Proposal to Kill ApeUSD/FraxBP Gauge

Proposals
#1

Summary:

Kill CRV emissions for ApeUSD/FraxBP gauge by calling set_killed().

References/Useful Links:

Motivation:

The Crypto Risk team has been looking into ApeUSD and recently released the report linked above. The report raises concerns about the ApeFi protocol and asserts that it does not meet, nor has it ever met, the criteria necessary to have a Curve gauge. A recap of the questions Crypto Risk investigates:

  1. Is it possible for a single entity to rug its users?
  2. If the team vanishes, can the project continue?
  3. Do audits reveal any concerning signs?

The findings in the report conclude that ApeFi places a significant amount of trust in an anonymous team that may only be composed of one or two individuals. Crypto Risk has reached out to the team in an attempt to bring ApeFi’s security practices up to an acceptable level. Response on the part of the ApeFi team has been unproductive, prompting this proposal to kill the gauge.

The gauge vote was bundled along with gauges for sUSD, LUSD, GUSD, BUSD, alUSD, USDD, and TUSD /FraxBP pairs. We strongly urge DAO voters to vote against bundled gauge votes in the future. Bundled gauge votes make it difficult for voters to properly vet each protocol receiving a gauge and increase the likelihood that a low-quality or malicious protocol will receive a gauge. It is likely that, had ApeUSD been up for vote singly, the DAO would not have allowed it to receive CRV emissions.

For:

Halt CRV emissions for ApeUSD/FraxBP gauge

Against:

Do not halt CRV emissions for ApeUSD/FraxBP gauge

8 Likes
#2

Can’t 1) be mitigated significantly by the apeFI team simply time-locking a significant protion of the crvLP tokens into frax.convexfinance?

image

1 Like
#3

No. If you read the assessment, which I encourage you to do so, the risk arises from the multisig having an inordinate amount of control (including upgrading the smart contracts) and having unknown owners.

1 Like
#4

Ok I read it.

Lots of projects on curve have anon teams. and upgradeable contracts. Don’t they? Is 1 day time lock not enough?

If ApeFi is able to depositAndStake so much, doesnt that mean there are people with FRAXBP tokens that are willing to “back” those apeUSD with their stablecoins?

If apeFI were to lock their crvLP tokens in frax.convex i dont see how they could rug? they wouldn’t be able to unstake the LPs to then withdraw the rightside tokens from the LP.

Are they able to mint() apeUSD unbacked and hand them to any EOA wallet to swap() through the pool? i don;t think so, but would like to verify this.

based on the need for the MSIg to run the stabilizer, i would have to say no, at current TVL.

Essentially, the $ApeUSD stability is fully controlled by Ape Finance multi-sig

This is both good and bad. Bad that it’s not algo, but good that its being done. all the cefi USDs are done the same way, but they are run by large dox teams.

I did ask the AC about the collateral and am told they are exploring alternative collaterals to increase those options, but i have also seen, with more and more collateral choices the risk of exploitation, and bad debt grows too.

The lack of trading volume is obv not good for veCRV holders. but again…there are a lot of pools on curve than have similar TVol specs. Is this (i dont know) drastically underperforming the other low TVol pools?

I don’t personally hold any APE, nor have I minted any apeUSD, but i have been farming this with rightside tokens, so I do hope that clarity on this is acheived

Added after further thought. {edits}

Even USDC can be painted as failing to meet the 3 req’s listed above with their centralized ability to freeze tokens.

There is also a lot of the undertones of “you” protecting “me” here, which many dislike about TradFi, in this proposal. Shouldn’t I have the right on my own to decide to trust my funds to this collection of contracts.

Propose that veCRV don’t vote on that gauge is a different matter. Propose that a guage be closed if it consistantly doesn’t get votes, perhaps. mind you that would just be a waste of gas.

4 Likes
#5

Since this proposal was posted, there have been some developments regarding apeUSD. On 12/12, ~200k APE valued around $1m was withdrawn from ApeFi, almost entirely by one user. This coincides with a staking feature release of the APE token, probably causing the large position shift.
Screen Shot 2023-02-07 at 2.05.16 PM

ApeFi has also deployed a new market for FXS as collateral on its lending platform. The apeAPE and apeFXS tokens contain all collateral in the system all explicit backing of ApeUSD (majority is instead implicitly backed by its AMO strategy)

apeAPE- https://etherscan.io/address/0xcaB90816f91CC25b04251857ED6002891Eb0D6Fa
apeFXS- https://etherscan.io/address/0x19D80289CcA7d724E941730905AB3142Ea13EF55

The combined collateral value is ~$42k, although apeUSD in the Curve pool currently totals >$900k. This puts the overall collateralization ratio of apeUSD at under 5%. This puts explicit backing of ApeUSD at <5%, whereas 95% is lent from the StabilizerV3 AMO contract. The screenshot below shows holders of apeUSD- practically all of the circulating supply is in this pool (screenshot from 1/11).

Screen Shot 2023-01-11 at 6.20.52 PM
Screen Shot 2023-01-11 at 6.20.52 PM1358Ă—552 95.6 KB

apeUSD appears to be almost entirely supported by Curve gauge emissions, which are at least in part supported by bribes. In the latest Votium round, close to $8k in FXS was paid for gauge weighting.

Personally, I feel the justification to kill emissions to this gauge is greater than when the proposal was first posted, and I plan to move forward with the proposal

EDIT: Corrected misleading conclusions about CR. The evidence above can conclude that Apefi has not found product-market fit with its main product, but there’s no cause for concern about CR level- all ApeUSD can be readily redeemed.

1 Like
#6

I can agree that the project seems to have run its course.

I’d would like to point out though that your calculation/conception of CR is very much incorrect. They look to have a CR that’s close to 100% right now.(could be above or below not looking too deep right now but looks like they have half the pool in pol)

#7

I voted to remove CRV incentives. But just to be clear, this had nothing to do with the report as it contains errounous data and conclusions.

However, I do see that CRV incentives were given to the platform as a means to bootstrap. Since apeUSD has not shown growth and seems to be stagnating over the past months, I think its time to hit the switch.

That being said, if they can restructure and gain usage I would be up to consider reinstantiation. For now I would suggest adding direct incentives to the FXS gauge if apeUSD decides to try to continue.

2 Likes
#8

Please, can you explain what is correct CR calculation?

#9

I corrected misleading statements in my previous post about CR. What I wanted to explain is that the core lending product has thus far not found a product market fit, given practically exclusive reliance on the AMO strategy. Almost all backing instead comes from FraxBP deposits into the Curve pool, motivated by Curve emissions. The conclusion I draw from this is, in absence of incentives, there’s no organic demand for ApeUSD.

I may have mistakenly insinuated that ApeUSD is unable to honor redemptions. Actually, there’s no danger of depeg I can see, so long as the owner (ApeFi msig) continues to process rebalances, and I agree that the CR of the system is sufficient.

1 Like