Summary
Decrease Compound USDC v3 exposure in the collateral basket in order to improve yield and diversification.
Current Basket:
- 25% sDAI - Supply APY: 11.5%
- 25% Morpho Steakhouse USDC Vault - 10.8%
- 50% Comp v3 USDC - Supply APY: 8.3%
Proposed Basket:
- 25% sDAI - Supply APY: 11.5%
- 25% Morpho Steakhouse USDC Vault - 10.8%
- 25% Comp v3 USDC - Supply APY: 8.3%
- 25% Aave v3 USDC - Supply APY: 8.6%
Abstract
The proposed proposal, if enacted, would decrease the Compound v3 USDC part of the basket from 50% to 25% and add Aave v3 USDC into the collateral basket at 25% allocation.
Problem Statement
According to the mandate, yield is not a priority for USD3, however, when an asset can improve the yield profile and fits within the bounds of the mandate, it should be considered by governors.
Rationale
This proposal aims to increase the yield profile and improve diversification of USD3 while remaining inline with the mandate. The 30 day MA supply APY of Aave v3 USDC is greater than Comp v3 USDC.
By increasing the number of assets in the collateral basket from 3 to 4, the scalability factor also increases. The proposed 4 assets would handle an increase in Market Cap growth better than the current basket composition of 3 assets.
Aave was previously seen in the collateral basket with Aave pyUSD in the initial creation composition of USD3.
Aave:
Aave is a decentralised non-custodial liquidity protocol where users can participate as suppliers or borrowers. Suppliers provide liquidity to the market while earning interest.
Risks
The USDC exposure of the basket will remain the same at 75%, the number of protocols in the underlying basket will increase from 3 to 4.
There are smart contract risks. The Reserve Protocol has undergone 9 audits, this is not a guarantee that there will never be an exploit, but it greatly reduces the risk.
There are underlying protocol risks with Aave being reintroduced into the collateral basket, however DeFiSafety.com has rated Aave v3 very highly at a score of 93 out of 100.
- Yes, I am for this proposal
- No, I am against this proposal
