Bootstrapping Our Rari Fuse Pool

Rari Capital governance voted in favor of allowlisting the BarnBridge DAO as a Fuse Pool creator today.

  • Fuse pools are Compound-style lending markets that give their owners control of asset inclusion and collateral parameters.

  • Having a BarnBridge Fuse pool allows us to increase the utility of SMART Yield and SMART Alpha ERC-20 assets (just juniors for the former, but both juniors and seniors for the latter).

For us to even consider an asset for our Fuse pool, however, it requires a degree of secondary liquidity (minimum of $500k essentially). Moreover, if the asset is too small for a Chainlink price feed, this secondary liquidity needs to be on Uniswap v3.

At this time, there are no secondary pools for jTokens on Uni v3. There are a number of ways we could remedy this:

  • Borrow against BOND deposited into the Fuse pool

  • Allocate treasury fees such that the DAO provides baseline liquidity for a few key pairs and earns fee revenue off of the LP positions

  • Allocate a tiny amount of BOND per week to jToken LPs

As you can see, we currently have $1.5M in stablecoins in the DAO treasury. This is in addition to 250k set aside for the bug bounty program.

My personal preference is for us to provide liquidity for two prioritized assets at first (i.e. $1M total, half in jTokens and half in stables). It would generate revenue for the DAO while leaving enough of a buffer to cover potential expenses without having to redeem assets. Given that cUSDC is still being incentivized, aUSDC and cDAI probably would make the most sense to start with.

Additionally, I’d like to open up the conversation around supply BOND to the pool. It would effectively provide the DAO with a credit line, while savvy users could use it for DAO or Universe.XYZ pool farming strategies (providing another source of DAO income). Would definitely be interested to hear what folks thoughts are on how much we should potentially provide. At the moment, close to 1% of supply is in Bancor - I don’t see why we shouldn’t do something similar here.

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In order of preference:

  • I’m all for using the treasury fees for jtokens as I suggested their use in this post previously. Direct pool fees to jtokens

  • BOND incentives would be minimal. I’d target 30% BOND APR for LPs for 6 months. For two pools at $1M combined, approximately 8K BOND would required for 6 months assuming $20 BOND.

  • I’m against supplying BOND as collateral for use in junior pools as the units required would be in 65K-100K BOND. Too much exposure for the liquidity target.

Depositing BOND as general liquidity and or borrowing collateral deserves its own thread imo.

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I like :+1:, this would not only set DAO funds to work but also avoid a negative feedback loop through further immediate inflation (more incentives, more circulating supply, more sell pressure, decreasing price, more incentive units needed to keep bonus APR up, more incentives, etc.)

I’d prefer this to be done through KPI options, direct funding should mitigate the need for an immediate incentive model. This seems a little slow and might even need a separate thread about exact amounts & potentially algorithmic/conditional flexibility.

This one seems the least appealing. Supplied DAO $Bond will most likely immediately get borrowed by someone doing essentially interest/apr arbitrage (i.e. I’d gladly pay high borrowing interest rate as long as that rate < than DAO staking rewards.) This results in DAO funds diluting rewards for other participants using a private actor as proxy, instead of just the DAO depositing into the DAO and hereby lowering the rewards for private depositors.
TLDR, this option sounds like the DAO depositing into the DAO over a private proxy.

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