Use Frax treasury to buy YFI

I’d like to start a discussion thread for adding YFI to the FRAX treasury.

YFI is in the midst of changing their tokenomics. They are planning to move towards a Curve style boost for their vaults. This will incentivize the lockup of YFI for several years to gain boosts to income and yield.

FRAX is an integral part of the Yearn ecosystem now with our vault. For the long term health of the vault and also to capture future revenues from the entire yearn ecosystem, FRAX should use its treasury to acquire YFI with the intention of locking for several years.

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love the idea, hope others agree with this approach

could make sense if it enables us to direct more rewards to the frax vault

Can you please go into depth how this would benefit the Frax ecosystem?

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are you proposing a DAO-DAO swap ?

I support this idea, I think treasury diversification and accumulating tokens of other important protocols can be beneficial in the future. I’d like to extend a little @ssmccul proposal with the following. The protocol is earning farming rewards through the following ways:

  • The Convex AMO has ~$1B earning CRV at 6.69% APR
  • There are $34M vlCVX generating cvxCRV at 4.88% APR
  • The Curve Metapool Locker has~ $23m in Fei3CRV generating TRIBE at 13.1% APR

All this totals ~$70m per year, if we consider 52 weeks per year, $1.34m per week. Building on samuel’s proposal, i think we could do biweekly snapshot votings in which these profits are used to buy teasury tokens from a list of possible tokens, which have to be approved through governance. Also, I think that to we should add these tokens to the treasury and use them to back newly minted Frax at a safe rate, like 1:4 or 1:5, like FEI does, and use this frax to buy fxs and distributed to veFXS.

I propose that as an initial basket of tokens to select from, we keep the ones the rewards come from, CRV and TRIBE, also add CVX, YFI, and obviously ETH.

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Can you expound on the direct benefits to FRAX by doing so? This seems more like an ancillary investment than one that generates positive feedback to FRAX, as the Curve/Convex relationship does. Thanks in advance.

wont this result in that minted FRAX being backed by volatile assets causing a bigger risk to the FRAX peg as we increase the amount of volatile backing?

will this lead to increased sell pressure on FRAX ?

also if its at a 1-4 ratio that will still lead to a 75% reduction in veFXS rewards / FXS buying pressure ?

wont it be simpler to just switch some of the profits away from veFXS and us it to buy assets. eg a 80/20 split (veFXS/ new asset)

it is hard to calculate all of frax profits, i think the ones i mentioned are not accounted in the vefxs redistribution (team member would have to confirm), so this would mean an additional ~$300k distributed weekly to stakers. i dont think this will create sell pressure for frax, since it will be directly minted and used to buyback fxs. worse case scenario frax needs more backing we have to sell the acquired tokens (i dont think this is likely to happen though)

The idea is that buying YFI now will boost our earnings later. We should plan to have our AMO’s fully boosted and also the FRAX pool.

How much YFI we buy should align with this.

immediate benefits i’m not sure. to me is like a long term partnership/investment with other protocols, were we support each other, win and help win, for example, (i speculate here) it would make more sense for yearn to build a pure frax vault if they see that we have been support yearn by buying and staking ther governance token

I understand this line of thinking. I guess the big question to me is how we accelerate the adoption of FRAX; if the team and veFXS owners believe that diverting profits into acquiring stakes in other protocols is beneficial then it makes sense. I’m just not sure YFI is any better than XYZ without a clear benefit out of the gate. Perhaps the dev team should correspond with Yearn and see if there is a clear enough benefit to consider this?

Pushing this up.

Would like to get a firmer understanding of what to put into the FIP.

Based on @seba comments, we should redirect a portion of funds used for buybacks to purchase YFI and place it into the treasury.

I think there are two issues here. First is how much of the weekly income we should use to purchase assets for treasury and second which assets should be included.

Possible FIP langauge

How much of income used to buy back FXS for veFXS holders should be used to buy other protocol assets.

Voteig scheme is multiple choice. The selection with the highest % at the eend of the voting period wins.

  1. 10%

  2. 15%

  3. 20%

  4. 25%

For now we should not go over 25%

Which assets should be purchased?

1.CVX
2. YFI
3.CRV
4.TRIBE
5.ETH