Allocate predetermined $750k CLAMM to Orange Finance's dual mining vaults

Single choice vote: Allocate predetermined $750k CLAMM to Orange Finance's dual mining vaults

Overview

As decided in the Future of Plutus -proposal, $750k of treasury will be allocated to Stryke's CLAMM.

After discussing options with Stryke, and aiming to keep our minds and hands free to work on more productive causes, we have decided to propose that the allocation goes to Orange Finance's vaults which provide a simple proven strategy for maintaining liquidity in range automatically while farming rewards on Merkl and Incentive programs.

Orange Finance glossary

We propose to use Orange Finance's vaults for the CLAMM allocation. This comes with a handful of benefits:

1. Focus on building and growing Plutus. Orange offers a fully hands off strategy which has been proven in backtesting and over the course of the last calendar quarter. The option of managing our own strategy does not carry the best ROI.
2. Faster implementation. We can get TTV down to signing a couple transactions over a planning and implementation phase. We can still explore native strategies once our productive treasury is yielding.
3. Additional rewards from LTIPP/STIP, Orange points and an additional ORG allocation adding up to a 30-50% APR on top of vault performance.

Target vaults

Vault	Amount
StrykeUniswap WETH-USDC	150k
StrykeUniwap WBTC-USDC	100k
StrykeUniswap ARB-USDC	150k
StrykePCS WETH-USDC	150k
StrykePCS WBTC-USDC	125k
StrykePCS ARB-USDC	75k

Pancaceswap (PCS) rewards are projected to exceed those of Uniswap as Stryke move incentive weight over. On the other hand D2 Options utilization is on Uniswap which is especially important for ARB-USDC

Strategy

Dual Mining (Uniswap/Pancakeswap and Stryke)

The vaults mint liquidity in a +/- 10% spread around current price and burn liquidity for reallocation outside a +/- 20% spread which creates a substantial buffer for price fluctuation. This approach allows the liquidity to be utilized for both swaps and options over the long term and is an immense improvement over the very narrow +/- 2% that originally was used and caused substantial IL.

The strategy provides liquidty on Uniswap via Stryke with a wider range and less rebalancing and is best suited for neutral to bullish market conditions.

There are similarities to a covered call: it allows users to participate in a covered call -options strategy while stacking four different sources of yield:

1. Stryke Options Premiums
2. Uniswap swap fees
3. Arbitrum STIP/LTIP rewards
4. Orange Points (and ORG allocation)

Three month ROI from the end of March until June on Stryke WETH-USDC Vault:

• 7.33% (29.32% APR) - $ETH basis
• 5.07% (20.28% APR) - USD basis

Expected yield A conservative estimate in line with previous PRFCs:

Source	Estimated APR
Option premia and swap fees	50%*
Stryke $ARB rewards	10%
Orange $ARB rewards	10%
Guaranteed $ORG allocation	12%
Additional $ORG allocation from Orange Points	20%
Total	102%*
* Orange provided a way more conservative estimate on CLAMM rewards at 15% APR. We have corrected this to what we have used in the original proposal based on CLAMM performance. Less than Stryke advertise but more than Orange do.

For more information on Orange's Stryke vaults, check their Gitbook

Risks (Plutus team analysis)

Using this vault exposes us to three (3) types of risk:

1. Smart contract risk

Orange takes security seriously. Their smart contracts have been audited by WatchPug.

2. Counterparty risk

Will they do a good job managing our funds? The performance of the Orange vaults has been very good since they updated their strategy after the first period of heavy volatility. They are endorsed by the Stryke team and the incentives are high.

We feel there is no reason to assume they will not continue to perform well. We will naturally be monitoring the performance closely and keeping everyone up to date on its performance via a monthly update. In addition to this, everything is on-chain and everyone can monitor this realtime if they want to!

3. Impermanent loss

With the exception of the initial fast rebalancing and narrow spread the fees and incentives have clearly outperformed IL.

We do not see a reason to believe that the long term performance of the vaults will differ greatly from the backtesting and real life performance of the vault.

Funds to allocate

(all values reflect prices on 2024-07-15)

The liquid treasury is still heavy on ARB even with the ARB++ allocation taken into separate consideration. ($300k $ARB to ARB++ allocation removed from the table below)

Liquid assets total	ARB	USDC	ETH	Others
$960k	$690k	$130k	$120k	$20k

The illiquid treasury is mostly in GLP which in of itself is productive already. The rest are in xGrail and plsAsset-Asset pairs.

Illiquid assets total	GLP	xGrail	Others
$910k	$610k	$210k	$90k

Considering the 72% weight in $ARB in liquid assets and 37% overall non-$PLS treasury value after the ARB++ allocation is taken out, we propose that the liquid $ETH and equivalents in the treasury are used and the rest is filled by $ARB.

This leaves us with $525k $ARB exposure through ARB++ and CLAMM ARB-USDC but drops the wallet ARB balance below $100k.

The other option is to use $200k worth of GLP to alleviate $ARB pressure. Leaving the wallet with $230k arb on top of the $525 vault exposure and reducing the treasury help GLP to $410k.

Conclusion

Considering the material available and the deep-dive given by the Orange team to us, we see the Orange vaults as a great fit for our productive treasury and feel confident in allocating our ear marked CLAMM portion to their vaults. Based on the estimates provided to us by Orange they estimate the APR to be 67% and feel confident a minimum of 50% APR is realistic. Our previous esimates on CLAMM performance would bring this up to 102%. Either will keep us on track by providing a minimum yield of $175k annual dividends to bPLS. By allocating 750k we expect great annualized rewards at the cost of some added counterparty and smart contract risk. We feel this is an acceptable trade-off. The rewards will be split between the treasury and bPLS holders 50/50.

There is also the added benefit that D2 utilizes CLAMM liquidity on ARB pairs for their ARB++ vaults. This helps us continue to build an ecosystem around Stryke and Plutus on Arbitrum.

Proposal

Allocate CLAMM positions to Orange Finance's vaults by:

1. Using $ETH equivalents + $ARB
2. Using $ETH equivalents + $200k worth of GLP + $ARB
3. Do not allocate through Orange*
4. Abstain

* Allocation done through manual positions with Stryke

If $ARB price drops below the necessary allocation amount, a corresponding amount of GLP will be sold to fill the deficit to achieve a $750k total allocation

To protect the treasury and maintain a dynamic response to market conditions or contract security issues, the Plutus core team and multisig members reserve the rights to withdraw at their discretion any or all funds from contracts approved by Plutus DAO for productive treasury allocation. Any withdrawals or alterations made by the team and multisig members will be made with a preference for in-kind withdrawal, and will be announced and reported with reasons.