Summary
This proposal looks to diversify the Degen ETH (dgnETH) collateral basket by adding apxETH to the underlying yield strategy. At 9% APR adding apxETH will increase the staked Degen ETH (sdgnETH) base APY.
Abstract
The proposed change involves adding apxETH to the collateral basket of sdgnETH. Currently, sdgnETH’s base yield stands at 5.27%, derived from Convex ETH+/ETH and Morpho Blue Re7 WETH Vault strategies. By incorporating apxETH, the new basket yield is projected to increase to 6.95%. The updated collateral exposure will consist of 35% Convex ETH+/ETH, 25% Morpho Blue Re7 WETH Vault, and 40% apxETH. apxETH, built by Dinero (Redacted Cartel), offers a 9.01% APY by auto-compounding rewards from staking pxETH. The integration of apxETH is expected to elevate the staking yield of sdgnETH from 12.8% to 17%, assuming the current percentage of dgnETH staked remains constant. This addition aims to enhance the overall yield of sdgnETH by leveraging the higher returns provided by apxETH.
Problem statement
At $2 Million market cap, Degen ETH is growing rapidly and will continue to. The long term vision is to keep sdgnETH staking yield between 10% and 20% by keeping a high base yield and total % dgnETH staked below 50% of the total supply. Currently, the sdgnETH base yield stands at 5.27% which means at 50% ratio of sdgnETH to dgnETH, sdgnETH yield stands at the lower boundary of its yield goals at 10%. This signals the opportunity to add more yields to the basket to drive up base APY.
Rationale
By adding apxETH to the sdgnETH collateral basket, another highly respected DeFi product is being added increasing the overall collateral basket to
The current sdgnETH basket yield earns a base yield of 5.27% from two strategies
| Current Basket Yield = 5.27% | |||
|---|---|---|---|
| Collateral Exposure | APY | Collateral Exposure | |
| Convex ETH+/ETH | 7.07% | 50.00% | 4% |
| Morpho Blue Re7 WETH Vault | 3.47% | 50.00% | 2% |
Convex ETH+/ETH: token obtained by providing liquidity to the ETH±ETH liquidity pool on Curve Finance and staking the LP token on Convex Finance. This variable yield is generated from a combination of native asset yield, CVX rewards, and boosted CRV rewards leveraging Convex’s veCRV power.
Morpho Blue ETH (Re7): ETH lent to a vault which supplies deposited assets to Morpho Blue markets whitelisted by the vault Curator. The Curator can set supply caps of each market. If the supply cap is reached, deposited assets will be supplied to another whitelisted market. This vault is curated by Re7 and aims to outperform staked ETH yields by lending WETH against a diverse set of Liquid Staking and Liquid Restaking Token collateral markets.
| New Basket Yield = 6.95% | |||
|---|---|---|---|
| Collateral Exposure | APY | Collateral Exposure | |
| Convex ETH+/ETH | 7.07% | 35.00% | 2% |
| Morpho Blue Re7 WETH Vault | 3.47% | 25.00% | 1% |
| apxETH | 9.01% | 40.00% | 4% |
Staked pxETH (apxETH): Built by Dinero (Redacted Cartel), apxETH is obtained by depositing pxETH into Dinero’s auto-compounding rewards vault (i.e. staking their ETH). Depositing pxETH into the vault results in a boosted staking yield for apxETH, as not all pxETH is staked. Each apxETH benefits from the staking rewards of more than one staked ETH, amplifying apxETH’s yield.
The current staking yield of sdgnETH stands at 12.8% which is 243% times the 5.27% base yield. With the additions of apxETH, the base yield increases to 6.95%. At the current % of dgnETH staked, the staking yield will increase up to 17%.
Dinero’s apxETH has completed 3 audits including 2 audits by Spearbit and 1 by Pashov (independent researcher). Adding apxETH drives up base yield, adds a well-audited yield product to the collateral basket, and is integrated with Redacted Cartel, a well-recognized group in the DeFi space.
Risks
Risks include smart contract risks added from adding apxETH, exploit likeliness can be significantly lowered through audits and bug bounties but the chance is never 0. Volatility apxETH is variable yield, adding another variable yield product adds more dependencies which means a dip in apxETH yield lowers the overall yield.
- I am for adding apxETH to the sdgnETH collateral basket
- I am against adding apxETH to the sdgnETH collateral basket