Create a VALUE DeFi ETF

I was playing with the idea of having ETF’s in DeFi as a financial product. Because DeFi has taken away the banks stature, they are no longer the gatekeepers. I like the idea behind that if cryptocurrency “banks the unbanked,” then DeFi will “bankers the unbanked,”.

One possible scenario would be:

  1. Select coins you would like in your ETF e.g. (wBTC, wETH, LINK) or perhaps just one (wBTC)
  2. Deposit VALUE into vault, or perhaps a percentage pair like VALUE & wETH
  3. Using a modified Dracula type contract Multi Farm a bunch of other DeFi coins
  4. Rewards are returned in the form of the ETF

So end user starts earning rewards in crypto, but must lock up VALUE.

There are many possibilities like: Perhaps the user could even pick from a list of crypto coins (thats on Liquid only) and select their own percentage ETF mix. UI/UX could possibly have dropdown/checkbox for crypto coin & slider for % user wants. eg. Select coins wETH and set it to 25%, wBTC 50%, LINK 25%, or perhaps user selects just one eg. wBTC for 100%.

Edit: added to it Mangeb ideas

Thanks for reading,
Regards,
Shane,

2 Likes

Very creative! While I don’t think the entire vault deposit should have to be in Value, I think a Value charge should be applied. For instance, you put in wETH and some % of value like when adding liquidity to a pool, that value is locked and a portion is distributed to the Gov Vault (without having to swap for wETH for Value saving a transaction) and reinvested. The vault can take in a single asset and process all of the Value transfers internally and automatically as well, saving the user a transaction and work.

Perhaps that locked Value could even be used to create an LP loan in vUSD or vETH to go reinvest. Then the vault can put all of those funds to work. We know the vault will pay back its loan as the contract will control it. So, the locked up Value is never dead money, it goes to work alongside all the wETH that was entered.

I think the Phase 2 and Phase 3 vaults may already be similar to an index or exchange traded fund in the sense that they will utilize multiple strategies at the same time to maximize returns. i.e. you “buy” one thing and that thing invests in lots of other things to give you returns.

I could see this further expanded as a new variation of the Value Vaults that would pay in the desired asset/coin instead of what you put in. when you remove from the vault you either get the earned target coin and your original deposit coin or everything is just converted to the target coin on the spot. For example, I have wETH but I want to be paid in wBTC. You put wETH in and when you withdraw you get wBTC, no wETH. I would think that for the vaults to compound, everything internal would have to be processed in wETH and only on withdrawal would it be swapped for wBTC.

Another thought is an exchange fund, where you put in almost anything, the vault either uses it as is or converts it to a stablecoin and invests, then pays out in the target asset. For example. I have Dai, USDC, OCEAN and wETH. I put all into the Exchange Vault. The vault converts anything it cannot use as is to the preferred stablecoin/asset and invests. When I withdraw, I get just wETH or just wBTC. The assets going in must have liquidity and can be swapped somewhere, cannot be a rug pulled shitcoin, etc. So, as long as it has monetary value, it can go in.

After a minimum hold/invest period, you get your desired asset out with growth. The goal is that it would save you some of the swap fees if you were to convert everything yourself, invest the monies and give you back what you wanted in the long run. The vault would have more internal fees to handle multiple asset types, swaps, etc. but all of that would be paid for by the vault returns. In this case, in a very bad market, you could theoretically get a negative return if the strategy doesn’t pay off and there are too many diverse assets to handle.

Things like this need scale to become cost effective. This would be an expansion on the Vault phase 3 with single asset to LP flexibility. it combines multiple different sources to invest. This exchange fund concept would just multiple the number of assets.

Lastly, the value locked in the Governance Vault has been waiting to be put to use. Perhaps instead of directly investing those funds to farm/earn for the vault, an LP loan is taken out on the locked Value in vUSD and that is reinvested. The value is never taken out of the vault and will always be available for withdrawal. The Vault contract would have to dynamically manage the loan balance/collateral levels. If invested in something dynamic but safe that doesn’t require the lent funds to be locked up for a set time, it can always get those funds back.

1 Like

yea, I like that. Neat thinking on the pairs instead of 100% value, and that part “I have wETH but I want to be paid in wBTC” very interesting aswell, I guess you could have the UI selection of end target coins you’d want and just select as many or as little as you like, so you can select target coin of only wBTC.

Good point. All vaults could just have a selector for target asset when you withdraw and swap on the fly. Swap fees would be automatically taken out of the withdrawn amount. So ANY vault, even the Gov Vault, could give you returns in a desired asset while still utilizing the Value on deposit and internally.

I like this very much and it doesn’t break the tokenomics of Value.

2 Likes

That’s another interesting possibility, you could apply that type of reward to ANY vault.