A Revised Proposal to Whitelist Kallisto’s Automated Vault Contract

Proposals
#1

Summary:
This proposal is a revision of our initial introduction proposal to Cuve DAO here based on public and private comments. This Version2 proposal aims to address some of the questions and feedback from the Curve community regarding that initial proposal. Special thanks to the Curve folks who shared their perspectives.

This proposal also aims to secure community support for the vote to whitelist the Kallisto Curve-APY Chaser Vault contract, enabling it to earn and to lock CRV rewards from LP staking. It will also enable Kallisto vaults to participate in Curve governance, Curve gauges, and to participate in LP boosting for Kallisto vault Liquidity Providers.

  1. Whitelist Kallisto Finance Curve-APY Chaser vault contract in Curve’s SmartWalletList
  2. Automatically lock CRV for extended durations for veCRV
  3. Acquire veCRV to participate in Curve governance as well as to boost its Kallisto Liquidity Provider holdings.

Abstract:
An introduction to Volume. Volume Finance is a launchpad team founded to explore new and decentralized ways to increase volume to AMMs. We have spent the last year working in the Cosmos ecosystem to support automated liquidity management projects such as Sommelier and Terra’s Anchor Protocol.

Volume’s current focus is on its blockchain https://palomachain.com and Dapp Kallisto, https://kallisto.finance. Paloma is a Cosmos-SDK chain whose validators execute transactions on smart contracts deployed on the EVM. Paloma’s goal is to manage liquidity contracts such as those of Kallisto Finance that bring liquidity to Curve’s AMM.

An introduction to Kallisto, the Bear. Kallisto v0 was previously built on Terra’s Anchor Liquidition Queue to automate liquidation queue bids. As Terra’s original chain and ecosystem is no longer, Kallisto moves to Ethereum to support the largest AMMs. Kallisto’s currently offers certain liquidity providers an automated Curve Finance APY chaser vault to move liquidity to the highest APY yields. This new vault provides a low-cost, continuously updating, data science-based strategy for liquidity providers to participate in the most profitable Curve pools even longer.

By aggregating users’ deposits, monitor, and then respond to price dynamics, the vault intends to significantly reduce the cost to stay in the highest APY pools on Curve.

Motivation:
At a time when AMM liquidity supply (The LPs) must decide between the crypto-ecosystem risk premium and simply investing in US treasuries, due rising US interest rates, and a stronger US dollar, We at Volume think the status quo is no longer a valid strategy. We see both trading volumes and TVL continue to withdraw from all AMMs, including Curve. We continue to see less leverage and increasing risk-off profiles from crypto traders. Volume believes that Kallisto’s Curve Finance APY chaser vault can bring significant value to the Curve ecosystem. Kallisto intends to support Curve liquidity supply by giving another reason for LPs to stay in the Curve liquidity pools. We believe that whitelisting this vault’s contract will be a win for the Curve community and the protocol’s survival.

By systematically scanning the most popular and liquid pools on Curve and dynamically moving the liquidity to the pool with the highest yield, the vault’s users enjoy the best LP opportunities. The vault’s automated LP managing service also improves the Curve user experience as select Liquidity Providers will not need to figure out which pool to join, nor will they need to constantly monitor their positions. Moreover, as users’ liquidity is aggregated and moved together, the transaction cost of switching pools is shared and therefore significantly reduced. As a result, we envision that the vault has the potential to strongly increase Curve’s TVL and enhance the user experience for Liquidity Providers who prefer to stay in Curve with low maintenance requirements.

If Kallisto’s Curve Finance APY chaser vault is whitelisted for CRV locking, the vault’s APY will receive a substantial boost of the supply of liquidity. We expect this should lead to more user deposits or at least to help maintain Curve’s TVL against the further possibility of decreased liquidity due to rising interest rates and competition from other AMMs.

Proposal
This proposal is intended to whitelist the Kallisto’s Curve Finance APY chaser vault smart contracts and allow Kallisto to take part in the gauge voting. We propose the following:

  1. An immutable contract whitelist for Kallisto.finance automated LP position management contract. The contract will automatically convert CRV rewards to veCRV in order to secure additinal boost. While base APYs continue to drop, relative to alternative demand for capital, we propose that Kallisto access boosted CRV to continue to attract liquidity supply.

Specification:
Curve DAO whitelisting the following Kallisto smart contract to allow locking of CRV, gauge voting, governance voting, as well as boosted LP rewards:

Kallisto Curve-Chaser Vault Contract deployed to Ethereum and viewed on Etherscan here:
https://etherscan.io/address/0x7620527fd09af964cdef936286091c636fc3b242

Keeping with Curve’s best practice for immutable contracts, this contract will be replaced with a new one as we upgrade features for Paloma’s blockchain control.

For:
A vote For signals community approval for Kallisto’s Curve Chaser Vault to be whitelisted for veCRV rewards to attract more Liquidity Providers to the Curve AMM. A vote will also be a signal to encourage Kallisto to continue to build new automated liquidity features valuable to Curve that will focus on both liquidity supply and demand.

Against:
A vote against signals community disapproval for Kallisto’s Curve Chaser Vault to be whitelisted for veCRV rewards.

Poll:
The poll will be submitted to the DAO, 24-hours after this post, and after comments and review from the community.

Special Thanks
Again, special thanks to the thoughtful comments on our first proposal. We hope this updated proposal clarifies the Kallisto opportunity and value to the community.

4 Likes
#2

Hi @taariq, interesting product from a LP standpoint. Just as a side comment, I went through the docs quickly but did not see any mechanism to protect users funds in case of a depeg. Maybe you could you add a script that monitor Token imbalance < token_imbalance_threshold more frequently than daily (maybe every 5 minutes if that’s not too costly) and trigger an emergency rebalancing if the condition is no longer true. Also, I see you plan to charge a 2% management fee on TVL in your v1.1, I think a performance fee would be more fair to your users and should allow to offer more competitive yields (vs. e.g. Yearn vaults).

You have my support, always happy to see new products built on top of Curve.

3 Likes
#3

Great team and initiative. Fully support this and more apps built within the Curve ecosystem

#4

I support. Thank you for updating the proposal.

The 2% management fee is interesting. Will have to give this model some more thought but it initially seems nice, given that Convex is taking 17%.

1 Like
#5

Convex is taking 17% on harvest, not on total TVL, 2% on TVL is a lot.

3 Likes
#6

Thank you for the interest and helpful feedback @3.1415r.

  1. We think we have actually exactly what you suggested in our vault design. We actively monitor depeg risk by checking pools’ imbalance and will get out of the pool if the imbalance exceeds a threshold. Please refer to the token_imbalance bullet in our doc Scheduler | Kallisto Finance. Does this address your concern for depeg protection as expected?

  2. We are happy to get feedback from the community on competitive fees. We also do plan to focus more on the performance fee part in order to be more competitive for our future vault roadmap. In fact, today we made this first Curve Yield chaser contract 0% Management fee and 0% Performance fee. We want to be competitive and we have more vaults on Curve which we wish to launch and on which we can explore future performance fees. We really want to appeal to the community to consider our request and are willing to give up all fees to receive Curve’s whitelist support.

We hope that we can show that we are responsive and attentive in the forums based on my reply.

3 Likes
#7

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Regarding point 1, unless I am missing something, your documentation mention a single check daily to chose the target pool. I was mentioning having another check that happens at a higher frequency (e.g. every 5 minutes) that would only check if token imbalance is still in compliance and trigger an “emergency rebalancing” if not.

2 Likes
#8

Thanks for the check. Correct, in this moment, we have only one check, but with your suggestion, we’ll be adding a second check for improved risk management. Looking forward to sharing when we have the upgrades online.

2 Likes
#9

Curious as to why veBoost delegation doesn’t suffice for the use-cases given. The only reason you would need this specific contract whitelisted is if it needed to vote, which would be the case if users were depositing CRV into it.

However, in your case you could simply have harvested CRV transferred to your multisig, lock it through that, and then delegate boost to your vault. Yes, that makes thing a bit more cumbersome on your side, but makes it smoother on the Curve side (as there is no need to assess sc or protocol risk for whitelisting). Also, since you seem to be making changes to your vault contract, you would avoid the friction of having the whitelist updated possibly multiple times.

2 Likes
#10

@taariq Would something like this work for you guys? I think it would:

a) Reduce potential risk vectors
b) Allow Kallisto to upgrade its contract more smoothly

The main con is probably slightly more gas cost (just to send CRV from your main contract to a whitelisted multi-sig).

A potential middle road might be to whitelist a minimal contract that has some auto-locking and/or auto-compounding functions, with its boost delegated to your vault and voting controlled by a multi-sig

1 Like
#11

Howdy @chanho. Thank you for the kind query. We are seeking voting abilities as well as CRV boost. This is a great recommendation and something we will explore in the future. Thank you again.

#12

Thanks for the additional insights @nagaking. We’ll be looking at veBoost Delegation further.

However, we think veBoost delegation will achieve the same goals as say just adding our liquidity to Convex, but without receiving CVX rewards. For the reasons you describe above, we may go with Convex to start and explore from there. Thanks again for the thoughts about the proposal. We will pursue these other options.

1 Like