Add ETH pegged yield earning assets to the Basket

Summary

This vote follows the [FIP-008] - Basket Diversification on the Forum.

Adding ETH pegged yield earning assets to the Basket of the Protocol is an easy way for the Protocol to be more capital efficient and generate revenue with the wETH it has sitting around. The initial allocation of ETH pegged yield earning assets we believe should be no more than 25% of the total Basket.

Choose from the options below on what yield earning assets you think should be added to the Basket and their respective allocations by weighting your votes accordingly. Any option with a greater than 5% total allocation (20% vote share) will be added.

Motivation

The Protocol is sitting on a lot of capital, namely wETH. This capital can be put to work. A simple way of doing this is replacing some of the wETH in the basket with sETH or stETH which yield 5+% when at rest.

One could take this further and utilise Basket Bags as containers for other yield bearing assets to be added to the Protocol’s Basket and thus increasing its effective Basket Factor. The quicker the Basket gets to its target factor of 100% the quicker BANK burns commence. For context, the Protocol is very efficient at accruing wETH via the Dutch Auctions.

This initial step of Basket diversification is a simple way to have an additional method of increasing the Basket Factor of the Protocol while laying the pathway via the "Basket Bags" to add other assets to the Basket in the future.

Risks

There are the typical risks in DeFi including smart contract risk with the actual implementation on the Protocol side, alongside potential exploits in smart contracts which the ETH pegged yielding assets rely on.

To manage exposure to such risks, we propose an initial maximum allocation of 25% of yield earning assets in the Basket at this stage.

With the initial implementation planned, there is the very unlikely scenario that the Auctions don’t have enough wETH to carry out purchases during a contraction, in this case the Auction fails.

The Operations Multisig will keep the diversified asset allocation at around 25% keeping the Basket replenished as needed to prevent this scenario.

Conclusion

Choose from the options below on what yield earning assets you think should be added to the Basket and their respective allocations by weighting your votes accordingly. At this initial stage yield earning assets shall not make up more than 25% of the entire Basket. An allocation to a choice below is an allocation with respect to that 25% of the Basket.

Your voting percentages will be 4 x your target basket percentages, as you’re voting for what to do with 25% of the basket.

Example A: 50-50 Split between A & B

You think the basket should be composed of:

• 75% WETH
• 12.5% A
• 12.5% B

You would vote:

• 1 point (12.5% * 4 = 50%) for A.
• 1 point (50%) for B.

Example B: 5-5-10-80 between A & B & C & WETH

You think the basket should be composed of:

• 80% WETH (additional 5% of the new allocation)
• 10% A
• 5% B
• 5% C

You would vote:

• 1 points (5% * 4 = 20%) for WETH
• 2 points (40%) for A
• 1 point (20%) for B
• 1 point (20%) for C

Any option with a greater than 5% total allocation (20% vote share) will be added.