Food for thoughts

Hi everybody, I found this proposal in PowerPool forum. I thought it sound very interesting and maybe could be useful to PieDao community. Who knows, maybe it will spark some new ideas.
here is the direct link to the original post:

Rationale

All crypto assets are highly correlated, it’s especially true in the Decentralized Finance ecosystem.
If indexes have a real appeal for investors not willing to commit to the insane amount of research needed to keep up with the ecosystem. They often fail at the purpose of many indexes: Diversification.

As Diversification is probably an uphill battle in crypto in general and in DeFi in particular, ASSY takes the opposite direction and commits to concentration and high risk/reward strategy while keeping for the end-user the benefit of being a passive “Buy-and-forget” yield generating asset.

Inspired by @degenspartan in his hilarious “CUM vs ASS” tweets comparing “CUM” (COMP; UNISWAP; MKR) and “ASS” (AAVE; SNX; SUSHI) pointing that both categories are highly correlated and pointing the potential of ASS over CUM.

We’re taking this strategy a step further with ASSY, regrouping 4 assets highly correlated and considering that they represent the potential “Fastest horses in the race” of the DeFi ecosystem: YFI, AAVE, SNX, SUSHI.

These 4 assets are also yield generating with forms of staking, thus to increase the rewards of the ASSY bet, we propose that the index will not hold the “simple” assets, but

their staked form in 4 different simultaneous strategies :

1 - YFI: a simple but efficient strategy: ASSY will stake the YFI held in the YFI vault and earn the vaults rewards.

2 - AAVE: AAVE will be staked in the AAVE staking module and allow to passively earn more AAVE that will be re-staked weekly/monthly to compound the earnings, at the time of writing, the yield of staking is 5%, it’s also important to point out that an upcoming AIP potentially increasing the Staking rewards for the Safety module: https://governance.aave.com/t/arc-aavenomics-quarterly-upgrade/1631

ASSY index will thus hold StkAAVE

3 - SUSHI: Sushiswap enable the staking of SUSHI in the form of XSUSHI earning 0.05% of every trade done on the protocol, we propose for ASSY to hold XSUSHI and collect the rewards weekly on it.

4 - SNX: The synthetix network is potentially the most active strategy of the index but with good opportunities for rewards, SNX holders can Stake their SNX into the MintR and create SUSD debt, as long as the collateral ratio is above 600%, doing so allow holders to earn rewards and as long as this ratio is above 200% there’s no risk of liquidation and loss of SNX.
According to the community risk appetite we suggest to the CVP community a set of strategies that can be used for the ASSY index in an active way, depending to market conditions, these strategies should be modified and discussed further.

  • Low risk & passive: Deposit SNX in Aave and earn on average 8.5% APY on it (source https://aavewatch.com/ )
  • Low-Risk and slightly active: mint sUSD to a 650% collateral rate, deposit the sUSD in AAVE and collect weekly the MintR rewards, if the collateral goes below 600% withdraw sUSD from AAVE and reset the collateral factor to 650%
    On average sUSD yield 6.91% on AAVE, SNX staking rewards are historically 25-40%
  • Mid-Risk and slightly active alternative: Same as before but provide sUSD liquidity to Curve, and collect CRV, allowing the ASSY index to slowly accumulate a very interesting 5th Asset: CRV that can also be staked to collect Curve protocol fees. (my personal favorite)
  • High-risk and very active alternative: Same as before, but “Yield Farm” with the sUSD, doing regular crop rotations from cool ecosystem actors such as Barnbridge (BOND) to the “food coin” of the day, We do not recommend this strategy as it requires a multisig of VERY active and responsive actors to allow flexibility and low reaction time added to quite a risk of rugpull() events, let’s avoid to have Powerpool in a REKT newsletter article!

ASSY index summary and composition

ASSY allows concentrated exposure to four (and maybe 5 depending on SNX strategy) DeFi ecosystem leaders, it’s a higher risk/reward bet on the sector with a focus on Yield generating strategies allowing holders to passively earn more assets over time.

Instead of holding the simple tokens, ASSY holds their staked form: yYFI, StkAAVE, SNX (at 650% MintR ratio) and XSUSHI

The proposed index “starting point” composition is : YFI: 30%, AAVE: 30%, SNX : 25%, SUSHI: 15%

this initial composition is meant to evolve naturally with the yield generated overtime and the fluctuations of assets value.

Synergies:

The ASSY index is a good match with PowerPool recent strategy, Powerpool is currently in active partnerships with the yEarn ecosystem, Sushiswap and Synthetix.

ASSY is an opportunity to reinforce these previous partnerships with a new index product and create new synergies with the Aave community. AAVE community will benefit from getting one more option to hold AAVE in a brand new productive asset.

link to original post:

1 Like

It’s a neat idea. Though strategically, with PieDAO currently having one PieVault option (YPIE), the next one should be carefully selected. Otherwise we risk having many flavors of blue. One with YEARN plus ASSY, ASSY + x & y. Rather than ASSY, why not have a more generic aggressive “steak pie” :pie: made up of those assets and any other attractive options.

I guess I don’t really get the rationale about correlation though I agree that making a pie with a basket of aggressive yield seeking blue chips makes sense however whether it should have this composition is unclear to me.