[SIPS-037] Upcoming Real Yield ETH Cellar Proposal

Governance
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Goal

The goal of this forum post is to discuss the upcoming Cellar proposal asking Governance to accept the Real Yield ETH strategy. The proposal will go to vote on Friday, April 7, 2023.

Context

Real Yield USD has proven to be the a highly effective strategy on Sommelier, showcasing the platform’s technical superiority for DeFi vaults. Building upon this achievement, Seven Seas has partnered with DeFine Logic Labs, a data science firm with extensive DeFi knowledge, to develop Real Yield ETH.

The Real Yield ETH Strategy is an optimized method aimed at enhancing ETH returns by capitalizing on the opportunities presented by leveraged staking and liquidity provisioning (LPing) on Uniswap V3. This strategy employs various Liquid Staking Tokens (LSTs), such as cbETH, rETH, and stETH, with plans to incorporate more options like wstETH in the future.

Assets:

  • ETH
  • cbETH
  • rETH
  • stETH

Protocols:

  • Aave V2
  • Aave V3
  • Uniswap V3

The strategy generates returns through two primary techniques:

  1. Leveraged Staking: This process involves continuously exchanging ETH for an LST, using the LST as collateral, borrowing additional ETH, and repeating the cycle. Sommelier’s innovative architecture allows for tight loops and close monitoring of on-chain conditions to reduce liquidation risk. Furthermore, the Cellar contract enforces a minimum 1.05 health factor during each rebalance as a safety precaution.
  2. Uniswap V3 LPing for ETH/LST Pairs: Mirroring the Real Yield USD strategy, this method entails providing liquidity to ETH/LST trading pairs on Uniswap V3, a leading decentralized exchange. Liquidity providers deposit both ETH and an LST into a liquidity pool and earn fees from traders exchanging between the two tokens.

The anticipated APY is approximately 15%. As more LSTs are supported, the APY is expected to increase.

Proposal for cellar authorization for strategy Real Yield ETH

If approved, the chain will accept signed function calls submitted to the cellar contract from the strategy provider.

Name: Real Yield ETH

Cellar share token: YieldETH

Platform fee: 2% (1.5% for strategy provider + 0.5% for protocol)

Performance fee: 20% (15% for strategy provider, 5% for protocol)

Strategy providers: Seven Seas Capital and DeFine Logic Labs

We will update this post with more details in the coming days, including contract deployments and relevant content.

1 Like
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This vault looks great, very excited to join a vault that holds (and is exposed to the gains of) ETH. I do wonder why the Performance Fee is so high, ryUSD has no performance fee.

1 Like
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A 20% performance fee is fairly common in the industry, and we expect yields to be competitive.

RYUSD currently has no performance fee because the Cellar smart contract lacked sufficient space for the logic at the time of the strategy launch, and an adapter to collect performance fees did not exist.
Since then, the logic for both platform and performance fees has been moved to an adapter.

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Can you share what other vaults have Performance at 20% or higher, the only example I can find is Yearn at 0% platform at 10% Performance. Forgive me for my ignorance, before this I came from mostly ETF investments which have an expense ratio of like .06% so when I see 20% it just sounds very high. So with the expected 15% APY you are going to take 20%? So the expected returns would be 12%?

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Yearn’s ETH, DAI, USDC, and USDT vaults all have 20% performance fees.
Dynamic strategies incur a higher operational cost (e.g. to the protocol) and therefore require higher fees

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UPDATE: The Cellar contract has been deployed, and audit report released.

Etherscan: CellarInitializableV2_2 | Address 0xb5b29320d2Dde5BA5BAFA1EbcD270052070483ec | Etherscan

Source: cellar-contracts/Cellar.sol at main · PeggyJV/cellar-contracts · GitHub 1

Audits (Macro): Sommelier A-7 | Macro Audits | The 0xMacro Library

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UPDATE:

Ownership of the Cellar contract has been transferred to Gravity, in conjunction with the proposal going live: