

Interested in the reasoning for keeping the RAI in Aave, when the yield there is pretty low as compared to RAI/DAI.

APRs are still high, and I’d prefer not to wait till OTC, which may be a while. Also, we can just pull liquidity if there’s a super important C.O.R.E. vote we need to participate in. Over the long term, liquidity provision also ensures that we have more TOKE, which can allow us to be a more powerful and involved voice in governance.

Moving to last call!

Diversification. AAVE is also a more useful asset than FLX at the moment even if we’d be getting a much lower quantity.

Disagree with speculating on pool 2s (TOKE/ETH) but otherwise some good suggestions.

What APR would make it worth it? Its arguably safer than Tokemak reactors as those have not been productionized yet. I’m pretty neutral overall over whether we allocate there and how much

Sent to snapshot!
https://snapshot.fei.money/#/proposal/0x467f0ebc28b50ef9bc760e05e6150cc221806c2d73bb58232fb558eca638f754

1 Like

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