Pool Durations for BBV2

We’ve talked a bit in Discord about pool durations for SYV2. This originally stemmed from a conversation with Defi Dad where he didn’t see much value in 1 or 2 week pools because people can reasonably expect to sit in farms that long so a fixed rate isn’t very valuable.

Similarly, some of the larger funds are looking at helping us scale liquidity for LONGER durations vs. shorter durations.

Since liquidity can be provided via FIAT once we start working more closely with them in Q1 of next year my proposal is this:

For stablecoins I think we start with 30 & 73 day pools. 73 is an odd number but 365 is divisible by 5 so we’re able to roll out a maturity where the subscription date is always during the working week (M/T or Th/F). This also helps in the scenario we aren’t 100% ready for 90 day pools yet.
My proposal is we utilize the 73 day pool for our first launch on Optimism (into Velodrome) for the sUSD/USDC pool (anyone can comment if we want to go into riskier stablecoins but based on predictions to this point and my last Medium post I think the DAO can show profits at these levels. In this case I’m also proposing we increase the funding rate to 1% as a starting point.
We don’t yet have a mechanism that allows us to roll pools for main net to various roll ups so I think we keep the 30 day pools on main net for now and introduce a 73 day pool on Optimism into Velodrome.

Next point, we’ve talked to funds where the thinking is that t-bills (or let’s just keep this simple and say the federal funding rate may go to 6%). This will inherently make defi yields to treasuries less attractive. In order to combat that I think we look into ETH staking pools since we can assume ETH staking will likely sit at above 6% &, furthermore, most millennials and younger would likely rather sit in longer durations of spot ETH and the USD.

So after we launch the pools on Velodrome, I think we can talk to both Lido and FIAT about how we can integrate BBV2 via ETH staking into their offerings as well and work on building deeper partnerships into the industry.

Finally, while we launch these pools, we will continue to add new originators so if we want to roll over the AAVE main net pools into, say Curve, we have the flexibility to do so.

Thoughts?

3 Likes

Launching the longer duration pool on Optimism makes sense in my opinion. It’s more a win for the users since there is a ton of options to generate yield on the day-to-day based fluctuations, e.g. perps, high-risk yield farms, etc. whereas for the more risk-moderate profile user having that fixed yield promise on the longer timescale provides another option to balance portfolio.

Let’s go!

4 Likes

Defi Dads take on 7 day pools is spot on. They would be a distraction to users attention and capital. I wouldn’t use them and prefer we focus on the 30/73 day pools.

1% funding rate for the OP pools is ideal . That would be sustainable for the protocol with minimal DAO participation.

Fully support the stETH + Stables approach.

Would users accept a higher funding rate to stay within originators that have access to leverage?

2 Likes

Agree with the above and fade the 7 days pools in favor of 30 and 73 day tenors on OP. I support concentrating on finding PMF with these pools and stables before moving on to more risk-on assets. At least until it becomes more battle tested.

Having access to leverage is very appealing especially when considering stables and what has been built by some originators using leveraged vaults. Just not sure if there is enough sustainable liquidity in initial iterations of building as TVL grows but maybe for a select number of pools? Thanks.

1 Like

I agree with everything being said here. Not much chance I’d have the attention to be able to keep up with anything less 30 day maturities. I’d probably use a combination of the 30 and 73 day pools. I’m most excited about an ETH pool though because the ETH that I hold is not especially productive right now. I could see this being very interesting to a larger range of people.

Pool Durations
I don’t like 73 day pools. Even with the explanation above majority would be just confused why the hell is it 73 days? I believe epoch duration is important so users can act accordingly.

I would even suggest quarter pools. I believe user experience (including DAO budgets) based on a regular starting date/ending date would be beneficial for users.

  • First quarter, Q1: 1 January – 31 March (90 days or 91 days in leap years)
  • Second quarter, Q2: 1 April – 30 June (91 days)
  • Third quarter, Q3: 1 July – 30 September (92 days)
  • Fourth quarter, Q4: 1 October – 31 December (92 days)

Unless we are not pushed by other parties to set constant epoch period duration or adjust accordingly to used instruments. (Element, Notional…) The floating epoch duration could work for month pools too. I forgot to roll over my position from epoch 1. I believe it is not only me. Epoch starting always 1st of the month would be much better. We could get users chance to roll over their position since day 1 and extend subscription period so people have longer window to check offered APY if necessary.

BB funding rate
We are at the early stage and markets are just learning about SYv2 product. Increasing fee would lead to less TVL, which should be our main goal at this stage rather then increasing protocol revenue IMO. We have to set flywheel pools which will grow overtime w/o any artificial injections.
In addition even 0,5% funding rate is not ideal and might result into negative APY at some cases. So we definitely have to come up with better pricing strategy.

Over the last 10 epochs on Velodrome, 0.5% FR would bring about 27.5% more TVL! While BB revenue would be higher about $1k. Is it worth it?

We have to see each $ of Realized Yield as our product and keep track of:

  • LP costs to generate 1$ of yield
  • Price of that 1$ users are willing to pay
  • How much $ of that 1$ yield is going to BB in form of revenue

I agree in theory with what you are saying here. Keep the funding rate low in the early days to attract TVL. It depends what we are getting at the originator. At least while in testing we should keep fees low to 50 bps or 30 bps. From there we can get more fancy but your reporting with charts is super helpful imo to at least come to the conclusion of what we need to be doing during testing and will drive more educated answers on what we do post. Great feedback m0xt.