Summary
Community feedback requested on the creation of a new BarnBridge Smart Alpha pool for gOHM. This pool would allow depositors to speculate on price and or potentially protect their dollar position in gOHM for a given period.
Motivation
TLDR; Smart alpha pools accept single asset deposits and splits them into low or high volatility derivatives. Seniors (low vol) can receive up to 35% absolute downside protection with limited upside and Juniors (high vol) can receive up to 19x leveraged price exposure.
This pool would allow depositors to speculate on the price movement, up or down, of gOHM for a given epoch (1 week). The winning side receives tokens from the other as compensation for choosing the correct outcome. Both positions are long the underlying asset, seniors acquire more of the asset during downturns to offset falling price and have small upside exposure during up weeks.
How does this work?
Depositors allocate to a senior or junior position at deposit. Their positions are queued for entry until the start of the upcoming epoch. Price/pool ratios/deposits are fixed at epoch transition, this ratio (measured as junior dominance) determines the protection/leverage available and the price delta at the conclusion of the epoch determines the outcome.
Check out this simulator for the WETH-USD pool. Enter junior dominance and the expected price performance for WETH during the epoch to see the outcome.
Costs?
The pool charges 0.5% of the earnings from the winning side at epoch conclusion. Lose and you pay nothing other than entry/exit gas.
Requirements?
Chainlink price feed is needed at this time for the pair (gOHM-DAI), although other non-chainlink oracles can be used.
Why do this?
Adds optionality for stakers to take on more risk exposure or protect their dollar denominated positions.
Senior-gOHM
- Easy low volatility entrance for new depositors.
- Long-time holders who may desire dollar protection.
- Less volatile collateral asset for borrowing, lower liquidation risks.
Junior-gOHM
- Cheap leveraged exposure to gOHM.
- No funding rate to hold the position.
Links
Website - https://barnbridge.com/smart-alpha/
App - https://app.barnbridge.com/smart-alpha/pools
Simulator - https://app.barnbridge.com/smart-alpha/pools/0x31f7da25361ad99ca4daa4e8709624660f324f48/simulate-epoch
Smart Alpha Summary - https://youtu.be/jXkzLK0Gq8o
Defi Dad on Smart Alpha - https://youtu.be/vpFgL1Fby-g
Discord - https://discord.gg/Yfs8PUSBfK
Proposal
This post is meant to gauge the interest of the OHM community for a Smart Alpha pool and open a dialogue to its mechanics. The pools leverage/protection parameters can be customized to meet the needs of the community (epoch duration, junior dominance models).
I’m curious, are there any community members familiar with BarnBridge and its Smart Alpha product? Let me know if you have any questions, I’m glad to help. Look forward to the discussion.