Growth of Treasury. ETH collateral yield [On behalf of AlphaGrowth]
Objectives
Hi Compounders. One more idea of how we potentially could increase the growth of the treasury. The first idea can be found here.
Proposal
Compound V3 - is an isolated MM (Money Market) protocol. It has a base asset, which can be supplied to earn APR for liquidity providing, and the same base asset can be borrowed. To borrow base assets we should have collateral, that will secure borrowing. Unfortunately, collateral does not yearn for any yield. The goal of this proposal is to generate yield for ETH that is supplied as collateral.
Mainnet USDC market ETH supplied 71,000 ETH
Mainnet USDT market ETH supplied 2,300 ETH
What if we create a mechanism, that will deposit some % of ETH collateral into Liquid staking protocol?
Note: Let’s use Lido as an example. The current APR is 2.93%. Current ETH price - 3,150$
Development concerns
- We cannot use 100% of collaterals, because the withdrawing process from Lido takes time.
- Properly handle liquidation logic
Why should we do it?
- Growth of treasury
- We can use farmed yield to incentivize users → bring more liquidity
- Yield can cover costs for Compound service providers
- Compound will support Ethereum as the network (validators that will be created with Compound’s ETH)
Math
| USDC ETH | USDT ETH | Total | |
|---|---|---|---|
| ETH Amount | 71,000 | 2,300 | 73,300 |
| Yield on 90% of Collateral | |||
| ETH yield t in 1 Year | 1,872.27 | 60.651 | 1,932.921 |
| USD yield in 1 Year - (ETH at 3150$) | 5,897,650.50 | 191,050.65 | 6,088,701.15 |
| Yield on 70% of Collateral | |||
| ETH yield t in 1 Year | 1,456.21 | 47.173 | 1,503.383 |
| USD yield in 1 Year - (ETH at 3150$) | 4,587,061.50 | 148,594.95 | 4,735,656.45 |
| Yield on 45% of Collateral | |||
| ETH yield t in 1 Year | 936.135 | 30.3255 | 966.4605 |
| USD yield in 1 Year - (ETH at 3150$) | 2,948,825.25 | 95,525.33 | 3,044,350.58 |
| Yield on 20% of Collateral | |||
| ETH yield t in 1 Year | 416.06 | 13.478 | 429.538 |
| USD yield in 1 Year - (ETH at 3150$) | 1,310,589.00 | 42,455.70 | 1,353,044.70 |
Next steps
- Figure out if the community supports this idea.
- Start discovering how we can implement such an approach
- Develop a new Comet version
- Audit
- On-chain proposal