PSP-IPΔX: Deploy PSP on APWine to farm APW tokens

Research and Discussion
1

Please keep in mind that this proposal is in research phase - sharing here to provide clarity on the intended usage of the unalloacted $PSP from BP Δ1.3 budget.

Important point also: the numbers introduced below will not be exactly the same in the days / weeks to come.

1. Proposal Number and Name

PSP-IPΔX: Acquire APW position by tokenize the sPSP Yield on APWine

2. Keywords

Farming, PSP, APWine, APW, Treasury, synergies, Diversification

3. Simple Summary

The Paraswap treasury has a lot of PSP available but it is currently the only asset it owns. This proposal seeks to earn yield on a part of PSP owned by the treasury in order to diversify its exposure.

4. Context

APWine is a protocol for tokenizing future yields and an AMM for trading tokenized yield available on Ethereum and Polygon. The concept and function of tokenizing future yield enables speculating, hedging, borrowing, and leveraging assets with new (to DeFi) strategies.

In the previous two winelistings, a voting event where the APW holders get to decide which productive asset is added to the APWine product, the APWine community voted to support both sPSP_PP4 and sPSP_PP3.

Stakers on pool 3 and 4 can now deposit their sPSP on APWine to get Principal Tokens (PT). Once they own PT, additional APW farming opportunities are available thanks to two incentivized pools:

  • PT/FYT (Future Yield Token): large APY, but IL risks
  • PT/Underlying: lower APY, but no IL risk

5. Goals

  • Generate a yield with the PSP owned by the DAO
  • Acquire a APW position without sell any PSP
  • Strenghten the synergy between Paraswap and APWine

6. Means

The DAO will use 4 millions PSP and provide liquidity on PT/FYT and PT/underlying pools on APWine:

  • 2 millions PSP will be used for pool_3 :

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The DAO will stake 1.098.675,0 PSP in Pool 3 to receive 866.854,58 sPSP_3 and then deposit those sPSP_3 on APWine to tokenize them into 1.057.562,58 PT and 1.057.562,58 FYT

After that, DAO will provide liquidity with the PTs and FYTs it received after tokenization.

25% for the PT/FYT pool (264.390,65 PT + 969.423,37 FYT) APR : 556%
75% for the PT/Underlying pool (793.171,94 PT + 901.331,75 PSP) APR : 281%

I chose this allocation because of the potential impermanent loss on the PT/FYT pool.

  • 2 millions PSP will be used for pool_4 :

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The DAO will stake 1.167.450,0 PSP in Pool 4 to receive 945.634,50 sPSP_4 and then deposit those sPSP_4 on APWine to tokenize them into 1.021.285,26 PT and 1.021.285,26FYT

After that, DAO will provide liquidity with the PTs and FYTs it received after tokenization.

25% for the PT/FYT pool (255.321,32 PT + 903.444,65 FYT) APR : 382%
75% for the PT/Underlying pool (765.963,95 PT + 832.569,51 PSP) APR : 920%

I chose this allocation because of the potential impermanent loss on the PT/FYT pool.

7. Rationale

Check if the TVL on the sPSP-3 and sPSP-4 pools will up on APWine due to the liquidity provided by Paraswap

See the number of APW that the DAO have accumulated

See the number of sPSP that the DAO have accumulated

8. Forward Thinking Consideration

Discuss what we can do with the FYT that will not be provided in liquidity. (There are 88,130.22 FYT unused for Pool 3 and 117,840.61 FYT unused for Pool 4, which together represent 51,789.81 PSP once swaped back).

This proposal can be followed by another proposal to lock APW tokens for veAPW and boost yield on the sPSP-3 and sPSP-4 pools but also to allow our other pools to be there (winelisting).

9. Implementation Overview

The treasury multisig will need to:

  • Stake 1.098.675,0 PSP on the pool 3
  • Tokenize 866.854,58 sPSP_3 on APWine
  • Provide liquidity on the PT/FYT Pool with 793.171,94 PT and 901.331,75 PSP
  • Provide liquidity on the PT/Underlying Pool with 850 285,10 PT and 1 004 352,82 PSP
  • Stake 1.167.450,00 PSP on the pool 4
  • Tokenize 945.634,50 sPSP_4 on APWine
  • Provide liquidity on the PT/FYT Pool with 255.321,32PT and 903.444,65FYT
  • Provide liquidity on the PT/Underlying Pool with 765.963,95 PT and 832.569,51 PSP

10. Voting Options

  • For
  • Against
  • Abstain
8 Likes
2

I fully support this proposal ! :fire:

Paraswap treasury could grow and diversify it’s treasury and have a stake in the governance of Apwine protocol :grapes:

1 Like
3

Hello and thank you for your work on this proposal.
I have not yet fully understood the potential of APWine but if I understand correctly:
1/ We stake PSPs in the ParaSwapPools integrated by APWine (3 and 4 currently).
2/ We tokenize the yield of the sPSP received in exchange for our staking (split between the main token and the yield token)

And then we can make them work in two pools, one with IL and very large APY, another without IL and with a reduced (but still important) APY.
Apart from the risks of using smart contracts, the second option does not involve any possible loss (apart from the price evolution).

I’m sorry if I’m repeating what was said above to make sure I understand. So if I’m right I have two questions:

  • Why not do 100% on PT/Underlying? From memory putting cash or assets on high risk products (IL) is not well received by some and I can understand that. Doing 100% PT/Underlying would allow us to have a significant return on our cash without taking too much risk.

  • I read in reaction to this proposal on the discord the possibility of an imbalance in the ParaSwapPool if the DAO invests in one pool rather than another (currently dependent on APWine votes for pool integration). What would be the impact on the PMMs?

Thank you in advance for your feedback

4

Why not do 100% on PT/Underlying? From memory putting cash or assets on high risk products (IL) is not well received by some and I can understand that. Doing 100% PT/Underlying would allow us to have a significant return on our cash without taking too much risk.

We provide liquidity for anyone who wants to speculate on the yield of paraswap staking (FYT)
and APR is juicy :smiley:

I read in reaction to this proposal on the discord the possibility of an imbalance in the ParaSwapPool if the DAO invests in one pool rather than another (currently dependent on APWine votes for pool integration). What would be the impact on the PMMs?

The goal will be to provide the same liquidity in all pools.
(And we are still waiting for the V2 of staking)

→ What is really important is to grow and diversify the treasury . WITHOUT COST !
→ In addition, we provide liquidity for anyone who wants to use apwine

1 Like
5

A co-operation with APWine would be a very promising avenue for PSP and Paraswap. Being another relatively small cap project, any form of cooperation between the two could lead to very fruitful growth.

However, I am worried about deploying PSP for farming in these pools, not only because the incentives being directed more at attracting users than DAOs, but because of only some pools being supported.

As of right now, only Pools 3 and 4 are supported, which means that 1M PSP would be placed on these pools disproportionately to all others. This part of the idea, in my opinion , could upset the balance of the staking mechanism, which relies on stakers strategically allocating their PSP to select either the best performing pool, or a pool that’s performing disproportionately better compared to the amount of staked PSP.

These 1M added PSP would mean that Pools 3 and 4 would be ‘subsidised’ unfairly compared to other Pools, would it not? That means that, if Pools 3 and 4 underperform, this increased staked PSP would still give them a piece of the pie, and if they perform well, organic PSP stakers will receive a lot less, as 1M is no small amount to stake into our own pools.

Rather than seek to acquire PSP for farming, which could upset the staking system, why not engage with the APWine DAO directly? We could talk about a co-operation that could benefit both parties without draining their rewards pool and affecting our staking pools.

Some ideas include a simple treasury swap for diversification or an OTC deal to increase liquidity in their pools exchange for a non-farming reward. Who knows, maybe even some way to integrate APWine natively into Paraswap?

1 Like
6

I would think we could instead divide up the 1M between all pools contingent on them setting up pools for all our different PMMs. I’m sure the APWine guys would be happy with that, I have a contact there I’ll reach out to see what they think.

1 Like
7

good very good
looking forward to it.

8

I agree with you that it is mandatory to distribute the allocated budget equally among all ParaSwapPools to avoid imbalances and to be able to use the sPSP_XXX according to those accepted on APWine.

I would be curious to see the possibilities / options that an OTC agreement with APWine mentioned by @0xYtocin could give.

As for @Tenzent 's proposal, it suits me personally, but we’ll have to be careful about the sensitivity of the stakers who will see their rewards decrease a little more.

What would be the protocol impact of staking unallocated PSP (and thus recovering some of the inflation for the treasury at the expense of the stakers’ APY). Do you think this would discourage some from staking or make them leave?
At the same time, while aiming for the POL, it is also important to favour the LP and the Safety module for liquidity, no? (if it is not already done enough with the PSP-BPΔ1-1: Reduce the staking rewards budget).

I’ve given free rein to my thoughts here, it may be a bit messy but I’ll take all your feedback!

2 Likes