MDP24.1 - Incentivized Liquidity Provision on Convex Finance

Summary

The treasury received over 422k DAI tokens from migrating the old DAI/MTA position on Uniswap v2 to Uniswap v3, and it is proposed that they should now be used to bolster our treasury via incentivized liquidity provision on Convex Finance.

The mStableDAO suggests to use the DAI tokens in the Asset Management subDAO to provide liquidity on the Convex Finance platform, and regularly harvest and compound the extracted CRV & CVX tokens.

By providing liquidity on the Convex Finance platform and compounding the accumulated tokens, mStable helps maximize capital efficiency and profits for the mstableDAO, as well as enabling other potential co-benefits.

Specification

This proposal suggests that the 422,647 DAI currently held in the Asset Management subDAO be put into a Convex Finance liquidity position in order to begin accruing CRV & CVX (and potentially other protocol tokens from one of their liquidity pools).

In the process of commencing with this opportunity on Convex Finance, the 422,647 DAI would be provided via single-sided entry on Curve Finance, and consequently split up into the pool allocation chosen in MDP24.2.

Liquidity rewards will be claimed and compounded back into the Convex Finance platform on a regular basis at the discretion of the Asset Management subDAO, which will consider and weight operational costs against accumulated rewards in the contract to make an informed and economically sound decision on the correct timing of these operations.

Successful passing of this proposal will allow the Asset Management subDAO to continue with this opportunity until the incentivization on Convex Finance ends, or a different proposal be made to change the method or utilization of the tokens in question.

Rationale

This proposal aims to:

  1. Provide maximum capital efficiency for our idle tokens in the treasury
  2. Increase TVL of the treasury over time & diversify token allocations held
  3. Generate a future revenue stream with the accrued rewards by participating in fee sharing from Convex Finance by compounding both CRV and CVX rewards (on top of any other rewarded tokens)
  4. Potentially use accumulated rewards to direct CRV emissions toward the mUSD pool, allowing mStable to simultaneously bootstrap its product while accruing value for the treasury.

Further discussion points

  • It should be noted that if this proposal is successful, the DAI contributed is subject to risks of impermanent loss, or complete loss in the event of a vulnerability in the smart contract, or if the underlying peg of the pool tokens fails.

This proposal is only asking if DAI should be deployed for liquidity provision on Convex Finance, but does not ratify on which pool exactly. Please discuss & vote for the actual pool to provide liquidity for in MDP24.2, which is concerned with the actual strategy of the deployment.

Pending no significant objections, this proposal will be taken to a public Snapshot vote on the 13th of September 2021 and will remain open for 5 days to give adequate time for a concurrent discussion here on the forum.

Definitely For, Use those DAI productively!

An interesting proposal raised by the Immunefi CEO on being a launch partner when they launch the protocol. I propose that we put 50-100k of funds in there to back our bug bounty, and at the same time produce revenue through yield farming + potential token incentives.

FW:

Protocol upgrade will integrate Immunefi’s web application into our onchain protocol. This protocol upgrade will:

  • More effectively prevent hacks by creating an arbitration backstop that hackers can trust; this will unlock report submissions from hackers who don’t believe they will be appropriately treated
  • Signal maximum security commitment to the community at large, marking your project as a good faith actor
  • Turn your bug bounty program into a revenue stream, rather than a cost centre
  • Give you special privileges and advantages on Immunefi.com, such as preferred ranking in our program search and co-marketing focus, as well as a ‘most favoured customer’ status for future products and services Immunefi launches

Participating in the upgrade requires:

  • Depositing funds into the protocol contracts (which can then be re-allocated to yield farming if desired)
  • Participation in the arbitration mechanic of the protocol, and subordination of deposited funds to the arbiters

Thanks everyone for the feedback and input. I have taken note of this @alsco77 and conservatively removed 100k DAI from the Snapshot Vote to give more time to discuss this new opportunity in greater detail first.

I think we can ratify in that proposal if we should put the remaining DAI in there, or simply use them for the existing opportunity at the next harvesting and compounding cycle. Curious to hear more about this in the coming days from the Immunefi guys here on the forum!

The proposal has now been moved to Snapshot, and will remain open until Saturday!

The DAI for MDP24 have now been successfully deployed on Curve Finance, and the resulting pool tokens staked in Convex Finance. Over time, we’re going to compound these positions and create a top-notch yield-generating venture for the Asset Management subDAO :smirk_cat:

We will keep the community up-to-date about these liquidity provision ventures via our quarterly treasury reports. The first one including the performance of these two positions should be available at the end of January 2022.

If you got any further questions or concerns regarding this, then please feel free to reach out here, or directly via Discord.

Onward and upward! :rocket:

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