SIP-15: Yield Stacking for LP

Proposals
#1

SIP-15: Yield Stacking for Liquidity Providers

Authors: @monstar, @dalakos8
Date: 2021-07-07

Context

The main aim of SIP-15 are to increase the yield for liquidity providers by stacking additional yields on top of the liquidity being provided by Siren LPs.

What is Yield Stacking

In order add additional yield, I propose that all the LP buckets get placed into the yield earning versions of themselves when not in use (for withdrawals etc).

The ideal mapping for this would be as follows:

  • Sushi -> xSushi (sushibar) + 7.58% APY
  • Matic -> TBD
  • Uni -> Compound + 1.6% APY
  • WBTC -> Compound + 1.6% APY
  • WETH -> Cream +1.93% APY
  • YFI -> Aave + 0.48% APY

Sushi is the main one with a big value add for LPs, but with almost $10mm of liquidity, and likely more in the future it’s important to add this additional yield now so everyone can share in the benefits.

Next Steps

Should we implement SIP-15?
  • FOR: Implement yield stacking and provide additional yield to LPs
  • AGAINST: Do not implement yield stacking

0 voters

#2

@monstar A very interesting idea. What is your high level technical approach to this? AFAIK it would require changes to the onchain smart contracts, so it deserves a lot of thought about the risks and tradeoffs.

How should we determine the appropriate amount of funds to keep in the non-yielding versions (e.g. regular Sushi, Matic, UNI, etc.) so that we have sufficient collateral to use for minting when users come to the AMM to buy options, and sufficient collateral to buy back tokens when users try to sell their options back to the AMM? We’ll need a function for converting yield-earning assets back into the regular versions of the tokens for when we’re low on collateral and need it to mint options or buy back options.

Also, we’ll need to introduce some type of offchain monitor for detecting and firing these liquidations, as well as some sort of incentive to arbitrageurs to liquidate.

This proposal will increase capital efficiency by generating additional yield but we need to nail down the specifics. Feel free to message me on discord and we can chat about ideas :).

#3

Hey! Can you checkout SIP-1 and add this to the github per the instructions in SIP-1. This is just so we can follow the proper governance process.

Feel free to DM is any questions.

#4

What about adding an opt-in option for LPs, that way they can choose to earn the extra yield or not? Not sure how complicated this would be to add-in, but just throwing this out there.