PIP 46: Re-balance DEFI+L to include SUSHI and YASS Sub-Pie

[williambrealey]

Overview

Following the recent developments from the SushiSwap community and growth of the protocol there has been clear demand for SUSHI from the community.

The SUSHI token is nearing $1b market cap.

As such I would like to propose a rebalance to our large market cap DEFI pie +L to include SUSHI. This would also affect the composition of DEFI++ and BCP.

Sushiswap Growth

Sushiswap achieved $2.4b of volume over the past seven days, making it the second highest volume DEX according to data from Dune Analytics.

This equates to 21.9% of total DEX volume.

Sushiswap Development

There are a number of factors that indicate Sushiswap will continue to grow in volume and reputation, and the project has rapidly introduced new features to the industry.

Key mentions:

Onsen incentivizes liquidity for low cap tokens.

Bento box will bring lending and yield leverage.

L2 scaling is being explored with Mooniswap, likely using a Zero-Knowledge approach.

Read the full roadmap for 2021 here.

Sushiswap’s integration with Yearn Finance brings significant advantages too, including access to audits and developer resources, integration with Cream’s iron bank and Alpha Homora (promising up to 90x farming leverage through protocol-protocol credit). Integration into the Yearn Finance dashboard may bring further trading volume and liquidity.

There is also expected to be an announcement regarding impermanent loss prevention through single-sided liquidity (SIL).

SUSHI

The SUSHI token has been one of the top DEFI token performers in recent weeks. SUSHI is up 156% over the last 30 days, with one token now worth $7.23 and a market cap of $916m. This growth makes SUSHI a clear contender for allocation in our large cap DEFI pie.

A key has been native SUSHI staking as xSUSHI, allowing stakers to receive a revenue stream, 20% of the fees generated by the protocol. This has realised a predicted compounding APY fluctuating between 9 and 60%.

With volume continuing to grow this has presented a strong use-case for the token, which also plays a vital role as the governance token.

Methodology

If others agree that SUSHI would be a valuable addition to DEFI+L I would love to see some modelling around the new allocation, as well as the impact upon DEFI++ and BCP.

Perhaps @gabo can provide the relevant data here.

YASS
@MarcZeller Introduced the idea of a concentrated DEFI pie, comprising YFI, AAVE, SUSHI and SNX. This has been a popular notion in the community and presents a unique use-case to our existing DEFI pies, which focus on greater diversification.

The introduction of SUSHI to +L could present an opportunity to construct the YASS pie, likely as a PieVault with the underlying assets able to natively farm.

If there is formal support for YASS pie here I would like to pursue this design and experiment with potential modelling, incorporating YASS as a sub-component of DEFI+L.

[gabo]

Here some numbers run applying the Correlated Risk-Adjusted Market Cap methodology

Keeping in consideration the 30days averaged Market Cap of all assets, the rebalance would propose a 7.2% allocation of $SUSHI in DEFI+L.

Translating in a 5.1% allocation for $SUSHI in DEFI++

Additionally, a further proposal could include the merging of $YFI, $AAVE, $SNX & the newly introduced $SUSHI to form a $YASS pie, which in turn would become an underlying asset within DEFI+L (accounting for 50.1% of it).

The resulting allocation in DEFI+L would remain the one already proposed above, with the clear benefit of adding the demanded $YASS pie to PieDAO’s offering.

A backtesting of this proposed allocation over the past 14 days shows an improved performance of DEFI+L (67.35%) vs the already impressive performance scored by the index (65.89% - best performing DeFi over the selected period).

[Shubiwubi]

Definitely a big fan of this proposal, as this will also free up some much needed space in the Defi+L pie for other great projects that surfaced towards the end of the year and will most likely become a large cap very soon to be included, like The Graph (GRT).

[chris]

I like the proposal. In saying this, would the DEFI+L transition to being its own PieVault on top or would it remain as an AMM?

[GiraeffleAeffle]

How about also adding Thorchain(RUNE), since it is now also available on Ethereum (ERC20)?

[williambrealey]

I made this proposal specifically for the inclusion of SUSHI and discussion around a YASS subpie, but it does raise wider discussion points.

What are your thoughts on the topic of PieVault upgrade vs keeping the AMM and having a separate PieVault product?

If YASS does gain support here perhaps it could be released as a PieVault, as a first step towards +L PieVault.

Perhaps others can weigh on from a technical standpoint.

@GiraeffleAeffle

How about also adding Thorchain(RUNE), since it is now also available on Ethereum (ERC20)?

I think that RUNE is definitely worthy of discussion, and would love to see that in a seperate proposal and in the community Discord. This propsal is focused on SUSHI.

[richandcreamy]

More vaults please!

[BlockEnthusiast]

@gabo

Additionally, a further proposal could include the merging of $YFI, $AAVE, $SNX & the newly introduced $SUSHI to form a $YASS pie, which in turn would become an underlying asset within DEFI+L (accounting for 50.1% of it).

I dig this. I think a sub vault in +L would be really interesting, and allows more offerings than purely adding Sushi, which will better allow investors to tailor their fit.

[chris]

I like the idea of adding YASS as a vault and a first step towards progressing +L into a vault. Simple and convenient product including of only the best-of-the-best earning competitive interest rates.

[selliry]

I am an absolute yass to $YASS PieVault

As well as it’s incorporation to DEFI+L

[mars]

My humble feedback is related to this proposal: PIP40: Yield Farming - autoharvesting and reinvesting PIE

Just holding diversified tokens is so 2020.

If you have $SNX can mint synths and do some magic: https://medium.com/88mphapp/88mph-app-using-susd-fixed-rate-deposits-to-maximize-your-yield-792bced777

If you have $AAVE you can stake it natively, curently the biggest farm by value: https://www.coingecko.com/en/yield-farming

I suggest the tokens that form the YASS PIE are put to work

The exact complexity, risk-reward ratio - TBD TBC

Maybe lending underlying tokens to those who who want to farm?

My point again - just holding diversified tokens is so 2020 - the skill is to make them work for us

[MoolaManX]

I love the SushiSwap project and have high confidence in their leadership and core developers. Including SUSHI ASAP would be awesome. Longer-term I love the idea of these tokens being used to generate yields on top of capital appreciation. Could we include xSushi instead of Sushi?

[poier]

Go for it!
As others mentioned, generating underlying yield would be awesome.

[richandcreamy]

+1 for xSushi

[williambrealey]

@mars

I suggest the tokens that form the YASS PIE are put to work

Completely agree. I’d love to see YASS as a concentrated PieVault utilising the same bouncing method to automatically maintain the best yield for each underlying asset.

@chris

I like the proposal. In saying this, would the DEFI+L transition to being its own PieVault on top or would it remain as an AMM?

I think this could present a unique opportunity to gradually scale out PieVaults, beginning with YASS and moving to the full +L pending further community consensus after the results of YASS.

These core assets of YFI, AAVE, SUSHI and SNX provide some of the best active yield-generating opportunities so I think it makes complete sense to provide them as a bespoke PieVault.

@MoolaManX

Could we include xSushi instead of Sushi?

Absolutely, glad to have your support for this!

It looks like there is clear preliminary consensus around both SUSHI inclusion and the YASS sub PieVault.

The allocation generated from Gabo’s backtesting looks excellent and I would be very happy to see this moved forwards.

Let’s see if there’s any more feedback in the next few days and then hopefully move this to a vote!

[MoolaManX]

I agree…let’s get xSushi in the allocation versus SUSHI…take advantage of that massive trading revenue of the SUSHI platform!

[dan]

for me, if we’re going to add another DEX to DEFI+L, may it be the second biggest, CRV and not sushi. I get sushi has grown quite a bit recently but CRV has also done quite a lot and increased their coin price too.

[mars]

Borderline related.

YASS in the wild.

Power Pool (powerpoolcvp)

[alextes]

Is this vote still coming? Discussion seems a bit silent.

Sushi seems pretty integral to DEFI exposure. Both due to the fundamental features they’re looking to offer (not quite offered elsewhere it seems, onsen, bentobox), and their raw numbers around economic value captured. Strong yes on that one.

The benefits of a YASS pie remain a bit vague for me so feeling neutral on that.

[williambrealey]

The vote passed and now that DeFi+L PieVault migration has happened we can add the Sushi!