Hey guys, I’m new to the community. I just want to clarify that I understand yUSD to equal yyDAI+yUSDC+yUSDT+yTUSD. I will use yUSD to represent yyDAI+yUSDC+yUSDT+yTUSD below.
The simplest strategies are the best strategies. I noticed that the yUSD markets on Uniswap aren’t very efficient. yUSD/USDT is the most liquid market on Uniswap:
24H Low/High = $1.09 / $1.22
All time Low/High = $0.931607 / $2.45
There’s a clear margin here.
I propose buying them up and burning them, whenever they hit a dollar or perhaps some fixed percent underneath what the true value of yUSD should be at the time (which can be calculated based on whats been deposited if I understand correctly.) I’m sure this can be optimized with better math but the general idea is that we can capitalize off of people’s laziness/for their convenience of dumping on Uniswap instead of going back to the vault
I hope this makes sense! I’m eager to learn so if I misunderstand some concept comment below!
Ohh, that’s interesting. A guaranteed price floor for yUSD on Uniswap.
This might save some gas as well for people who complain withdrawal fees are too high, they can just use Uniswap’s lower gas tx. In a way, this can function like batching withdrawals through Uniswap. Might run into some conflict of interest on gas subsidy between withdrawers and LP, but we can look into that later.
This might bring up client confidence as well, knowing they can always trade their yUSD for a what it’s worth. Promoting people to become LP.
Maybe this can be implemented for other vaults as well. But yearn should probably refrain from becoming LP for those Uniswap pools due to impermanent/divergent loss, which is exacerbated by the one way movement of y token vs its underlying token (yUSD always appreciates against USDT).
- Profit from arbitrage
- “Guaranteed price floor” brand promotion
- Likely promotes more people becoming LP
- A new way to withdraw that might save gas
- Conflict of interest on gas subsidy if this becomes the main way people withdraw
- Might be hard to implement, hard to decide how much yCRV to burn for USDT and swap for yUSD (Or maybe just let Uniswap determine the best path between yCRV and USDT?)
I agree I don’t think it’s a good idea for yearn to become LP on any AMM based on what you said (unless some new angle is discovered.)
To clarify, I don’t think we should limit this strategy to this exchange or market. But this specific market is certainly a solid playground to prototype the idea.
Regarding the conflict of interest, I would argue it’s impossible to completely block the withdrawal fee for somebody who is determined. For example, imagine for OTC trades.
I didn’t quite understand the “hard to implement” point. But this may be simply beyond my level of understanding of how yUSD is created. I used Zapper.fi to get in directly from ETH but I would imagine we would start by referencing the formula used to mint these yearn tokens, as well as look at the TVL in the related vaults, right?
I do agree this market is a good spot to test this idea since the opportunity is evident by the price difference.
OTC trade doesn’t affect gas subs since the buyer still has to pay for gas to cash out. But in this strategy, since yUSD is burned by the protocol, the protocol pays for the cash out gas.
The “hard to implement” part is just me being lazy and glossing over how to determine what portion of the vault should be used to execute this arbitrage at any given time, and the method of executing this arbitrage.
Now that I think about it some more, gas sub will be paid for by portion of profit and dictated by market price since this YIP seems to be moving along nicely. Profit is easily calculated (New yCRV - Old yCRV). The only hiccup now is how to get from yCRV to yUSD on uniswap. Do we:
- Burn yCRV for USDT, DAI, etc.
- Convert the other stablecoins to USDT
- Uniswap to yUSD
- Let Uniswap figure out the best path straight from yCRV to yUSD
There’s more methods too, these two aren’t the only options, just throwing some out there as examples.
There is an understanding that yield on YUSD > yCrv > yDAI
so it would be trivial that one will place a premium on YUSD.
Also there is some costs in minting yCrv.
Usually the tendency is to sell yCrv and hold YUSD.
We should let the market play this out instead; since both are not created equal, and YUSD price will always be higher due to strategies deployed on Curve.fi
There is almost no liquidity in this market at the moment (24h volume of 50k USD is not a lot). You can check the swap rates as well. For 100 USD, you can expect making a profit, at 1000 USD (per trade) you are already at a considerable loss.
I think smaller trades are not a problem as long as (including fees) they are profitable. The less yUSD in circulation, the more valuable each yUSD is.
No updates in a few days - does this mean that the community is not onboard? How does this process normally go?
Total liquidity and volume is just too low on the uniswap pool listed above for any vault to use it probably even if it was just 1% of a vaults total.