• AIP

  • [AIP] Idle Finance Integration Incentive

Previous info from Davide with IdleDAO here: https://forum.alchemix.fi/public/d/267-improving-aleth-alusd-liquidity-in-curve-with-idle-yield-tranches-vote-is-on

Summary:
alUSD is one of 15 assets vying for 5 spots for new perpetual yield tranches with Idle Finance. The purpose of this proposal is to determine if Alchemix should incentivize IDLEvoters to vote for alUSD.

Overview of Idle tranches:
Idle tranches take existing stablecoin yield strategies and splits them into a senior and junior tranche (ie, two separate vaults). The senior tranche collects 10% of the yield from the strategy, and the junior tranche collects 90% of the yield. If the overall strategy suffers a partial loss of funds (for instance, someone is able to “steal” some chunk of the alUSD liquidity from users), the junior tranche is slashed to make the senior tranche whole. The net result is that the senior tranche will have a slightly lower APR than the base strategy as it is protected somewhat by the junior tranche. The junior tranche will have slightly higher APR as it is somewhat taking on additional risk from the senior tranche. Ultimately the market will decide what the difference in APR is by how they allocate to each pool.

Benefit to users:
The primary purpose of the senior tranche is to offer a tradeoff in risks. You are taking on additional smart contract risk by routing through IDLE finance, but you eliminate some risk in the event of a partial loss of funds in the pool. I imagine the senior tranche may be attractive to newer DeFi users who may like a form of “insurance”. Additionally, IDLE DAO is in the process of voting on a gauge model, where IDLE rewards will be distributed to the senior tranches based on voting weight. This would create an additional (albeit initially small) source of farming income for alUSD stakers.

The primary purpose of the junior tranche is for users who are comfortable with the risks and would likely get slightly higher APR on their alUSD.

Proposal
I propose that Alchemix consider incentivizing IDLE voters to vote for alUSD with a conditional purchase of IDLE should AlUSD place in the top 5. We would use this IDLE to direct IDLE gauge rewards to the alUSD senior tranche. This is a small commitment to position ourselves to expand the partnership if the tranches prove to be popular. IDLE is currently 3m marketcap and has integrated DAI, FEI, stETH, MIM, and FRAX tranches.

Options:

  1. Do not incentivize IDLE voters (ie, do nothing)
  2. Alchemix DAO to purchase $5k worth of IDLE on the open market if alUSD is selected as a new perpetual yield tranche.
  3. Alchemix DAO to purchase $10k worth of IDLE on the open market if alUSD is selected as a new perpetual yield tranche.
  4. Alchemix DAO to purchase $20k worth of IDLE on the open market if alUSD is selected as a new perpetual yield tranche.

Vote for all options you support. Because users can select multiple options, the choice with the most total votes will be executed.

5 days later

FYI:
The vote is live, alUSD is currently in a somewhat distance 6th place without promising incentives. I am sharing this proposal with the IDLE community now.

FYI with this proposal going live alUSD has jumped into approximately 1st or 2nd place (a bit hard to tell as votes are split between IDLE stakers and holders)

Frankly I just don't see enough AUM in Idle to justify this. Idle has 1.8M AUM? I'm not saying a $30k purchase is breaking the DAO but there I'd rather be bribing Bancor for an alUSD pool if what we want is to drum up some alUSD demand. The existing tranche rates in Idle aren't anywhere near ConvexFinance or D4 rates so I think this will attract limited liquidity even if it passes.

    LogrisTheBard Tbh bancor may just give us an alUSD pool if we ask, they initiated the ALCX pool back in the day. It does seem that if we "do nothing" we probably end up out of the top 5. I'd encourage ppl to maybe vote more for the 5k option considering that's still a decent initial commitment relative to IDLE TVL, rather than the all-or nothing vote right now. But I consider this like a high R/R move where downside is going to 0 and upside can be quite high. They also just announced a pretty large integration with Lido, so that should go a long way with helping their legitimacy.

    I just don't think we have a great way to see how much people will actually use the pools besides just having it be spun up! The rates for alUSD should match, or for junior tranche slightly exceed, convex and D4 though since they will be using those pools as their base yield.

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