FIP-XX PCV/Treasury Diversification: BMI

Proposals
1

FIP-XX PCV/Treasury Diversification: BMI

Status: Stage 0 - Discussion

Author: @arcology

Summary

This proposal seeks to support BasketDAO’s BMI product by either using the Treasury (TRIBE) or the PCV (ETH/FEI) to purchase $1M worth of BMI tokens and to hold this, both as a means of yield and a diversification into other decentralized stablecoin products.

Motivation

There have been continual, but brief discussions about the usefulness of stablecoin diversification for the PCV since the defeated proposal FIP-6. It is agreed that the PCV needs a source of growth as well as the need to reduce the reliance of an all ETH-based reserve to mitigate risk.

Recently there has been a product which BasketDAO launched - the BasketDAO Money Market Index (BMI), which is an index token based from a series of Yearn strategies involving underlying stablecoin pools on Curve Finance.

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In discussions with core dev 0xLingonberry on Discord there is a sound methodology for the inclusion of asset components in this token. As you can see, the largest components (with a cap of 20%) are ALUSD, LUSD, FRAX and USDN.

The components are decentralized stablecoins and as part of the ecosystem effort to both decentralize as well as to diversify, this asset would be a good fit to hold, as well as to earn yield. The smart contracts are derived from basketDAO’s DPI product, which is audited by Haechi.

Furthermore, Fei Protocol’s involvement will be symbiotic to both the Fei and BasketDAO communities as well as a show of confidence in decentralized stablecoins and assets. This proposal will signal Fei’s intent to join BasketDAO’s partnership program and will be eligible for:

  1. Lifetime fee waiver for withdrawal;
  2. Airdropped BASK tokens, the governance token of basketDAO;
  3. Institutional-grade additional yields on BMI product.

Risks include:

  1. The possibility of one of the components losing peg, which will cascade in regards to the Yearn strategies and Curve pools.
  2. Concentration risk to underlying assets being Yearn strategies, Curve pools and basketDAO’s underlying infrastructure.

Specification
The implementation is simple. This proposal will either:

  1. Spend PCV ETH to acquire $1M in BMI tokens to hold within the PCV;
  2. Spend Treasury TRIBE to acquire $1M in BMI tokens to hold within the Treasury itself.

In both scenarios, because of the $1M investment, Fei Protocol will receive 100 BASK tokens. The amount of investment is less than 500 ETH (as of this writing, the PCV holds over 230k ETH) so the risk is minimized. There is an opportunity in the future to review whether Fei Protocol should upsize or reduce its investment in this product.

As always, open to feedback and comments.

Would you support this integration?
  • PCV (to spend ETH) to purchase $1M in BMI
  • Treasury (to spend TRIBE) to purchase $1M in BMI
  • Do not purchase any BMI

0 voters

4 Likes
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I support this whole heartedly! (Full disclosure, am member of BasketDAO team)

Good summary of the benefits and risks. To clarify the additional benefits of holding BMI, there is currently single sided BMI staking for 3 more weeks which boosts the APR by 25% to 36%, and on top of that, treasury partners get an additional BASK incentive.

We think this is a great product to support decentralised stablecoins in a diversified fashion.

I will also highlight that Yearn does their own due diligence on all their vaults - all stablecoin vaults on Yearn have thus passed their internal due diligence and risk assessment.

1 Like
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BMI seems to be a cool and innovative product! At the moment I would prefer to focus any stable investments in PCV into FEI liquidity such as FEI-3CRV, d4, and FEI-RAI.

Once we are more established in Curve we can hope to be added to the BMI and reconsider a PCV allocation then

1 Like