Boostrap MIM Tranches - leveraged Convex yield and LP protection

Boostrap MIM Tranches - leveraged Convex yield and LP protection

Idle DAO recently released a new tranches product to let MIM liquidity providers enjoy:

  • leverage on Convex APY (20% APY now)
  • built-in protection features (11% APY now)

The product provides an alternative gateway to liquidity provision via Curve/Convex and on-top vaults, enabling risk-oriented and risk-averse MIM users to pick their preferred exposure on MIM liquidity provision.

This is a proposal to allocate 1% of the current SPELL emission [11.6m SPELL/week] to bootstrap the Senior Convex PYT - MIM pool, building up solid fundamentals to reach hundreds of million $ in potential liquidity.

Until today, the deployment of liquidity was possible via direct deposit into Curve/Convex or on-top protocols (e.g. Yearn).
Users that deploy liquidity into MIM pools can do it using 3 gateways, with different dependencies:

  • Curve, with rates between 8% and 18% (according to the veCRV held)
  • Convex, with about 20-26% APY
  • Yearn, with actually 19% APY

Idle DAO released Convex PYT to unlock two additional gateways to attract liquidity, choosing MIM in the first batch of integrated assets.

PYTs provide two new classes of risk profiles, expanding the Abracadabra ecosystem with those alternative solutions:

  • Junior Tranche receives a higher proportion of Convex’s yield but also takes on extra smart contract and protocol risks.
  • Senior Tranche receives a smaller portion of the yield generated on MIM3CRV via Convex but carries a higher grade of protection against these risks.

PYT Features
PYTs are epoch-less, which brings limitless product interactions: liquidity providers can deposit and withdraw anytime, with no maturity date or locking period.

Tranche tokens are also fully fungible: they can be integrated into other protocols as yield source or used for additional on-top use cases like stablecoin minting, collateral for loans, leveraged, tokenization of future yields.

Security aspects
A decrease in the value of yield-bearing tokens will trigger a pausing mechanism. Senior Tranches are first in line to be repaid in case of default, while Junior holders have a second lien or no lien at all in case of fund losses.
PYTs have been audited by Consensys Diligence and Certik. The documentation is available here.

Currently, a total of 1,161,501,384 SPELL per week is currently emitted (source). 48% of that amount is distributed across liquidity mining and bribe activities.

The allocation of 1% of the weekly issuing [11.6m SPELL] on Convex Senior PYT - MIM pool will empower $250m to receive 10-15% APY on the Senior Tranche, with 30% - 50% APY on the Junior side (addressable Tranches TVL: $500m-800m).

On the Senior side, most of the attention will be on security features, with a focus on attracting loyal liquidity. The removal of incentives will generate a minor APY reduction (e.g. -2% APY), holding product appetibility.
After the bootstrap phase, an eventual outflow of liquidity from Senior Tranches will be translated into organic incentives to deposit there.

Simulate APY and TVL here.

Next steps
This post aims to gauge Abracadabra community feedback.

If the community shows to be in line with this proposal, I’d be glad to spin off a Snapshot poll to assess the consensus from SPELL token holders. Next step would be to propose it on-chain and finalize the liquidity deployment.

About Idle
Idle DAO’s objective is to create a product suite for Decentralized Finance (DeFi) that provides yield aggregation, automation, and optimization while allowing to diversify the associated technical and financial risks. We work with integration partners and DAO/institutional treasury managers to simplify their yield experience. Partners don’t need to stitch together disparate protocols or spend months integrating and updating yield functionalities.

One integration, to rule them all – DeFi yields aren’t easy to manage, but Idle makes you feel like they are.

Our core product suite is currently composed of:

  • Best-Yield strategy is a lending aggregator that aims to achieve the highest yield for supported digital assets at all times. It does this by programmatically allocating these assets across several lending protocols operating on the Ethereum and Polygon blockchain. The strategy has been battle-tested since mid-2019, and it’s considered one of the most resilient in the entire DeFi space.
  • Perpetual Yield Tranches are capital pools that automatically generate and tranche yields and risks based on a range of market-neutral yield strategies, including lending income, trading fees from Automated Market Makers, and protocol incentive farming. Pools are associated to two risk-adjusted products: Senior and Junior Tranches. Depositors into the Junior Tranches receive a higher proportion of system yields but also take on extra smart contract and financial risk. Inversely, the Senior Tranches receive a smaller portion of the system yield but are protected against these risks.

Website | Twitter | Discord | Docs | Github

MIM Senior PYT, based on Convex and developed by Idle, is now competing to get listed on APWine!

APWine allows users to speculate on the evolution of the generated yield.
With MIM listed on this protocol, you can hedge your risk on your passive revenue and sell unrealized gains, or trade the underlying to have full exposure on future yields.

In the first batch of selected projects, the stake of the underlying asset generated from 80% to 800% APY, while the stake of the future yield was in the range 800% - 3000% APY.
These high returns are the consequence of low liquidity (from $200k to $1.1m per pool), and the high amount of APW incentives issued by the protocol.

The competition will last for 5 days, and the 5 most voted assets on Ethereum will be integrated into APWine and receive farming incentives for 60 days.

As stated in their listing template, APWine suggests fortifying the candidacy with liquidity commitments, additional rewards, $veAPW holders bribes, or badges like POAP to reward the voters later.

If you are an APW token holder, vote for “AA_idleCvxMIM-3LP3CRV-f” (next time better to pick a shorter name :grin:) to increase the chances to get MIM Senior PYT listed.
You can also reach out to the AWPine community via social media (links available in their UI.

If you think that co-bribing might be a way to get a spot, Idle could be open to matching your commitment :eyes:
Remember that this initiative is time-sensitive!

New contest, this time from Idle side!

After listing MIM Tranches, MIM-USDT pool is currently running to be integrated into the Idle Perpetual Yield Tranches (PYT). Voting starts on Thursday the 20th!

The 5 winners will be selected through playoff & final rounds! MIM-UST is located in playoff #1.

In order to increase the chances to get your pool voted, join our Forum and connect with our community. DAO2DAO proposals are welcome too!

Further information can be found in the Idle Forum: Tranches Battle: choose which asset integrate next - 🧩 Protocol & DAO - Idle