A Strategic Path for Sommelier
Here is a direct proposal for the Sommelier community. This focuses on a specific opportunity with Terra’s rebuilt ecosystem. The goal is generating sustainable yield for SOMM holders through a clear, executable strategy.
The Core Idea
We can access low cost capital from other DeFi ecosystems. We deploy that capital into high yield opportunities on Terra. The profit difference between our borrowing cost and our earned yield flows back to the community. This builds treasury assets and rewards stakers.
Terra presents a unique landscape for this. Activity is growing but available capital is still limited. This creates high yield opportunities for early liquidity providers. The Terra Liquidity Alliance, powered by Eris Protocol, is the centerpiece. It offers substantial rewards for committing liquidity to key Terra pools.
The Strategy: Borrow Low, Deploy High
Step one is sourcing capital. Our community controls significant assets across chains. We use Sommelier’s cross chain functionality to our advantage. We borrow stablecoins against these assets on networks like Ethereum or Arbitrum. Target borrowing rates exist below ten percent. Several established money markets offer this.
Step two is deployment. We bridge those stablecoins to Terra. We commit them to the Terra Liquidity Alliance through Eris Protocol. The primary target is the ampLUNA-LUNA pool. This pool currently generates estimated annual returns near 150 percent. Returns come from trading fees and TLA incentive rewards.
The math is simple. Borrow at nine percent. Earn 150 percent. The net annualized return for the community is roughly 140 percent. This spread is our profit engine. It works until arbitrage closes the gap, which will take time.
Integrating the New Money Market: Creda
Terra recently launched Creda Finance. This is a native money market. It allows lending and borrowing of Terra assets. Creda changes our strategy for the better. It offers more options.
We can use Creda as a secondary tool. Here is one method. Deposit a portion of our borrowed stablecoins into Creda as lenders. This establishes a low risk yield baseline. It also supplies liquidity to the Terra market. We then borrow LUNA from Creda against that deposit. We take the borrowed LUNA and stake it to mint ampLUNA. We then provide the ampLUNA-LUNA liquidity to the TLA. This leverages our initial position.
Another method uses Creda for safety. We deploy most capital to the high yield TLA pool. We take a small portion of the incoming rewards and place them into Creda. This builds a reserve fund. The reserve fund earns yield and can cover borrowing costs if needed. It acts as a buffer.
Simultaneous use is possible. The point is flexibility. Creda gives us a secure base layer on Terra. The TLA gives us high yield opportunities. Using both creates a more resilient strategy.
The Argument for a TLA Whitelist for SOMM
Sommelier should pursue a whitelisted position with the Terra Liquidity Alliance. A direct partnership benefits both sides.
For the TLA, Sommelier delivers reliable, sophisticated capital. We are not short term farmers. We are a structured community building long term value. We provide deep liquidity that stabilizes core Terra pools. Our vault strategies can automate and sustain this liquidity. This aligns with TLA goals.
For Sommelier, a whitelist provides guaranteed allocation. It ensures our capital always earns the highest possible TLA rewards. It gives us a seat at the table for new incentive programs. It formalizes a relationship with a key Terra ecosystem project. This partnership can lead to future integrations, like a dedicated Sommelier vault on Terra.
Think about the signal it sends. A whitelist marks Sommelier as a preferred institutional grade liquidity provider. It boosts our reputation across DeFi. It also makes our strategy more efficient. We reduce competition for reward allocation. We secure our yield source.
Execution and Risk Considerations
This is not without risk. We must watch our loan to value ratios on the borrow side.
The execution path uses existing Sommelier strengths. Our community passes a governance proposal. It allocates a portion of treasury assets as collateral. Our strategists identify the optimal borrowing venue. They execute the low cost borrow. Funds move to Terra via a secure bridge. Liquidity gets committed to the TLA pool via Eris. Yield accrues. Rewards get harvested regularly. A portion covers borrowing costs. The profit gets converted to SOMM or stable assets. These assets flow back to the treasury and stakers.
We start with a pilot amount. We prove the concept. We then scale up.
Closing remarks:
This strategy uses our cross chain capability as a true advantage. It turns borrowing from a cost into a profit center. It positions Sommelier at the forefront of Terra’s regeneration, capturing early, high yields while they last.
The integration of Creda Finance adds a new layer. It provides tools for leverage or risk management on Terra itself.
Securing a TLA whitelist is critical. It protects our access to the yield source. It builds a formal alliance with a growing ecosystem. This move aligns with our identity as sophisticated liquidity managers.
The proposal is actionable. The infrastructure exists. The yield spread is visible. The next step is community discussion and a governance vote. We should pursue this.