Proposal to add USV/FraxBP to the Gauge Controller

Gauge Proposals
#1

Gauge Proposal Template:

Summary:

Phuture has deployed a pool for USV/FRAXBP to instantiate USV’s first decentralised exchange listing. We intend for this to be the canonical liquidity venue for USV as we grow our exposure to the Curve ecosystem.

This proposal is seeking the approval of a gauge for this pool in order to incentivise and grow both the USV and FRAXBP liquidity on Curve.

Describe what this proposal is about

References/Useful links:

Link to:
• Website: https://phuture.finance
• Documentation: https://docs.phuture.finance/introduction/master
• Github Page: Phuture · GitHub
• Twitter: https://twitter.com/phuture_finance
• Defillama: Phuture: TVL and Stats - DefiLlama

Protocol Description:

Phuture is an index and structured product provider operating across Ethereum and Avalanche. Our vision is to provide best-in-class products for new and experienced investors.

USV or USDC Savings Vault is a USDC bond ETF built using Notional’s fixed rate lending market. It provides the holder with yield on their USDC via the investment into the underlying bonds the vault holds.

USV is ERC-4626 vault that holds and manages 3 and 6 month Notional bonds. It’s initial price was $1 and it has traded as low as 0.995 and as high as 1.001 which can be evidenced here: Phuture - Crypto Index Platform

Describe the proposed asset(s), the corresponding protocol(s), and historic prices of the token (price must come from the source of highest liquidity).

Motivation:
Phuture has seeded the initial liquidity for the pool and would like to join the FRAXBP network of pools in order to grow the volume and TVL of the pool through the additional incentives offered via the FRAXBP programme. We envisage this to be an attractive offering given the fact that USV is already earning at the time of writing 3.33% natively with the addition of CRV incentives adding to this.

Explain why this pool needs incentivization

Specifications:

Please answer in a short and clear manner.

  1. Governance: Provide current information on the protocol’s governance structure. Provide links to any admin and/or multisig addresses, and describe the powers afforded to these addresses. If there are plans to change the governance system in the future, please explain.

USV is owned by the Phuture multi sig: 0x6575A93aBdFf85e5A6b97c2DB2b83bCEbc3574eC which has the ability to upgrade the USV contracts should it be required. There are no plans to change the governance structure.

  1. Oracles: Does the protocol rely on external oracles? If so, provide details about the oracles and their implementation in the protocol.

USV values the bonds that it holds via the exposed Notional TWAP oracles. More info can be found here: Interest Rate Oracles - Notional V2

  1. Audits: Provide links to audit reports and any relevant details about security practices.

Please find a list of audits executed on the protocol here:

  1. Centralization vectors: Is there any component of the protocol that has centralization vectors? E.g. if only 1 dev manages the project, that is a centralized vector. If price oracles need to be updated by a bot, that is a centralized vector. If liquidations are done by the protocol, that is also a centralization vector.

USV has no centralisation vectors.

  1. Market History: Has the asset observed severe volatility? In the case of stablecoins, has it depegged? In the case of an unpegged asset, have there been extreme price change events in the past? Provide specific information about the Curve pool: how long has it been active, TVL, historical volume?

USV is not a stable coin but the fluctuations in its price due to underling bond movements have been very slight with a max downside movement of 50 bips from its initial price. USV/FRAXBP pool has been created recently and seeded with circa $200k. In addition, since USV has launched it has amassed close to $400k in tvl.

To summarise:

• Phuture is applying for a gauge to be added to the USV/FRAXBP pool
• This will be the canonical pool for USV and is part of the FRAXBP network of pools.
• USV is the first bond product of its kind and will provide liquidity providers with a native yield atop of the yield gained from incentives
• The creation of this pool will generate additional volume through the arbitrage of exchange price vs NAV price which was previously not possible.

2 Likes
#2

Happy to answer any questions on the above proposal and understand next steps.

1 Like
#3

It’s a 2/3 Multi sig and the owners seem to be connected to Phuture. Who are they and how are they connected with Phuture?

phuture multisig owner connections
phuture multisig owner connections1920×835 70.9 KB

#4

Thanks for your comment. The multi-sig is operated by the three co-founders of the business including myself.

Co-founders are listed here:

1 Like
#5

It is advised against proceeding with the allocation of a gauge for the USV-FraxBP pool at this time.

Findings:

  • Since inception, the USV-FraxBP pool has not generated any trade volumes. Refer to this query for further analytics.

  • Currently, 100% of the liquidity in the pool is supplied by the Phuture team

    1. 99% is provided by a multi-sig owned by Phuture (0x237a4d2166Eb65cB3f9fabBe55ef2eb5ed56bdb9).

    2. The remaining 1% by one of the multi-sig owners (0x9fD6Ac607AE0B13e066a609f6e5f2d41c3d04A5F).

  • 375,659(Total USV supply) - 271,208(USV held by their multi-sig) - 100,000(USV provided as liquidity by their multi-sig) = 4451. Only 1.2% of USV is held by the wallets other than the Phuture multi-sig.

  • The Phuture team has confirmed a 100% reliable and just-in-time redemption system, which would make it more attractive for users to redeem their funds through the Phuture platform rather than the Curve pool.

  • USV-FraxBP will be incentivized with the gauge weight allocation by the Frax Finance liquidity program. Higher pool TVL grants higher vlCVX votes from Frax for a particular FraxBP metapool.

  • Phuture will deploy the remaining USV to the liquidity pool once the CRV gauge is allocated.

  • Phuture claims that the creation of this pool will generate volume through the arbitrage of exchange price vs NAV price which was previously not possible.

Gentle Recommendations:

Phuture, with its 100% share of the pool TVL, is poised to reap all the CRV rewards. Furthermore, with additional USV liquidity yet to be deployed, the CRV reward share for them is expected to grow even further. The Phuture team is doubling down on CRV rewards and firmly believes that these enhanced CRV rewards will play a crucial role in attracting new users to their platform.

It should be noted that the USV token was designed as a vault token, intended to appreciate in value over time. Ideally, users invested in USV would never need a liquidity pool for any purpose. In the case where a liquidity pool exists, imbalanced liquidity deposits or substantial fluctuations in USV value (though USV is designed not to be volatile) may result in arbitrage trading activity.

Taking this into consideration, it is recommended to hold off on allocating a gauge for the USV-FraxBP pool until there is a reasonable level of user adoption and a clear demand for a liquidity pool.

This approach will ensure that the CRV gauge allocation is utilized effectively and that the CRV rewards flow through a pool that generates trade volume, ultimately benefiting the veCRV holders.

In my personal opinion, if you are of the opinion that promoting a product with CRV incentives as a means to increase the user base is a fair and justifiable strategy, even if no tangible benefits to the Curve community can be immediately discerned, then you may still choose to lend your support to this proposal.

#6

I think your analysis is rather one dimensional, even after breaking down our strategy with you over text.

Counterpoints

  • USV is an excellent product that provides some of the best low-risk USDC yield when compared with Compound, Aave and Yearn. I don’t think we should be penalised for backing our own products with the most sacred capital that we have to showcase confidence in the product and highlight the type of yields it can provide. Given the quality of the product we are exploring every option available to distribute the USV holder percentage.

  • Yes, applying for a gauge is going to allow us to attract more users but I think its disingenuous of you to suggest that incentives of any kind are not, ultimately, to attract more users. I struggle to see how us adding more tvl is a net negative when an increase in rewards will again attract more users and beget more tvl benefitting both Curve, Frax and Phuture. One of the key benefits of tokenising a strategy is the ways in which it can be composed to generate different return profiles. Take frxETH, you think people would hold it over weth if there wasn’t rewards attached? From that perspective CRV rewards have grown many a user base and will continue to do so.

  • Other key reasons for us to build out liquidity on a Curve pool is to provide people with a cheaper option to buy and sell USV as exchanging is generally cheaper than minting/redeeming from a gas perspective. It also allows us to tap into the liquidity aggregator network to provide more venues to access USV and give liquidators access to USV through their typical exchange channels.

  • The idea that it is always more attractive to redeem through Phuture is totally floored first from a gas perspective and secondly due to a difference in pricing between NAV and the exchange price. There is a reason why most index products are bought on exchange instead of being minted.

  • Not sure how the token appreciating in value is relevant but i’ve already covered why having a liquidity pool is not only relevant but is also the done thing amongst many vault products.

A USDC bond ETF that generates a native yield of 3%+ through overcollateralised bonds + paired with a gauged pool is an attractive offering we think and distinct from any of the other pools currently on Curve.

1 Like
#7

Yes, applying for a gauge is going to allow us to attract more users but I think its disingenuous of you to suggest that incentives of any kind are not, ultimately, to attract more users.

  • It is just that I don’t see it fair if the incentives are coming from a source that doesn’t get benefited from providing those incentives. Will Phuture incentivize some projects if there are almost zero factors pointing towards Phuture getting value out of it?

I struggle to see how us adding more tvl is a net negative when an increase in rewards will again attract more users and beget more tvl benefitting both Curve, Frax and Phuture.

  • It looks net negative for veCRV holders. Pool TVL doesn’t matter if a pool is not being utilized.
    Ooh, btw it does matter when you apply for gauge allocation from Frax :slight_smile:

Other key reasons for us to build out liquidity on a Curve pool is to provide people with a cheaper option to buy and sell USV as exchanging is generally cheaper than minting/redeeming from a gas perspective.

  • I see this as hollow reasoning because if you were concerned about the gas you would have created a pool on Uniswap but I guess they don’t provide any additional incentives like Curve.

I don’t think we should be penalised for backing our own products with the most sacred capital…

  • You are not getting penalized in any way. Surely you have a great product, leverage it to get users and show that there is an actual need for a pool for the users.

I am not against allocating CRV gauge to the USV pool but I am against it at this time concerning the things that are laid out. Phuture can always set an example and reapply for a gauge.
I don’t think it will bother any of us…will it?

#8

  • Your analysis assumes a static environment where exogenous variables do not have an impact. The presence of CRV rewards will stimulate both increased volume and TVL. Remember that USV is actually natively yield bearing which differentiates it from, and makes it more attractive than the numerous copy cat stablecoins that Curve incentivises. In fact, there are circa 27 pools receiving rewards that have generated 0 volume recently and these pools are far more established than ours. If our thesis is correct, then our pool with incentives should be far more attractive than these other pools and this will be shown in tvl and volume migrating over.

  • Again, veCRV holders are incentivising pools that are not being utilised and these tokens have no differentiation from the major stable coin assets and are therefore unlikely to generate volume in the future. USV offers a completely different and higher return profile than these pools. Which token on Curve is giving exposure to Notional’s fixed rate yields?

  • The CRV rewards are there to incentivise projects such as Phuture to list on Curve vs a competitor. So strategically it makes more sense for us list here. I assure you we aren’t the first to have this thought and that doesn’t negate the aforementioned benefits of having an exchange listing.

  • We are literally leveraging the tokenised properties of USV to kickstart an ecosystem that gives users multiple angles to get involved with the product and increases the propensity for new users to hold it. The alternative, as you suggest, is to sit back and wait for the users to come which isn’t a winning strategy in this market.

1 Like