Create Metapool between alUSD and alETH pair

whalegoddess

Hi Fren,

My idea is to create a metapool on Curve that consists of [alUSD-3CRV]-[alETH-[sETH-ETH]], then reallocate ALCX emissions such that providing to this new LP token (holding tokens for 2 asset pairs) is more beneficial than just holding one or the other. We should think of this as expanding to future pairs as [asset1, alAsset1]-[asset2, alAsset2]-... for V2.

What is a Metapool?
Here ser: https://resources.curve.fi/faq/base-and-metapools
The purpose of a metapool is to leverage an existing pool (say 3CRV) and allow it to be traded with another token (alUSD). The suggestion here is to iterate on the two

Why should we link our alAsset pairs?
i. Why this specific link and why Curve? Can be swiftly implemented on Curve protocol (with precedent), as opposed to the coordination required to LP between platforms. al3CRV exists and alETH-[sETH-ETH] has support as seen in snapshot: due to existing sETH-ETH pool.
ii. This increases depth of liquidity for all of our alAssets. Allows clean swap from alUSD-ETH, and alETH-3CRV tokens.
iii. Assuming rewards that outweigh IL, it encourages holding all of our Liquidity Tokens.
Suppose 10 alAsset pairs, how shall we encourage people to provide liquidity to each? How do we balance that? This metapool is one proposal.

Quick thoughts on Impermanent Loss
Stable-ETH pairs are precedented. I can see net gain by swap fees and rewards despite IL. It may become riskier when expanded to several alAsset pairs, but specific structures of the metapool can be considered.

whalegoddess

After some sync ups on Discord in Curve and Alchemix, some new thoughts:

Metapools like described above are a direct a use case of Curve V2.
The discussion can move towards if we want to incentivize metapools, and if so, which ones. Pls ser, consider our options:
- Reward no metapools. When we add new asset classes, we create a new pair (eg [alBTC-BTC]). The community will calculate the appropriate ALCX rewards.
  - Pro: Can be more granular (?) Managed manually, more stable
  - Con: May become difficult to manage
- Reward two metapools -- stable and volatile. When we add an asset class, we label it as stable or volatile, then add it to the pool.
  - With this thinking [alETH-ETH]-[alBTC-BTC] with rewards, and [alUSD-3CRV] evolving to encompass all stables supported by Alchemix.
  - Can add a new category other than stable and volatile if this is too restrictive.
  - Pro: Supposedly less IL.
  - Con: Does not link all stables.
- Reward large single metapool
  - Create metapool as described above. All asset class pairs will be in this metapool...
  - "One ring to rule them all" -exHuman on Discord
  - Pro: Arguably simpler to manage and reward.
  - Con: Possibly worsening Impermanent Loss situation. Deep dive required AI 2

Action items/Open Questions:
1 - How many swaps does it take to go from alETH to DAI with each option? If it is multiple swaps, then don't see the huge benefit to the large megapool. Thus this depends on V2 impl. Plan to check in on Discord.
2 - Target LP token ratios for the protocol. What does it mean to target a ratio of LP tokens? At times we may want more liquidity in a specific asset pair. Do we need a floor of liquidity? how 2 incentivize.
3 - Reward distribution specifics

I'm still thinking about all of this.