Forum Discussion: https://tribe.fei.money/t/fip-42-deposit-2m-fei-into-visor-finance/3568/4

Summary

The following is a proposal for a partnership between Fei Protocol and Visor Finance.

FEI Optimistic Approval Multisig will send 2,000,000 FEI into Visor Finance for the FEI-USDC Uniswap v3 pool @ 0.05% fee tier on Mainnet.

Motivation

The proposal aims to generate yield on FEI DAO’s treasury assets using Visor Finance to facilitate the liquidity provisioning process. Concentrated liquidity provisioning on Uniswap v3 involves managing price ranges and manually re-investing earned fees. The advantage of using Visor Finance for this deployment is continual re-investment of fees. Price range adjustments and fee re-investments are done according to top-of-the-line strategies developed by Gamma Strategies, which is a research organization funded by Visor.

Risks

Providing liquidity in a narrower price range can lead to earning higher fees, but can subject the liquidity provider to greater impermanent loss as prices of the underlying assets diverge. However, impermanent loss is not a concern for this initial deployment because it is a stable coin pair. Conversely, providing liquidity in a wider range will earn less fees than a narrower one, but are accordingly at lower risk of suffering impermanent losses when there is price divergence. See here for a calculator that allows you to explore how impermanent loss can be affected by the width of price ranges. https://defi-lab.xyz/uniswapv3simulator 1

Gamma Strategies aims to reduce the risks of impermanent loss through active range management. This may include widening the ranges during periods of high volatility and narrowing the ranges in periods of low volatility in order to maximize yield taking into consideration impermanent loss.

Specification

FEI will be sent to the Visor position manager contract called the Hypervisor https://github.com/VisorFinance/hypervisor/blob/master/contracts/Hypervisor.sol, which will mint fungible ERC-20 LP tokens to a whitelisted address provided by FEI.

FEI will be actively managed on the FEI-USDC pair on Uniswap v3 on Mainnet by the visor protocol. In the future, when the FEI-ETH pair picks up volume on Uniswap v3 and this pair becomes more profitable to LP, this FEI liquidity can be moved to that pool.

Only the whitelisted Optimistic Approval address provided by FEI will have the right to deposit / withdraw assets to and from the Hypervisors. The position manager contract has the right to a few functions which are to set base ranges, set limit ranges, collect fees, rebalance, and mint/burn LP tokens to the whitelisted address. Therefore, the Hypervisor contract has only management rights and is non-custodial in that only the provided whitelisted address may deposit / withdraw assets into and out of the contract.

Visor Finance takes 10% of earned fees, which get distributed to VISR stakers. 90% of earned fees will be automatically re-invested into the LP positions. Visor Finance will cover all gas fees for rebalancing positions and re-investing earned fees.

This will be an OA action and will not go through the DAO.

OA Actions

1. Send FEI to the Mainnet Hypervisor contract.
2. Receive ERC-20 LP tokens for LP positions in the whitelisted Optimistic Approval address.