TLDR
- Large TVL is great, but TVL, protected from market performance is better.
- What are the best ways to make TVL in PowerPool ecosystem indifferent to market movements?
a. Add “short DeFi ETF” and “DeFi Volatility Index”
b. Add the same instruments to other indexes which are considered to be added in the product line (NFT ETF, tier-2 ETF, etc.)
One of the key KPIs for Powerpool (PP) ecosystem is to aggregate as large TVL as possible. Especially right after the mainnet launch.
At the same time
- When the market sentiment is bearish (which will often be the case), LPs can pull out massive amounts of liquidity from PP ecosystem to put it into more conservative products (e.g stablecoins, stablecoins deposits, curve-like pools etc.)
- Recent examples of vampire attacks and liquidity withdrawal after reward distribution stops (to be attractive) show that TVL should not only be large, but also immunized.
While #2 is the area where a lot of active discussions have already been started, below there are some thoughts on potential solutions for the #1
To outcompete other indexes and secure mid/long term success of PI, a more important goal is to KEEP TVL protected from massive withdrawals by making it indifferent to the overall market performance/sentiment
I would indicate several groups of instruments which will help with this goal
I. Expand the product line with other GTs indexes (indirectly protects the TVL)
so that the LPs will hold funds in several products and likely to keep a part of their liquidity inside the ecosystem whenever the market moves (e.g. pull out funds from PI when the market is down but keep the funds in NFT Index)
-
Tier-2 DeFi indexes
easy to implement and partially has already been implemented, but relatively small market with limited liquidity / ADTV -
NFT Indexes
novel product, but relatively small market with low liquidity
(see the research topic by @MightyManbun here NFT Index Fund- Help Decide the Composition!) -
Infrastructure indexes
- Large opportunity, but just a few tokens now w/o govn functional (e.g. - LINK)
- Zapper, Instadapp, DeBank, Staking derivatives (particularly ETH staking derivatives), Oracles (API3?)
II. Expand the product line with non-GTs indexes (indirectly protects the TVL)
-
Stablecoin indexes
Looks like it’s meaningless to compete with existing providers (CRV and others), but can be a room for cooperation with them -
Mirror / quasi-mirror indexes (can be non-GT or quasi-GT)
Similarly to ETH/wETH there can be PIPT/DPI or PIPT/Dough, REN/wBTC
Actually all the instruments related to wBTC deserve a separate discussion -
Beyond ETH (including Polka, Cosmos and other ecosystems)
Not the first priority atm
III. Enhance the product line by adding new instruments to “long” GTs indexes (directly protects the TVL)
This group of instruments can be implemented to any of the “long” indexes described above, and being much more technically sophisticated, can, in my opinion, differentiate PP from the competitors.
- Inverted Power Index: [1/PI], i.e “short PI”
- Volatility Power Index
Introduction of #7 and 8 allows using the risk of the market drop or high volatility as PI advantage
Issues/Ideas:
- Obviously, execution is the key problem with #7 and 8. Potentially such instruments can be synthetically build via derivative instruments or via putting large collateral and issuing synth (similarly to how SNX does this), but much deeper research is required in this field
- Depending on the Team’s view for the future of the GTs Lending pool (which was the initial idea of PP) there are some potentially interesting synergies can extracted from it (e.g borrowing GTs or whole index to short)
- Number of opportunities for cooperation with CRV and other protection instruments providers is huge and will be considered in following research (not considered here as it will not directly increase PI’s TVL)
P.S. the ideas described above, as well as setting an advanced governance structure and selecting the best models of cooperation with other DeFi ecosystems is something I would like to get focused in case I am elected as PP Politician (or work with the Project team in any other role)
To be continued