In pursuit of a Curve Gauge - Exploration

Hi,

I’d like to gauge the communities thoughts on pursuing a Curve gauge now that they’ve deployed cross-chain gauges that receive $CRV as incentives.

It is my personal belief that an opportunity exists for Defrost.Finance to be the first native over-collateralised stablecoin in the Avalanche ecosystem to get a Curve gauge. Presently only three pools (atricrypto, Aave 3pool and renBTC/renBTC.e) are receiving $CRV emissions of approx. 0.04-3.91% APR.

The benefits of succeeding in getting a Curve Gauge are as follows:

  • Legitamisation: Securing the vote of the Curve and Convex communities can be seen as a vote of confidence and approval for Defrost.Finance. Some of DeFi’s brightest minds operate within the Curve ecosystem and a gauge equates to their tacit approval that we offer value to the ecosystem without posing risk. Their approval is also likely to come with a review of our security which, if successful, is another boon for Defrost and make securing partnerships much easier.

  • Increased incentives for LP’s: Securing a gauge will allow veCRV and vlCVX holders to vote for gauges they want to receive $CRV emissions. This will bolster the rewards (%APY) for liquidity providers.

  • H2O peg: Having secured approval from the Curve and Convex communities for a gauge we’ll be giving arbitrageurs confidence to deploy 3CRV stablecoins (USDC/USDT/DAI) to purchase H2O at a discount and collectively push H2O back to peg before taking profit. They’ll have the confidence to execute this strategy over time because of the $MELT and $CRV rewards they’ll receive. For example, they could avail of a potential 6% arbitrage opportunity and, whilst waiting for peg to re-establish, farm $MELT at 10.2% APR + X% APR in $CRV.

  • Marketing: Being the first native AVAX over-collateralised stablecoin to acquire a gauge within the ecosystem is an effective coup and will bring significant attention to the protocol. There exists significant potential to initiate a positive feedback loop, i.e. gauge approval and $CRV emissions incentivises arbitrage and return to peg, leveraged looping becomes attractive again increasing stability fees which increases $MELT value, increasing pool APR whilst looping offers more arbitrage opportunities, more volume through H2O3CRV pool giving more fees to veCRV stakers resulting in more votes for our gauge which subsequently results in more $CRV emissions. Starting the cycle all over again.

  • Convex: If (when) Convex emissions go cross-chain H2O3CRV LP’s will be eligible for $CVX rewards as well.

Please feel free to suggest any additional benefits you think below in comments.

How do I propose we get there?

I believe the methodology to acquiring a Curve gauge is through offering ‘bribes’, i.e. incentivizing veCRV and vlCVX holders to vote in the affirmative for our gauge proposal in return for $MELT and/or $H2O tokens.

Bribes can be allocated via Andre Conje’s (https://bribe.crv.finance/) to veCRV holders and via (https://votium.app/) for vlCVX holders.

To date there have been two gauge proposals to add Curve gauges to AVAX pools but they, at the time of writing, have yet to hit quorum and thus will fail. These two proposals have not offered bribes/incentives to secure veCRV and vlCVX holders votes but this is not surprising as USDC/USDT will never do so and it’s unknown whether the proposer for the MIM pool is related to Abracadabra.Money and thus able to incentivise.

MIM/USDC.e/USDT.e
(https://dao.curve.fi/vote/ownership/135)

USDC/USDC.e
(https://dao.curve.fi/vote/ownership/136)

Thus I’d like to invite discussion from the community on whether they agree on whether this is a feasible proposal to pursue and if so, to what extent?

$MELT emissions could be redirected from existing farms to subsidize this endeavor at a rate to be determined by the DAO. Looking at (Llama Airforce) for every $1 spent in bribes equates to approximately $1.21 in $CRV emissions making this proposal attractive for LP’s and the protocol through stabilization of peg.

There are, of course, trade-offs of undertaking the above strategy, some of which are summarised below (feel free to add your thoughts below):

  • Reduced $MELT emissions for farms as some % of emissions is used for bribes.
  • Split $MELT emissions; some $MELT rewards will need re-directed directly to the H2O3CRV gauge on Curve, reducing the number of $MELT available for sMELT stakers to get through boosting.
  • Technical assessment and impact (if any?) of collecting $CRV emissions when staking on Defrost.Finance

To date preliminary chats with people on Convex’s Discord have indicated that they are open to the idea but that we would need to prove the value proposition to them, i.e. increased volume through our pool (which is 6th most used pool presently with $234k of daily volume) which increases fees for Curve and Convex. However, I think we need to agree as a DAO what we want to do before formulating a proposal to take to Curve and Convex.

Please provide your feedback and thoughts below.

Thanks for your time,
A

3 Likes

I’m fully for this, let’s get devs on it ASAP

1 Like

Id obviously love a curve gauge, but there a whole lot of details that need ironed out before I could say Im for or against a proposal. Ill be monitoring to see how this develops and Ill add my thoughts if we see a detailed plan start to formulate.

1 Like

I’m all for the CRV gauge rewards but I do not think it will solve the peg issue. some may deposit 3crv but there is currently very strong demand to loop stables. the H2O3crv pool may get a little bigger with some deposits, but the peg will not improve in my view.

nonetheless, this is probably worth pursuing and testing to see if the results are worth the bribes paid.

i’ve created a rough draft of a proposal, to post in the CRV gov page. Lmk what you guys think:

Summary:

Proposal to add CRV Gauge incentives to the H2O-CRV Factory Pool in Avalanche.

H2O is a crypto-backed overcollateralized stablecoin in the Avalanche blockchain and I like the meme. Powell taking away the liquidity? Have no fear, have some H2O for liquidity. Lol. This proposal is submitted by me, aka itcha, a community member from Defrost and Curve.

It is whoever makes it their interest to promote deeper liquidity for the H2O-CRV pool, for fun and for profits - build, add value, create value.

Protocol Description:

Defrost Finance (www.defrost.finance) is a decentralized protocol that allows one to utilize liquidity pool (LP) tokens and other pool tokens from various Avalanche and cross-chain protocols as collateral for generating H2O, a soft-pegged stablecoin native to the Avalanche ecosystem.

Defrost Finance helps users improve capital efficiency from assets locked in pools or vaults. It allows users to provide liquidity to gain additional yields from features such as farming, borrowing, staking, swap, and bridge support for convenience when trading.

H2O, a stable coin with a soft peg to 1 USD. H2O can be minted by depositing collateral such as liquidity provider tokens from AMM (automated market maker) dexes (decentralized exchanges), lending, and other DeFi protocols.

The pool sits at 57M (0x40a2bf8a6091010cae4a96e02e13d5b7157be236), currently it is deeply overweighted towards H2O as users have been using the stablecoin as a leverage instrument for looping since they can’t be liquidated by spikes in H2O prices, and they can choose when to repay the loan to take advantage of cheaper H2O for instant profits.

The project is incubated by Avalanche Star Asia Fund(Avatar) and Wanlabs. Institutional liquidity providers for the pool are Colony, Avatar and Wanlabs.

The platform’s token is Melt, which can be staked in exchange for sMelt. sMelt can be used for boosting yields, it accrues 50% of the platform’s revenues and is used for DAO governance.

Motivation:

Curve is a key partner of Defrost. An incentivized inclusion on Curve provides visibility to H20. Incentive rewards from the Curve community can be seen as a vote of confidence and approval for Defrost.Finance. Some of DeFi’s brightest minds operate within the Curve ecosystem and a gauge equates to their tacit approval that we offer value to the ecosystem.

It also bolsters arbitrageurs confidence to deploy 3CRV stablecoins (USDC/USDT/DAI) to purchase H2O at a discount and collectively push H2O back to peg before taking profit. They’ll have the confidence to execute this strategy over time because of the $MELT and $CRV rewards they’ll receive. For example, they could avail of a potential 6% arbitrage opportunity and, whilst waiting for peg to re-establish, farm $MELT and $CRV.

References/Useful links:

Website: https://www.defrost.finance/home

Token Address: Defrost Finance Token (MELT) Token Tracker | SnowTrace

Twitter: https://twitter.com/Defrost_Finance

Medium: Defrost – Medium

Community: Defrost Finance

Audit: Defrost Finance - CertiK Security Leaderboard

Docs: https://docs.defrost.finance/

GitHub: DefrostFinance · GitHub