• AIP

  • [AIP-68] Launch Yearn vaults and vault migrator on Optimism

This proposal is to launch vaults for the newly deployed Yearn DAI, USDC and WETH strategies, as well as the vault migration tool (currently only deployed on mainnet) on Optimism.

Launch Configuration

Accepted Collateral

  • DAI, USDC, ETH
  • yvDAI, yvUSDC, yvWETH
  • Max LTV = 50%

Deposit Caps

  • DAI = $5m (after min 1 week of 100k, at multisig discretion)
  • USDC = $5m (after min 1 week of 100k, at multisig discretion)
  • ETH = 5k ETH (after min 1 week of 100, at multisig discretion)

Repayment and Liquidation Caps

  • DAI = $2 million per 60 minutes
  • USDC = $2 million per 60 minutes
  • ETH = infinite

Maximum Loss

  • DAI = 5 bps (0.05%)
  • USDC = 5 bps (0.05%)
  • ETH = 5 bps (0.05%)

Cap Raises

  • All vaults are pre-authorized to have their caps increased to $5m

Context

With Yearn being the original “money lego” protocol that Alchemix was built on, it has played a significant role in which chains Alchemix could begin its multi-chain expansion on.

On Ethereum Mainnet, the vast majority of funds deployed in Alchemix were and still are in Yearn vaults.
On Fantom, Alchemix launched solely with Yearn vaults and those are still the only vaults available as yield sources.
Naturally, when Alchemix expanded onto Optimism, having Yearn vaults at launch would have been business as usual. But at that time, Yearn was not yet present on the chain, so only Aave strategies were included.
With Yearn now establishing their presence on Optimism, we now have the ability to offer these vaults.
Note that USDT is not included among the vaults to be launched as Yearn has not yet deployed it on Optimism.

Yearn, as almost all other protocols on Optimism are working towards receiving a grant from the Optimism collective that they can use to enable higher yields for their strategies. This yield would get passed on to Alchemix depositors, further strengthening our value proposal.

The Alchemist parameters follow the precedents set by previous launch parameters for the initial v2 alUSD and alETH launch, the Fantom deployment, and the AAVE Mainnet and Optimism launches. Deposit caps are significant but smaller than mainnet, with an initial “soft launch” period. Liquidation caps are also kept smaller, as the amount of arbitrage possible in the event of an underlying token depeg is a function of all liquidation caps combined.

alAssets already have liquidity on Optimism due to the generous veVELO NFT gift from Velodrome as well as a subsequent purchase of VELO as per AIP-59.

The vault migrator tool is currently only deployed for the mainnet strategies.
With the Yearn vaults being deployed on Optimism, it would make sense to deploy the vault migration tool here as well, so that depositors can easily switch between the Yearn and Aave vaults, depending on which ones have higher yield.

Voting

A vote “FOR” authorizes Alchemix to launch the Optimism Yearn vaults mentioned in the proposal, as well as the vault migration tool on Optimism.
A vote “AGAINST” does not authorize Alchemix to launch the Optimism Yearn vaults and vault migrator with the above parameters.

Nice write-up. Two questions:

1) Can you please remind me the reasons for repayment and liquidation caps?

2) Given what's been mentioned the last few days about the possible questionable future of DAI as collateral, are these vaults being designed/implemented with some sort of potential exit strategy in mind? Or is that more of a "we'll cross that bridge when we get to it" kind of thing?

    IMIMIM
    1) The purpose of these is to limit the amount of damage that can be done to the protocol, should one of the accepted collaterals suddenly drop in price and arbitrageurs would use the vaults to take alAsset loans, swap them to the damaged collateral and then repay/liquidate their loan. This then gives some time for the team to suspend the vaults, so that no more damage can be done.

    2) For now, given that most Alchemix users prefer to use DAI (as the evidence shows in the deposits), there are no immediate plans to turn off DAI as collateral. But it should be a goal in my opinion to reduce reliance on DAI, so that should the day come when we do need to shut it off, the protocol is not that heavily reliant on it. The proposal to start using FRAX as collateral would be the next major step in this direction.

        barree To elaborate, repay/liq caps only really apply to alUSD collateral, since ETH loans can only be repaid with ETH (including wETH) or alETH (whereas alUSD has DAI, USDC, and USDT that are all supposed to be pegged to each other). That's why the ETH cap is infinite.

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