Inverse Finance <> yearn.finance
As disclosed previously, Inverse Finance has entered the “Curve Wars” in order to significantly increase DOLA liquidity in the marketplace and enable new and faster revenue generation options for the DAO. Inverse Finance is planning on using a hybrid approach to gaining veCRV votes which includes a Curve Fed model similar to the Curve AMO model popularized by Frax Finance as well as “bribes” using platforms such as bribe.crv.finance and votium, in addition to private bribes.
With Yearn, the proposal is to use a Fed model already in use with other Inverse partners albeit with some notable differences:
- An Inverse Finance controlled Yearn Fed mints DOLA into a private DOLA Yearn Vault.
- A private Yearn strategy extracts this DOLA and supplies it to the DOLA-3Pool Curve pool, and then farms CRV and CVX rewards using Convex Finance.
- Yearn compounds the rewards to profit. Yearn takes a 100% performance fee.
This entire process is carried out using trustless smart contracts, meaning at no point does either Yearn or Inverse Finance have access to the underlying DOLA or DOLA-3Pool.
Benefits of this proposal
- This proposal will allow Inverse Finance to build extremely deep DOLA-3Pool liquidity on curve at essentially no cost. To-date, Inverse Finance has spent significant resources in the form of INV emissions in order to rent liquidity via Anchor and this proposal is designed to reduce our reliance on INV for liquidity rental. Liquidity rental on Anchor today currently costs the Treasury 920 INV per month.
- This proposal will benefit Yearn through improved increased revenue from their veCRV voting weight.
- Much deeper DOLA-3Pool liquidity will lead to greater revenue for the Inverse Treasury, unlocking many future opportunities for the Growth Working Group to explore.
- The requirements for a ChainLink oracle price feed is very deep liqudity on DEX’s, this will bring us closer to satisfying the requirements for DOLA.
- Yearn will allocate an initial 10% of its veCRV gauge weight vote to the DOLA-3Pool for a minimum of 60 days. This is currently 2,428,625 veCRV, equivalent to $5.5m worth of CRV locked for 4 years.
- The Inverse Finance Fed Chair will manage the contraction and expansion of DOLA supplied by the Yearn Fed to ensure that the performance fee earned by Yearn is at least 2% greater than the opportunity cost of Yearn’s missed bribe revenue (e.g. SPELL). Inverse Finance commits to maintain capital farming in the Yearn vault with a 50% performance fee for at least 20 days following Yearn’s initial 60-day vote obligation.
- Yearn agrees to not claim any additional INV tokens that are added on any bribe service for as long as this program lasts.
- If the Inverse Finance Fed Chair is unable to meet the performance fee commitment required by Yearn due to adverse market conditions, the difference will be paid via the TWG sending INV tokens to Yearn treasury.
Changes to the Stabilizer
In order to reduce friction in the market, we propose a small adjustment to the fee incurred when using the stabilizer.
- When buying DOLA using DAI, a flat fee of 0.4% is charged. We propose leaving this unchanged.
- When selling DOLA to redeem DAI, a flat fee of 0.4% is charged. We propose reducing this to 0.1%. This ensures that if there is a market imbalance weighted towards DOLA, arbitrageurs can quickly reduce the imbalance provided there is DAI liquidity in the stabilizer.
Looking to the future
There will shortly be another proposal to deploy an additional “Convex Fed”. This Fed will operate in a similar way to the Yearn Fed, except it is deployed directly to Convex Finance and 100% of the revenue will go to Inverse Finance treasury. This will allow Inverse Finance to collect CRV and CVX rewards at no cost, which will then be used to vote for the DOLA-3Pool Gauge in the future.
In addition to the Yearn veCRV votes, Inverse Finance Treasury Working Group is currently engaged with Curve “bribing” and will continue to do so in order to increase the overall votes going towards the DOLA-3Pool Gauge.