TDP26 - Uniswap V3 Liquidity Redeployment

Summary:

After this successful internal motion, and in line with the public launch of the actively managed MTA/ETH pair on Visor Finance, the TreasuryDAO proposes to re-deploy the liquidity currently provided on the MTA/DAI Uniswap V3 pair into more capital efficient pools in the ecosystem.

It is also suggested to inject a one-off liquidity boost of 100,000 MTA into the new pair on Visor Finance in order to ensure continued low slippage trades on Uniswap V3.

The received MTA portion from exiting the position is to be used for liquidity provision on a different AMM, which will form the basis of a subsequent TDP, and the received DAI portion of the pair is to be put into a Convex Finance position to accrue further CRV and CVX rewards for the treasury.

Specification

This proposal suggests that the TreasuryDAO removes the entire liquidity from the existing MTA/DAI Uniswap V3 position, and redeploy the DAI portion of the pair on Convex Finance in the pool that receives the highest amount of votes.

The following pools will be available to be voted upon:

3pool hedge

3pool native

In the process of commencing with this opportunity on Convex Finance, the DAI would be provided via single-sided liquidity, and consequently split up into the respective allocation of the winning pool.

All liquidity rewards will be claimed, compounded, and locked 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.

Since a Gnosis Safe cannot directly participate in Snapshot votes, the resulting voting power from the above deployment would thus be delegated to the Cat Herder of the Asset Management subDAO in order to participate in gauge & other votes that will result in a beneficial outcome for the mStable ecosystem, and take a passive stance on all other proposals on the platform.

A successful passing of this proposal will allow the Asset Management subDAO to continue with this operation until the incentivization on Convex Finance ends, or a different proposal replaces the method of utilization of the tokens in question.

Additionally, a total of 100,000 MTA (roughly 60% of these coming from fees the old position generated, with the remainder coming directly from the MTA portion of the position) will be injected into the existing MTA/ETH position on Visor Finance in order to ensure continued low slippage trades on Uniswap V3.

Rationale

This proposal aims to:

  1. Increase effectiveness of the active liquidity management provided by Visor Finance by removing our passive pairing from Uniswap V3
  2. Create positive feedback effects from the newly deployed DAI in order to perpetually increase returns for all mStable Save users & mUSD liquidity providers on Curve
  3. Free up additional MTA to deploy on a different AMM to further diversify the availability of MTA in the ecosystem
  4. Have a potential say on proposals & the decision-making processes in the suggested protocols by holding their native governance tokens custodied by the TreasuryDAO

Further discussion points

  • It should be noted that the Curve 3pools are subject to impermanent loss, and in case of a peg failure of any of the underlying 3pool tokens, a complete loss of value is possible
    • With this in mind, it is suggested to discuss and weigh the benefits and drawbacks of hedging risk by choosing a Curve pool that does not rely on the 3pool
  • This proposed strategy is dependent on multiple protocols in the DeFi ecosystem, which exposes funds to several smart contract platforms, and thus, risks
  • The above is simply a suggestion in terms of pools, amounts, as well as a proposed strategy. Meta Governors are encouraged to provide their own input to help the DAO come to the best possible outcome for the protocol

Next Steps

Pending no significant objections or changes to its content, this proposal will be taken to a public Snapshot vote on the 8th of November 2021 and will remain open for 5 days to give adequate time for a concurrent discussion here on the forum.

We look forward to hearing what Meta Governors have to say, and are excited to be maximizing the use case and returns for our treasury assets.

2 Likes

More protocol owned liquidity and less pool2 rewards => gov token numba go up

By using imbalanced UniV3 pairs, more MTA can be placed in the pool and the Treasury can leverage its vast supply of MTA and earn a larger share of the AMM rewards. (3,3) has convinced me that the more a protocol can own of the AMM the better - treasuries earn trading revenue on both boom and crash events and not pay mercenaries to provide the pool. I am not familiar with Visor but I would hope that some sort of Olympus type Bonding could be introduced to complement this (basically bonds in range defined by protocol).

Sidenote: let’s also try Bonding on Polygon chain. (But what would be so cool is if an option could be provided to let bonding rewards come on the L1 Mainnet.)
Also, would love to see the pool in mUSD/MTA pair. Would be nice to have a plug in that allows on mStable app that uses Uni or whatever to allow MTA->mUSD (on xy=k AMM) ->USDC/USDT/DAI/FRAX (on mStable swap). Alternatively, could incentivize an mUSD/ETH pool and thus the xy=k amm would MTA->mUSD->ETH->World of Assets

2 Likes

This all seems good to me.
Looking at the stats for the various choices, it seems like the sAAVE pool is the most lucrative of the hedge options, and frax seems to be the best ‘native’ option. My eye is untrained, but that’s how it looks to me.

With the incoming storm of regulation in the US, it might make sense to go with the sAAVE. OTOH, if there are regulatory issues mUSD itself has some problems…so. Not sure how that pans out.

2 Likes

Edit: My post is dated in that this TDP was already approved 5 days ago: Snapshot

We wouldn’t be first to market on Polygon (Klima took this honor) but we’d definitely be a first 5 or 10. In my opinion I think this should be prioritized into order to ween ourselves off of renting liquidity.

This would allow the protocol to directly capture fees of people who are compounding rewards back into stablecoins, which is what a lot of stable yield farmers are doing to minimize their perceived risk, so I agree with this too.

3 Likes

Is it too gas-inefficient to do both? At least on mainnet, i mean.

1 Like

Considering the amount at play, if the gas were timed well I don’t see why it wouldn’t be possible for both. It just feels more advantageous to go all in with the amount than to split it.

2 Likes

Thanks for the feedback all around, some great points there!

I agree that some mechanism to capture liquidity is a must in the next cycle, as it feels like we’re just throwing MTA to mercenaries over there. A MTA/mUSD pool seems really smart in this regard, so open to hearing some concrete ideas on where you could see this being deployed on Polygon, but please in a separate thread :wink:

Regarding the bond program, this was indeed ratified and is currently being deployed by Olympus Pro, so we should have some good news soon!

We can totally deploy the DAI in two separate pools, as this injection is at least twice that of the alUSD deployment we did a while ago.

If we did this, I’d definitely recommend choosing at least one hedged pool though, and we would need to ratify this within the next 2 or 3 days, so I’d suggest to let it run with a single pool for now, and perhaps come to an agreement if the total amount at stake is less than <1M worth, we chose a single pool, numbers above warrant a splitting?

I’ll post a poll regardless to see the sentiment over the weekend.

Gas does add up to be honest. We’re talking at least $400 to $500 (maybe more with this current mania) for a compounding action, as claiming and staking happens from multiple pools and contracts.

Should we deploy the DAI in two separate pools rather than all in one?

  • Yay
  • Nay

0 voters

1 Like

The proposal has now been moved to Snapshot and Meta Governors have until Friday to cast their vote :ballot_box_with_check:

Good to see this being done, I’ve appreciated everyone weighing in on the USD options as I am out of the loop on where the best place to allocate the DAI would be. I am for allocating it all into one place, and have voted for saave initially. Im open to changing that should there be a convincing argument for another option.

On MTA liquidity, I’m of the opinion that we should be concentrating our liquidity for MTA on ETH L1 into a single source. This means consolidating separate liquidity positions under the DAO’s control into 1. If Visor is our place for getting this done then I feel we more other MTA liquidity (like that deployed on Bancor) into Visor or into the same MTA/ETH pool as our visor liquidity is deployed.

If we do this well, it will probably free up MTA liquidity to be effectively deployed in other environments like Polygon, other L1s or L2s etc, which I am in favour of. We should be satisfying for deep ETH L1 liquidity quickly then branching our powers out elsewhere!

3 Likes

Agree with this! @mZeroNine what are the next steps now the vote has closed?

Thanks for asking JS!

We’re currently waiting for Visor Finance to deploy a proxy contract into which we can deposit the one-off MTA as to not disturb the progressive cap on the pair (should happen today), after which we’ll liquidate the MTA/DAI pair and commence with the deployment on Convex Finance.

1 Like

Cool thanks for the update :smiley:

Are there any issues with impermanent loss in doing this?

You mean by deploying the liquidity on Visor Finance?

As far as I know, the impermanent loss is still very much present on Uniswap v3, and becomes permanent once they rebalance the position into another range.

I also just received an update that the proxy will be deployed on Thursday, so sorry for the slight delays with this.

The Uniswap position has now been liquidated, and the resulting DAI deposited in Convex :sunglasses:

You can find an overview of the Asset Management subDAO war chest on Zapper :zap:

1 Like

Thanks for sharing that zapper profile. I’m glad to have that address for my DUNE analytics queries. I have a question. Is it bad form to sell Balancer tokens? Currently there is $10k USD worth. I would deposit them to a high yielding balancer pool bal/something where the paired asset seemed reasonable. I’m a bit of an antsy degen tho and sometimes just holding is the best strategy

I’m generally of the opinion that an asset that isn’t working is probably wasting potential, so long as the risks are reasonable. So yeah, if there isn’t any particular reason to leave the BNT liquid it should be staked/LP’d IMO.

1 Like

Balancer has an 80/20 BAL/ETH pool with ~23% APR in BAL rewards. That is a pretty conservative move with the money and puts it to work.