RFC - Proposal to add Cauldrons for Umami Finance’s Delta-Minimized GLP Vault Tokens
Umami Finance, an Arbitrum based protocol focused on building institutional grade DeFi yield products, is developing its suite of GLP Vaults. Following discussion with the Abracadabra team, we are proposing that Abracadabra builds Cauldrons for our vaults. We see Abra as the optimal partner to work with for borrowing against one’s position, for both our users and institutional interest.
Benefits for Abra users
- A suite of profitable Cauldrons opportunities
- Access to the most optimal risk-adjusted returns for core crypto assets (USDC, BTC, ETH, UNI, LINK)
- Optionally, the Vaults could provide a diversified high-sharpe yielding opportunity for the Abra Treasury, with a boosted APR in line with other institutional and locked deposits.
Benefits for Umami users
- Allows Vault users to access liquidity on their yielding positions, without having to exit the Vault.
Umami’s GLP Vaults
There will be 5 Vaults, one for each asset in GLP (ETH, BTC, USDC, LINK, UNI). Users will be able to deposit these assets into their respective vaults which will in turn mint GLP to earn yield, whilst simultaneously hedging so as to maintain the deposit token asset exposure. To hedge Umami utilizes its proprietary internal netting strategy to achieve the most optimal fee reduction for its required trades. Initial backtesting has been extremely promising with returns over the past 8 months showing an APR of 26.67% (even after removing positive outliers) with extremely meticulous delta-tracking throughout, and the most promising of Max-Drawdowns currently in the delta-hedging space of DeFi. Umami’s vaults however do not hedge against trader wins/losses and can gain or lose value based on their PnL.
Find out more about our strategy here: Umami v2 GLP Vaults — Initial Backtesting Results and Analysis
Find out more about our timeline here: Umami GLP Vaults – Launch Timeline
Full, extremely detailed Whitepaper coming soon, so stay tuned!
Next steps, if the proposal passes:
- The Abracadabra Team will conduct a thorough risk analysis, the Umami Labs Team will assist by providing relevant information and code.
- After Audit, Umami will release the vaults.
- Umami and Abracadabra will work together to gauge demand and help provide the most profitable and highest-yielding cauldrons for Abracadabra as possible.
- The Abracadabra Treasury will also have the option of depositing into the vaults where, if committing to a small lock, it can earn a boosted yield in line with our institutional deposits.
App Website: https://umami.finance/
Umami Labs Website: https://www.umamilabs.io/
Discord: Umami Finance
Docs: Welcome to Umami - Umami
Github: Umami DAO · GitHub
Umami Team: Meet the Umami Labs Team