[For Discussion] Allow Vault Tokens to serve as collateral for AUSD

Community Discussion & Proposal Product & Feature
1

Summary:

Add AV tokens as collateral types for AUSD in order to increase the demand for both products and the capital efficiency of the protocol.

Abstract:

Automated vaults have proven to be a great tool to reduce downside risk. In the recent crash, both the Market Neutral and Savings strategies were less volatile than their underlying risky token (BTC, BNB, ETH). Automated vault tokens should be added as a collateral type for AUSD.

Overview:

This is a revisit of a previous proposal.

There is currently ~13M equity deposited in 3x automated vaults and ~5.8M equity deposited in 8x automated vaults that could be used as collateral to mint AUSD.

Looking at the data for returns within the various vaults, we can see that the price volatility compared to the underlying is greatly reduced even at 8x leverage. Automated vault tokens are less volatile with a greater return potential on collateral over ibTokens.

We should look into adding some of these as collateral types for AUSD.

Motivation:

  • Revenue from AV usage and AUSD stability fee increases for governance.

  • Access to safer collateral with better return for minters.

References:

3x Market Neutral Vaults

vault token days online return vault underlying begin underlying end return underlying
n3x-BNBBUSD-PCS1 78 -1.90% 420.14 216.19 -48.54%
n3x-BNBBUSD-PCS2 59 -2.51% 404.03 216.19 -46.49%
n3x-BNBUSDT-PCS1 92 -0.82% 408.71 216.19 -47.10%
n3x-BNBUSDT-PCS2 59 -2.07% 404.03 216.19 -46.49%
n3x-BNBUSDT-PCS3 45 -2.48% 322.90 216.19 -33.05%
n3x-ETHUSDT-BSW1 45 -4.31% 2,383.29 1,071.41 -55.05%

3x Long Vaults

vault token days online return vault underlying begin underlying end return underlying
L3x-BUSDBNB-PCS1 29 -1.67% 321.33 216.19 -32.72%
L3x-BUSDBTCB-PCS1 43 -1.30% 28,304.90 20,106.36 -28.97%
L3x-BUSDBTCB-PCS2 31 -0.55% 29,386.09 20,106.36 -31.58%
L3x-ETHUSDT-BSW1 43 -4.92% 1,937.43 1,071.41 -44.70%

8x Market Neutral Vaults

vault token days online return vault underlying begin underlying end return underlying
n8x-BNBUSDT-BSW1 15 -2.00% 289.94 216.19 -25.44%
n8x-BNBUSDT-PCS1 92 -7.28% 408.71 216.19 -47.10%
n8x-BNBUSDT-PCS2 87 -5.75% 430.06 216.19 -49.73%
n8x-BNBUSDT-PCS3 15 0.33% 289.94 216.19 -25.44%

8x Long Vaults

vault token days online return vault underlying begin underlying end return underlying
L8x-BUSDBTCB-PCS1 15 -4.29% 30,453.76 20,106.36 -33.98%
L8x-USDTBNB-PCS1 15 -2.32% 289.94 216.19 -25.44%
2 Likes
2

This would create a infinity loop for the AIP 8
Using AUSD as metric to how much to put in the Vault

3

You can already loop AUSD positions for more leverage with current collateral types. It is not an infinite loop, there is a maximum leverage you can achieve.

4

The thing is:
AIP 8 adds an utility for AUSD so that the more AUSD you hold the more you can invest in x8 AVs
If you make so that x8 AVs be able to be used to create more AUSD, you will create an infinity loop for such vaults and they will be over leveraged

5

I misunderstood what you said in your previous comment.

What you are describing wouldn’t work because you need to lock the AUSD on Ellipsis to get the extra 8x AV room. Can’t spend it in two places.

6

Let’s not forget that vaults have a max capacity. But this could indeed cause vault access conflicts with AIP-8 if in the end, you only need x3 Vault tokens to mint AUSD, to then be able to invest in x8 vaults.

7

Yeah you are correct, you can’t double spend, so it wouldn’t be infinite
However you can still lock 1/2 into Ellipsis and 1/2 into the AV
Then 1/2 again into Ellipsis and 1/2 into AV
And keep doing it until not profitable anymore

8

AUSD provides access to 8x AV, but doesn’t provide fund :wink: