OIP-142: LUSD/OHM Boosted Liquidity Vault

Mark11

What is Liquity contributing to this?

0xFelix

Mark11 I assume you mean in terms of incentivization? If yes, they will vote for the gauge with vlAURA.

Mark11

0xFelix

Thanks

Can you explain the 5% fee and how it was arrived at?

Yella

Great proposal, but not a fan of the 5% fee.

I don't really understand its purpose, it won't really add anything to liquid backing while it could lower the conversion rate into the pools.

It'll become another friction point for potential users, especially as this product is targeted at cold audiences.

I don't believe the value proposition to OHM holders should be the growth of liquid backing.

In my opinion, OHM's value propositions should be stability, predictability, scalability, utility, deep liquidity, and future decentralization.

z_33

Yella
I agree that the fee might be too high (see my comment). I disagree that the fee shouldn't be there at all. BLV vaults are otherwise actively discouraging of holding OHM and we need to find a way for these to be accretive to holders. e.g. if someone is holding $1million worth of OHM and LP'ing it against stables. I don't see why they wouldn't wind that down, sell all OHM for LUSD and deposit that into BLV. That whole process would be a net loss for ohm holders and needs to be accounted for.

0xFelix

The fee was always intended to be turned on at some point, but following the community feedback on both the forum and the Discord server, it seemed that people generally preferred to turn it on sooner rather than later. This is why it's included in this proposal - the purpose is purely to better align the product with the expectations of OHM holders.

It's worth noting that once a user's vault is deployed it is locked into that configuration - so turning on the fee switch at a future date will mean that all existing vaults will be grandfathered in at 0% fee.

Mark11

0xFelix yes yes the fee is good! But what trading fee is it 5% of?

0xFelix

Mark11 So basically the swap fees are split in the LP token (i.e. 50% to third party depositors and 50% to the protocol), and this fee % is the amount of third party rewards (think BAL, AURA) that accrue to the protocol.

z_33

0xFelix Good to see the staking switch being turned on. But I'm concerned the Fee might be too high… I don't know how much juice we have to push meaningful rewards to another BLV. But let's assume we can sustain 10% return over 1 year on this (which I'd be surprised if we can…), that'd result in a net return of just 5% after taking fees into account… less if withdrawn earlier, add around 200 to 300 USD cost of creating and withdrawing a BLV and the position really becomes untenable.

Can you provide more info behind the 5% fee? otherwise I'd suggest lowering it to like 2.33%

0xFelix

z_33 So just to be clear, the fee setting is a % of the total rewards earned. So if the vault earns 10% in yield over a year, 9.5% of that will go depositors and 0.5% to the treasury. Does that info change your view?

notSHAFT

z_33 I do not agree that BLV vaults are discouraging users from holding OHM especially since almost every OHM/stable LP position outperforms a BLV. Your example assumes that the user initially chose to hold OHM over LUSD solely because BLVs did not exist.

z_33

notSHAFT Even if we assume it's not actively discouraging, BLVs without fee switch, at best, do pretty much nothing for OHM holders.
In reality, if $1m worth of OHM-stables LP is giving you, say 15% rewards and you can get, say 10% from BLV why would you bother holding OHM? why not sell that OHM and convert that 1m worth of liquidity into 2m worth by depositing through BLV?
The only BLV we have right now is OHM-wstETH, that sees pretty much no volume whatsoever, so is not a good yard stick to judge OHM-stable BLVs by.

notSHAFT

z_33 I agree for the most part but my point is that there are other reasons to hold OHM outside of yield farming and we should be mindful of them. The existence of a BLV doesn't change anything for someone that is holding OHM because it is stable and predictable.

Mark11

0xFelix I think the fee is too low actually!

Bur happy for it to be tested out at the proposed rate here - we can always change later or redeploy

z_33

0xFelix oh it's 5% of the rewards… yeah, that might be too little… agreed with @Mark11 . Although the Mark, I think changing fees requires redeployment… correct me if i'm wrong felix.

TokenBricexyz

Hello Ohmies, here's TokenBrice from the Liquity team. 🙂

Just wanted to thank @0xFelix for the well-crafted proposal; looking forward to how this will be received, but overall the proposed design seems balanced and attractive and should find its audience.

Regarding the support provided to such initiatives, there will be vlAURA voting power re-allocated from the LQTY/ETH/LUSD pool (to be discontinued, as volume is not there) to other LUSD-related pools on Balancer, including of course, LUSD/OHM.