Inverse Finance
Published in

Inverse Finance

A New Salvo In the Curve Wars

As we recently posted, Inverse is making large investments to aggressively grow DOLA liquidity in the marketplace. This is essential to accelerate revenue growth but this is also likely to have many indirect benefits including, to cite just one example, ensuring DOLA is included in analyst coverage of stablecoin markets, which is often missing for us today.

A major part of our new liquidity strategy was unveiled today when we added a new proposal on GovernorMills to launch a new DOLA Fed with Yearn Finance. It’s another DOLA Fed that is similar in most respects to others we operate, but with some notable differences that I will briefly highlight below.

A Bit of Background on Curve Bribes

As mentioned in previous posts, the path to stablecoin liquidity today is currently via Curve Finance, who built an entire DEX just for stablecoins like DOLA. They’ve masterfully developed a system that emits fresh Curve governance tokens — CRV — every week and sprinkles them on wallets that lock their CRV tokens in vaults for between 1–4 years. The longer you lock, the more CRV gets sprinkled onto your wallet every week.

But when you lock your CRV governance tokens, you also get this voting token, veCRV, in return. For every CRV governance token you lock, you receive one veCRV. Big deal … another useless voting token, right? No! In addition to sprinkling CRV on wallets who lock their CRV, Curve also sprinkles CRV tokens as rewards for anyone providing stablecoin liquidity into their curve.finance DEX. Wallets with the veCRV tokens get to decide how next week’s batch of new CRV tokens will be split across different stablecoin pools and, in turn, dropped into the wallets of their liquidity providers.

So the more CRV that is voted to be sprinkled into your pool, the higher the APY for liquidity providers. The higher APY, like lions to a fresh kill, causes these LP’s to move over to your pool and provide liquidity.

Alas, you may have heard there are a number of stablecoins competing to be your favorite. So they compete against each other to get the most veCRV votes for their stablecoin pool and deepen liquidity. How, you ask, do they compete to get veCRV votes?

Bribes.

Inverse < > Yearn

Yes, a whole industry of veCRV bribery is out there. Inverse is now competing with other stablecoin projects to get veCRV voters to send CRV rewards to the DOLA-3POOL pool on Curve.

But today Inverse is light on veCRV in our treasury. So we connected with our friends at Yearn. Yearn has lots of veCRV and .. we’re doing something really cool together!

Boosting DOLA 3POOL with Yearn

Yearn today owns approximately 9.7 million veCRV tokens and they’ve committed to voting 10% of those to DOLA 3POOL. This is currently 2,428,625 veCRV, equivalent to $5.5m worth of CRV locked for 4 years.

Inverse, in turn, is injecting millions of DOLA to a custom Yearn vault in a way that is more profitable for Yearn than accepting pure bribes.

For Inverse, instead of renting liquidity by spending our own INV tokens as bribes to veCRV owners, we are deploying DOLA — via a custom DOLA Fed — into a custom Yearn vault that in turn, deploys that DOLA into DOLA 3POOL, receives LP tokens, and deploys those tokens into Convex. The cost to Inverse here is essentially zero.

For Yearn, this delivers a better return than what is available through conventional bribing as swap fees, CRV rewards, and CVX rewards all accrue to Yearn.

In return for access to Yearn’s veCRV tokens, Inverse benefits from voting rights that direct CRV rewards to DOLA 3POOL, attracting more liquidity providers and expanding DOLA liquidity there.

Recallable DOLA Liquidity Feds

Launching a DOLA Fed with a partner that is not, in turn, lending DOLA to borrowers is new for Inverse, but actually similar to other DOLA Feds. The smart contracts supporting this effort make the DOLA injected into this Yearn vault 100% recallable with 0% chance of default. This is similar to unborrowed DOLA in other lending pools on Scream or Rari today.

If necessary, to defend DOLA’s USD peg, Inverse has the ability to call functions in the contract that expand/contract the supply of DOLA. Yearn only has the ability to harvest profits from the contract and has no actual access to the injected DOLA.

Today’s Yearn DOLA vault is our first of what we believe will be multiple instances of expanding DOLA liquidity with this approach.

Benefits to Inverse

In addition to adding DOLA liquidity at what is effectively zero marginal cost to Inverse, this also begins a wind-down of liquidity rental using INV tokens on Anchor, where DOLA-3POOL tokens can be staked for rewards. Today Inverse spends 920 INV per month here.

As we’ve written previously, deeper DOLA liquidity is the key to unlocking a range of new product, partnership, and revenue opportunities for Inverse. We’ve shied away from the Curve Wars in the past due to the zero-sum nature of bribing for liquidity with governance tokens — something we may still do opportunistically — but this use of DOLA to deepen DOLA liquidity itself is, we believe a great example of positive sum defi in action where in collaboration with smart teams like the one at Yearn, we make the pie bigger for everyone.

How Inverse Users Can Profit Now

Inverse users can profit handsomely by depositing DOLA into DOLA-3POOL on Curve and then depositing those LP tokens into Yearn. More on this strategy here.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information may be accurate. Consult a financial professional before making any financial decisions.

#

16 Apr 2022

--

--

--

Building the Future of Finance

Recommended from Medium

HyperTrader Review — The Ultimate Trading Experience

THE BEAT OF SOLROCKERS NFT

Galactic Blue Index Report #10

BitMax.io Mining Features | Part 4

A Simple Guide to Blockchain

TUTORIAL: Decentralized leveraged trading

Wave Valley is a collection of 1,234 PFP NFTs algorithmically generated by layers with the cartoon…

5 Things You Need to Know About the JPM Coin

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
patb

patb

Head of Growth at Inverse Finance

More from Medium

Shots Officially Fired In the Curve Wars

Into the Limelight

Tribe Turbo Launch

Guide : How to use AMM/TWAMM on FraxSwap.