Better monetization of wrapped yearn vaults

More discussion on how to better monetize the wrapped yearn vaults and/or low yield jars has led me to abandon my proposal in my last thread, I will no longer pursue implementing any withdrawal/deposit fees, and will try to look for ways which are both beneficial to pickle and the broader ecosystem that pickle is and should remain part of.

My last thread: [Proposal] Introduce withdrawal fees for low yield native jars and wrapped yearn vaults

One avenue which is being explored is depositing the USDC, lusdCRV, and fraxCRV jars on abracadabra.money to boost the yield by minting MIM and fold it into more of the underlying collateral. Going this route users could safely (we would still need to monitor liquidation levels, as abracadabra has liquidatable vaults) earn up to around 6x the yield they would otherwise earn.

As this would only increase TVL (by a considerable amount) it’d still generate lackluster fees. Assuming we fold our current TVL in yearn vaults (around $11.5m at time of writing) by the max amount, so 6x times, we’d go from fee tier 3 to fee tier 4, which would increase our profit share from 20% to 25%.

We could however in addition charge 20% performance fees over the now levered vaults, assuming that the yvUSDC vault returns 5.5% unleveraged for end users, it would return about ~33% fully folded. Taking 20% off that as a performance fee would bring the net APY to around ~26% for the end user. Alchemix has a similar strat where they harvest profits off of the yearn DAI vault and take 10% off of that for the protocol.

We would need abracadabra to increase their borrowable limit for us to maximize our yearn vaults, as of right now their yvUSDC vault is saturated.

Assuming we can however fold, and keep on folding new depositors I’d want to propose an additional strat for the yearn vaults:

We wrap the yearn vault + PICKLE emissions and harvest the PICKLE on the depositors behalf, we then deposit those harvested PICKLE on cream and draw USDC or any other stablecoin off that, take a fee (say 10 to 20%) and reinvest the remainder (at a manageable collateral factor). We make it so depositors can’t harvest the PICKLE themselves. By only depositing the emitted PICKLE on cream, only the PICKLE is at risk of being liquidated (and not the yield earning principal of the user). The borrowed asset (a stablecoin) is then redeposited into the users position and levered up again through abracadabra.

If the 20% cut off of the leveraged profits is a route we want to go down, then we could leave out wrapping the PICKLE rewards.

My once again amended proposal would not incur any additional fees upon deposit or withdrawal, and it would mute the PICKLE gains a user would get over the vaults, the end user would enjoy a much higher yield on their principal however.

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This is a much better idea to generate profit without adding any more fees. I think the jar might need an explainer to let people know where their pickles are going.

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I agree. After all the discussion going on. I believe we are better suited to abandon the withdrawal fees discussion and look other avenues to generate profit.

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Thanks for the hard work and evolution of your proposal HarryvdK, i agree a “painless” fee is better than entry or exit fee, which would scare some investors away…we definitely need to push in this direction!

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I think I like the idea of this - clearly it depends on Abra coming to the party as a starting point. Discussions have been positive however with ETHcc going on it might still be a little while to confirm.

Once we know what that side of things look like, we can map out the feasibility of the more advanced folding/borrowing strategies you have outlined. We’d also need to do the maths on the Pickle-CREAM idea to see if the 6% (base rate on USDC) Pickle emission on top of the Jar would add real value once it goes through the supply-borrow-fold process.

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I agree, it’s hard to determine what a save collateral ratio is with assets volatile relative to each other. Cream has a 45% collateral factor for PICKLE. If we borrow at 15% and try to keep it at 15% (or in a range, say up to 30%), we’d get a rate of about 0.9% at the lowest end of the PICKLE emissions on the USDC jar, around 2.25% on the highest end.

This is however both before folding back up and redepositing into the users position. Assuming we can fold this back up to 6x (in reality this would be a little bit lower for the end user if we go the 20% perf fee route), it’d go back up to on the lowest end 5.4% and 13.5% on the highest end, including a 20% perf fee this would be 4.32% and 10.8% respectively.

This would also allow us to double dip, we take a 20% fee folding the users initial position, and we take a 20% fee off depositing the PICKLE and folding it back into the users position.

My example is oversimplified though and assumes no lending and borrowing APYs as well as dilution of PICKLE rewards. But in my example, the end user would on the lowest end make ~30% and ~37% on the highest end.

If we can’t get abracadabra to come to the party for the users principal, then we could still apply abracadabra for the supply-borrow-fold process for the PICKLE-CREAM part of my proposed strat, as that doesn’t need new collateral introduction on abracadabra.

It would also allow us to borrow USDT in addition to USDC off of the supplied PICKLE, to deposit either USDT or USDC on abracadabra depending perhaps on borrowable limits.

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I strongly agree with this type of proposals! Happy with this ok.

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I agree with the proposal, but we should introduce additional security measures when we go forward (like limit the max amount of capital that can be moved or something like that). There would be several layers of smart contract risk, if we suffer from an exploit this throws us back 1000x harder than the subvention of the yearn jars.

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In order to somewhat mitigate this we could leave out levering the users principal and only go the pickle-cream supply-borrow-fold strat and take a cut there, in case of liquidation, only the accrued PICKLE would be liquidated, and none of the user’s principal

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