Proposal discussion: ASSY index creation

Disclaimer: this proposal is only the initial draft for community discussion. Some important logical pieces of the proposed index, such as CVP liquidity mining program and index fees aren’t established yet. Feel free to add your thoughts, share ideas and participate in brainstorming!

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 w ill 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.

To start this relationship I will :

  • Use ~10k CVP voting power to support the ASSY proposal on governance once the discussions reach enough consensus.
  • Participate in discussions with PowerPool community members on defining this index
  • Participate in a co-marketing campaign to support ASSY asset launch

More mid-term, if the ASSY asset reaches enough traction, volume and receives a favorable Risk report from the Aave risk team, Up to 10k AAVE proposal power delegation will be considered to help support the project of an AIP adding ASSY into one of the Aave markets.

CVP liquidity mining program, fees and additional incentives

To be discussed by the community

Misc and fun :

For the token logo can we consider something like this? xD

11 Likes

Big fan of this index. Have you considered maybe using https://xtoken.market/invest/xSNXa for the SNX portion? My feeling would be that SNX debt management could cause a lot of complications combined with the token locking mechanisms. Like redeeming the token and handling the debt exposure accounting for SNX could become very difficult and gas intensive. I could see xSNX maybe being a better option.

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This is nice.
$AAVE we’re creating basket of Indexes.
:+1:

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Index composition and value proposition are great. We need to define the CVP LM program and mechanism for CVP value capturing.

@Lemiscate @YanDelphi @anildelphi @Sergey @dae @DeFi let’s think about it ASAP

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FOR the proposal, the idea of value capturing from combination of simple strategies has been in the air for a couple of months. Let’s be the first:)

Re CVP value capturing - I think the easiest thing to implement would be LM program with incentives skewed towards ASSY/CVP pool

Also if this is not complicated technically we can allow the metagovn function for ASSY only for the accounts with CVP holdings in any form

As with YETI I have a question the the math behind the initial weights:)

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LPs supplying to ASSY wouldn’t have any voting power since there is no CVP in the index. So basically it will work as you said - no voting power without additional CVP holdings

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Was going to suggest the exact same thing as @Spreek!

xSNXa can automate allot of the SNX staking, and auto-compounds the returns.

Similarly, I suggest taking a look at xAAVEa and xAAVEb (auto-compounding), in contrast to plain stkAAVE (non-compounding).

Generally, I am very much in favor of this proposal!

1 Like

Big fan of this index and rationale. Think this will do very well.

This is a great idea @Lemiscate, you are truly a 1000 IQ farmer :heart_eyes:

I think it’s a great idea, two questions :

  • What makes us think these assets are going to stay correlated ?
  • Isn’t it risky to have all 3 indexes composed of YFI ?

I was interested in PIPT but I don’t care for 1/2 of it.
If there was an ASSY index token, I’d go all in on this. I

Keeping with the theme of powerpool tokens, I’d add 10% CVP.

How about CLASSY?

10% CVP
20% LINK
20% AAVE
20% SNX
10% SUSHI
20% YFI

or just AAVE / YFI / SNX / CVP (40/30/20/10)
Might even be better to do 5% CVP instead of having people invest $10k/$100k into CVP.

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just finished reading this, its a big yes from me image

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Well, lets ask this obvious question: why no CVP?

I don’t mind having indexes with and without CVP in PP product line, but so far one of the key ideas was the meta-governance, right?

I see more value than damage in case we add 3-5% of CVP (aaaaand put it into the vault on YFI)

@powerpoolAdmin do you think it ll be possible (the YFI vault for CVP?)

Thus we will have

  1. additional buying pressure on CVP
  2. great index based on strategies
  3. enforcement of meta-governance

oh, wait! is CVP price correlated with ASSY?
No, of course, it doesn’t! so adding CVP will ruin a part of the ASSY index logic.

So looks like the only way to add CVP here and kill the three birds in one shot (see above) is to completely skew the mining rewards to ASSY/CVP pool. But why the users need ASSY/CVP pool? Only to chase high LM rewards and dump CVP.
And remember CVP price is not correlated with with ASSY, so the IL risk in ASSY/CVP pair is huge.

=> Looks like we only have ASSY as proposed
in this case I see a clear cannibalization risk for PIPT and YETI

The last option of how to include CVP in ASSY (at least indirectly) is the following:

  1. ASSY holders w/o CVP on their balances are eligible only for ASSY price appreciation and ASSY pools mining rewards
  2. ASSY holders w/o CVP on their balances are eligible to the above + distribution of the revenue streams from strategies
    (or can distribute 1/4 to those w/o CVP and 3/4 to those with CVP)
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Nice to meet aave here!
Sry but i dont understood why cvp holders should give money by inflation to sushi holders?
And yes cvp should share same ammount whith others

1 Like

First of all thanks for the amount of engagement from the Powerpool community about $ASSY

here are a few updates about the feedbacks, please note it’s only my answer and it’s completely up to the powerpool community to decide of their own path.

xTokens

  • using xTokens is a very good suggestion, both for xSNX and xAAVE, it allows more passive management and auto-compounding and increase synergies with another new project : xTokens

I think it’s a no-brainer for AAVE holdings xAAVE will auto-compound and it’s more efficient than direct StkAAVE

for xSNX, it’s up to the community, my personal favorite is still to accumulate passively SNX & CRV, but xSNX does not require direct management, the community has to pick between a passive and slightly active strategy.

for more information about the xTokens project feel free to visit: https://xtoken.market/

More assets in $ASSY ($CLASSY)

There’s been debates to add $LINK and $CRV into $ASSY to make it Classy, I do not support this :

  • This index is intended to be a concentrated bet, too many assets make it lose it’s purpose, I’m sure Powerpool will create many cool indexes in the future and others assets will have their time to shine

  • It’s no secret that I’m a big fan of $LINK, but $ASSY is designed to hold Yield generating assets, as of today, there’s not easy way to passively stake LINK, the $YALINK vault V1 yearn option could be a path but it’s already getting further from the intinial purpose of Yield generating “Blue Chips”

  • There’s already a cool way to accumulate $CRV into $ASSY with SNX that was proposed, I think it’s better to earn CRV and build it’s composition overtime

CVP into $ASSY

There’s been a lot of demand to add $CVP into the Index, I not in favor of this, even at homeopathic dosage, $CVP is the powerhouse of the Powerpool protocol but it simply doesn’t fit in the $ASSY concentrated bet.

There’s a very simple way to have CVP with $ASSY, and that’s my transparent intention : if the community decide to support $ASSY with liquidity mining, I’ll provide liquidity on a $ASSY pair in balancer and use that liquidity to collect more precious $CVP.

$ASSY has potential to bring more spotlights to the Powerpool protocol and users. Indexes have fees that benefits the $CVP ecosystem, I don’t believe that we have to squeeze in $CVP in every single index, as a beta round participant and community member,
I believe in the long term future of Powerpool and think $ASSY has the potential to participate in it’s success.

Index composition

It’s more up to the tech team and design convenience but I believe the initial ratios (30/30/25/15) should be a starting point and it would be a very interesting experiment to let the market and yields decide overtime of the $ASSY composition.

Maybe in six months, due to market fluctuation and compounding rewards the composition will be
: 32% AAVE 26% YFI, 28% SNX 12% xSUSHI CRV 2% ?

Of course, if that’s not convenient, less flexible rebalancing can be implemented.

Logo

@Future_fund_ from YFI community made a very cool logo, shall we pick it as the official one?

8 Likes
  1. Fully agree With what you are saying iN “More assets in $ASSY ($CLASSY)“ part

  2. Re CVP again, agree - meaningless to squeeze it just to have it in the index, still please check out my suggestion to
    a. skew the ASSY LM rewards distribution proportion to CVP holders
    b. Same for the cash flows from the ASSY components strategies

Yes, ASSY is undoubtedly beneficial for PP ecosystem , but I think we need to hedge from ASSY cannibalizing YETI and PI at this point not to drop CVP price.

2 Likes

Agreed with your smart suggestions!

quote :

The last option of how to include CVP in ASSY (at least indirectly) is the following:

  1. ASSY holders w/o CVP on their balances are eligible only for ASSY price appreciation and ASSY pools mining rewards
  2. ASSY holders with CVP on their balances are eligible to the above + distribution of the revenue streams from strategies
    (or can distribute 1/4 to those w/o CVP and 3/4 to those with CVP)

What does the community think about it?

2 Likes

I think that there are enough arguments about why the index should be a concentrated asset, consisting only of four productive assets (at least for now). It is not a drawback, but a great feature allowing to bring really HUGE TVL to PowerPool protocol.

For CVP we should add clear value capturing mechanisms, described above:
(1) Vote.Lock option to get CVP LM rewards (or greatly boost them)
(2) Fees are charged from the index (entry, exit, swap fees) anyway and benefiting CVP value from the first block of the index operation
(3) Don’t forget that CVP holders will be in charge to add/remove tokens from the index, change weights, fees and basically any other rules of this game. Imagine 50m TVL, it’s a huge power guys.
(4) And I am even not talking about meta-governance power, it is obvious for anybody who is up to date with this project

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I will use all of my CVP to vote against this proposal. Silly to not have CVP allocation.

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CVP should be included in about 8% or so imo.
It could break the tokenomics structure to have CVP in all indexes except one.

2 Likes