RariCapital

Summary:

Whitelisting Yam Dao as Fuse pool creators.

Governance permitting, Yam’s initial Fuse pool would be set up with the goal of creating the first liquid lending market for Yam token holders in a lower/average risk Fuse pool. Yam Dao will provide liquidity from its treasury to bootstrap the pool (a governance vote will take place post whitelisting).

In the future as Yam’s familiarity with the Fuse ecosystem grows, the Dao will work closely with Rari to consider adding its synthetic asset collection and their respective LP tokens as collateral for future pools. These tokens fit well in Fuse’s value proposition as these synthetic assets are considered a long-tail asset. The Dao will also consider additional future pools, such as one that can be used to deposit some portion of treasury assets.

Background:

Yam token holders need a lending market in which YAM can be used as collateral to borrow other tokens. Yam community members may want to temporarily hedge their Yam as opposed to just selling it, but this is also not possible without an active lending market. Thirdly, this pool will generate interest on Yam which could benefit the community members/Yam treasury by allowing idle yam to become yield bearing.

Motivation:

Whitelisting Yam as a pool creator will increase protocol utilization and fee revenue for Rari. Yam will actively support and promote this Fuse Pool as the go to location to borrow against Yam tokens, which will also create additional visibility for Fuse.

On top of this, creation of a Yam owned Fused pool offers a great service to the Yam community by increasing Yam token utility. This is likely to form the foundation of a good relationship between Dao’s and provide the base on which future long tail assets can be added to additional pools further driving up Fuse utilization.

Forum Discussion Additions:

Link to forum post

Jai makes a strong point in response to a community member’s ideas pertaining to Fuse pool fee sharing: “By having both of the fees {Rari admin fee & Dao admin fee} add up to the 10% static, it ensures that this pool has a moat and nobody can just spin up their own with the same assets and draw all the liquidity their way.”

For this snapshot, we propose that for the initial Fuse pool the 10% admin fee be split 8% to Rari and 2% to Yam treasury. Although it’s likely that this initial Fuse pool will not generate considerable revenue for either protocol at this stage, it is suggested in principle to align incentives, solidify a cross Dao partnership and a proof of concept of a liquidity moat (see forum post for more info). With this sharing arrangement, Yam can set the pool creator fee to 0% and have a competitive advantage on future pool creators that try to siphon liquidity away with a 0% fee pool.

It is likely optimal to have a fee sharing arrangement that scales with TVL, as it allows those protocols that bring in more Fuse revenue a greater share of that revenue. But as this does not exist at this point the initial static 8%/2% split has been proposed for the initial Yam Dao Fuse pool. Yam Dao’s future pool deployments will abide by Rari’s future TVL based sliding fee sharing scales if they are to be implemented.