Aavegotchi X Resonate: Rethinking Liquidity Incentivization - Request for Comment

Paartnerships
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Revest Protocol

Split Principal and Interest through NFTs

Resonate splits apart the interest and principal components of a yield-bearing position. Those who hold tokens which may be deposited into yield-bearing systems can receive an instant, upfront payment on the present value of that future yield, in exchange for locking their tokens. An Ideal solution for traders who want to receive guaranteed and consistent yield farming rewards for staking tokens or providing liquidity. For those who want to purchase the yield futures or the rights to future yield, Resonate places them in a position where they can do so at a discount to the expected future value of the interest. For protocols like Aavegotchhi who want to reduce their burn rate this discount can offer a better way to incentive providing LPs while locking down that mercenary liquidity for a certain duration. Below I will go over the structure of Resonate and how it can be of benefit to the Aavegotchi ecosystem.

How it works

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There are 3 parties involved essentially (all numbers are indicative)

  • Issuers – LP Providers

    • They will deposit the principal (100 USDC) and receive the interest (9.5 USDC) upfront
    • The principal is locked for a certain duration (ex. 1 month, 1 yr.)
    • Revest receives 5% (0.5 USDC)
    • At the end of the duration, the Issuer receives the remaining Principal back. All Impermanent Loss has to be borne by the issuer
    • Likely to be whales and HNIs
    • Issuers can sell a portion or all of the upfront payout to provide themselves with a dynamic range of IL-protection

  • Purchasers – Aavegotchi DAO

    • They provide the upfront interest (10 USDC) which went to the issuers
    • In exchange, they receive all the future yield on the 100 USDC principal over the duration of the pool term
    • If the yield is less than the interest paid upfront, that’s a potential loss for Purchasers
    • Revest takes 5% of the yield to the Purchaser as well
    • This is likely to be whales, DAOs and institutional investors. In this example, the Aavegotchi treasury would seed the pool with at least 50k USDC (so that issuers can start to deposit up to 500k USDC)

  • Yield Farm

    • This would be any of the Aavegotchi Pools (GHST-USDC for example)
    • Revest will build an adaptor that will interact with the Aavegotchi pools
      • Deposit the principal, route the yield to the purchaser (Aavegotchi DAO), route the principal back to the issuer (LP provider), route the commission to revest

Note: Purchasers and Issuers receive FNFTs to represent their positions. These are tradeable across secondary markets. So an exit, if desired, can be had.

How Resonate Benefits Aavegotchi

  • Resonate provides stickier liquidity for Aavegotchi pools
  • LPers would have an opportunity to earn their yield upfront
  • Change in the dynamic between LPers. No more Prisoners Dilemma
  • Potential buy pressure from new LP positions being created
  • Opportunity for the treasury to deploy otherwise-idle native token assets
  • Potential for a return for the treasury
  • Outsized benefits for relatively small deployment by treasury (50-80k DAI to seed Resonate pool represents 6-8% of treasury. Depending on upfront rate paid to issuers could lock down hundreds of thousands in mercenary liquidity, 500-800k per the example)
  • Treasury diversification
    • Initial funding of pool by $DAI grows $USDC/GHST balances over time
    • Potential to “re-use” earnings to continue pool payouts w/o depleting $DAI reserves over long-run
    • Optional GLTR earning for the DAO. Potential to replicate process for alchemica pairs and upfront $GLTR payouts (future discussion)

Next Steps

  • Revest and Aavegotchi to do some numbers modeling to chalk out the exact structure including
    • Upfront payment to issuers
    • Max loss to the issuer
    • Expected yield to Purchaser
    • Duration of the vault
  • Assess technical requirements for adapter
  • Coordinate on marketing
  • Educate Aavegotchi community on Resonate
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Ok so if i am understanding this correctly, we the DAO will be incentivizing investors to deposit usdc/dai for an upfront interest to be paid back in full at a later date. Then the DAO would use these funds to purchase Aavegotchi pool tokens to LP so we can farm $GLTR to sell on the open market. Is this correct? And if so, would that not cause the investors that are already LPing to remove their tokens since the DAO would take a massive chunk of $GLTR from them? It would be easier for them to just sell it all and go this safer route.

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Sorry if not very clear but the Treasury would be using DAI (or something else) to fund a Resonate pool to provide Issuers who are locking GHST-USDC LP with an upfront payout on their future yield earned by that LP. The Treasury in exchange would get back the yield that LP position produces over what ever duration the position is locked for. So in the example the Treasury paid out 10% upfront but the position actually yields 20% so the Treasury makes a 100% return.