Authors : nanojohn
Summary : Goldfinch should use a portion of its USDC reserves to acquire FIDU tokens and pair them with additional USDC on Curve as an LP. This will have the dual purpose of signaling strength in the protocol to other participants while also increasing the secondary market liquidity for FIDU tokens.
Motivation: GIP-26 was approved by the community to re-invest ~$500K USDC of reserves into the protocol, however, the liquidity in Curve pool diminished significantly before implementation. Thus, we suggest an alternative way to invest this capital by becoming an LP on FIDU + USDC Curve pool, noting that the Goldfinch USDC reserves continue to sit idle and are not being utilized to generate additional yield.
Specification & Requirements:
- A fixed amount of protocol USDC reserves (for example, 500,000 tokens) will be allocated for buying FIDU and pairing with USDC to become an LP on Curve.
- The LP position will be staked to earn additional GFI rewards on top of the interest income on FIDU and the trading fees on Curve.
This proposal requires the creation of the following protocol parameters:
- USDC amount to allocate to LP: The $ or % amount of protocol reserves to earmark for FIDU + USDC LP position. We are initially proposing a total 500,000 USDC allocation as follows: a.) deposit 250,000 USDC into the protocol to receive ~225,000 FIDU and then b.) pairing it with an additional ~250,000 USDC to become on LP on Curve without any impact.
This proposal would operate as a short-term measure to boost FIDU liquidity, grow reserves, and signal strength in protocol:
- This would allow the protocol to earn revenue on its USDC reserves in the form of Senior Pool interest payments, Curve trading fees, and GFI staking rewards. A $500,000 FIDU + USDC LP investment would generate ~$59,500 of profit for the treasury at today’s yields if held for 1 year ($19,500 of interest payment profit, $15,000 of trading fees, and $25,000 of GFI rewards), which is a 11.9% APY and a competitive return.
- The investment into FIDU senior pool would signal goodwill and strength to the general public by showing that Goldfinch has skin-in-the-game.
- Secondary market liquidity for FIDU tokens will approximately double, allowing new users / DAOs / organizations to access Goldfinch real-world assets who do not qualify for UIDs (i.e. treasuries of other DeFi protocols)
Drawbacks and Risks:
- These funds are at the same risk as any other LP in the fund, with the potential of borrowers to default and not return capital or for utilization to be high, making funds unavailable for withdrawal.
- Reserves are subject to the third-party Curve smart contract risk.
Yes: Allocate a specific amount of protocol USDC reserves for initiating a FIDU + USDC LP position on Curve.
No: No allocation of reserves