FIP-90: Fuse-boosted USD Balancer pool (bb-f-usd)

Proposals
1

Status: Draft

Author(s): @Eswak

Summary

Create a “bb-f-usd” Fuse-boosted USD pool on Balancer, containing FEI, DAI, and LUSD.
Boosting will use FeiRari (fuse pool 8) to generate additional yield for liquidity providers.

Seed 16.67M FEI (minted), 16.67M DAI (pulled from Compound), 16.67M LUSD (pulled from B.AMM Liquity) from PCV to bootstrap the new bb-f-usd pool with 50M$ liquidity.

Context / Motivation

In december, Balancer released “boosted pools”, which are pools that re-allocate idle trading pool assets to productive yield sources, like what is done with some unborrowed tokens in Fuse, in order to increase liquidity provider’s returns.

Today, the only boosted pool live is the bb-a-USD (“balancer boosted in Aave USD tokens”) pool, which contains USDT/DAI/USDC tokens and allocate ~90% of the pool funds in Aave :

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The re-allocation of idle LP funds to Aave increases the APR earned by Liquidity providers :
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On the technical side, these “boosted pools” are pools of 3 pool tokens, where each of the 3 underlying pools are “linear pools” containing the naked asset (e.g. DAI) and the yield-generating asset (e.g. aDAI).

Balancer recently developped an ERC4626 Linear pool, that can “boost” an asset by depositing it in an ERC4626 yield vault.

Fei core team recently developped an ERC4626 vault wrapper around Fuse cTokens, meaning any token that can be deposited in a Fuse pool can have its own ERC4626 vault whose yield generation strategy is to deposit tokens in Fuse as a lender in a given pool.

This proposal is to create a boosted USD pool competing with bb-a-USD, made of decentralized stablecoins (FEI/DAI/LUSD instead of USDT/DAI/USDC), boosted in Fuse pool 8 (Fei Rari) instead of Aave, and bootstrap this pool using the Tribe DAO’s PCV.

Note that the funds deposited in this new bb-f-usd pool, in addition to providing liquidity, will be mostly re-deposited in FeiRari, so that will increase the available stablecoin liquidity to borrow there (and will increase the overall Fuse TVL) :slight_smile:

Specification

  • Create a FEI ERC4626 vault whose yield strategy is to deposit FEI as a lender in Fuse pool 8 (FeiRari)
  • Create a DAI ERC4626 vault whose yield strategy is to deposit DAI as a lender in Fuse pool 8 (FeiRari)
  • Create a LUSD ERC4626 vault whose yield strategy is to deposit LUSD as a lender in Fuse pool 8 (FeiRari)
  • Create a bb-f-FEI Linear pool that uses the new FEI ERC4626 vault
  • Create a bb-f-DAI Linear pool that uses the new DAI ERC4626 vault
  • Create a bb-f-LUSD Linear pool that uses the new LUSD ERC4626 vault
  • Create a bb-f-USD “boosted pool” containing bb-f-FEI, bb-f-DAI, bb-f-LUSD
  • Deposit Tribe DAO’s PCV in this new boosted pool
7 Likes
2

Nice work on this. Its great to see Fei, Rari, and Balancer all becoming increasingly interoperable via ERC 4626. I’d love to see this in production.

5 Likes
3

Moving to last call :slight_smile:

Snapshot will be a simple YES / NO (more discussion) with 48h voting period.

4 Likes
4

as part of the proposal actions, after providing this liquidity, the protocol should market-buy some of the LUSD using FEI+DAI according to the current oracle price of LUSD. sometimes the LUSD price rises above $1 and if this happens then Tribe DAO will lose money to IL. otherwise this is just a donation to MEV / arbs. for FEI+DAI pricing is not an issue since their pegs are currently tied by the FEI PSM

what will the A parameter of the pool be? among other things this will determine the degree of IL for a given price of LUSD

2 Likes
5

the A factor will be updateable by OA but if you can suggest an initial value, that would be great. We’ll only need it at the time of on-chain proposal execution, this should be non-blocking for the snapshot vote?

I was thinking A=200. For reference, the d3pool has A=250 with 120M$ liquidity, the FEI metapool has A=100 with 174M$ liquidity (and is almost not used).

In general I think a high A factor is desirable, because the pool acts as a “peg buffer” with both DAI and LUSD. For the protocol, holding 1 DAI or 1 LUSD or removing 1 FEI from circulation should be equivalent… if LUSD is 1$.

If LUSD is overpeg at 1.02$ at time of proposal execution, and the pool A factor can tolerate an imbalance of 80% FEI-DAI / 20% LUSD, that means 6.67M LUSD can exit the pool, that’s ~130k$ of MEV. Not terrible but not great, I’ll see if it’s possible to seed the pool in inequal proportions, or if it’s possible to perform a swap directly after seeding.

I’ll change the vote to say :

Use 50M$ of stablecoins from the PCV (minted FEI, DAI pulled from Compound, LUSD pulled from B.AMM Liquity) to bootstrap the new bb-f-usd pool.