[TMP #2.1] Authorize Treasury Council to lock UWU-ETH LP tokens

[TMP #2.1] Authorize Treasury Council to lock UWU-ETH LP tokens



Scope:

Authorize, for the next 120 days, the Treasury Council to lock UWU-ETH LP tokens using currently held/vesting UWU and future UWU rewards.

Current Governance Limitations:

Currently, WIP #14 requires explicit DAO approval for “long term defined lock ups”. By voting yes on this proposal, the DAO would be giving permission for the next 120 days or until voted otherwise by the Treasury Council or DAO, whichever comes first, to lock UWU-ETH LP tokens.

The minimum locking period on UWU-ETH LP tokens is 8 weeks. After the 8 weeks, tokens are permanently unlocked and available to exit.

Objective:

Utilize the UWU acquired from rewards and private OTC deal to capitalize on the LP yield at the discretion of the Treasury Council.
Grow the size of the allocation while the yield is high, since there are limited high yielding farms currently in DeFi.
Lower our cost basis on OTC tokens that were purchased.

Rationale:

It is believed that it would be in Wonderland’s favor to utilize the UWU rewards while the yields are high, since there are currently limited high yielding farms in DeFi.

This would also prevent the recently purchased UWU tokens from remaining idle during the full vesting period of 24 months.

Utilizing the rewards would also help maintain a low cost basis on our UWU by acquiring additional UWU and other tokens from the LP rewards.

To further clarify, there will be no further acquisition of UWU other than by farming and vesting prepaidpre-paid tokens. ‘Farming’ is limited to activities that generate a positive yield partially or totally in UWU, e.g UWU-ETH LP, providing credit on Uwulend, or potentially future vaults on Uwulend.

Snapshot:

TBD

Voting options:

  • Authorize TC to lock UWU-ETH LP
  • Don’t authorize TC to lock

UWU Lend Background:

UwU Lend is a liquidity market that offers depositing and borrowing forked from AAVE v2. Users earn interest on deposits and pay interest to borrow. The protocol was founded and is managed by Sifu.

Risks/Considerations:

UWU Directional Price/Locking Risk:

UWU price could continue to drop, potentially lower than our current cost basis over time ($11.02 per UWU on farmed tokens). New tokens added to the LP will be locked for a total of 8 weeks preventing the sale of locked tokens during this timeframe. After the 8 weeks, tokens are permanently unlocked and available to exit.

Smart Contract Risk:

UWU Lend code was forked from Aave v2, which has undergone numerous audits. The rewards system is forked from geist, which has also undergone numerous audits. Uwulend has completed its independent audit with Peckshield and results will be published soon.

Liquidity Risk:

The LP for UWU-ETH is incentivized and guarantees short-term stability due to the 8 week lock. However, as the weeks pass, we may have less forecastable liquidity as providers can pull out funds. To mitigate this uncertainty, Wonderland will actively manage its UWU position to capitalize on periods of stronger liquidity and decrease its need for liquidity when uncertainty is greater.

Given the current state of the market, it is not smart to be in any LP. The UwU price is highly variable. If UwU gains traction, prices could skyrocket (LP’s lose compared to holding assets); If UwU doesn’t gain traction Prices could plummet (LP’s lose extra compared to holding assets).

UwU is a moonshot. It’s either x5 or x0. On top of that, market s are highly volatile. It is not a moment where you’d want to be in an LP.

I did not read a strong rationale as to why we would invest in this LP. The % APR?

I advise to vote against this proposal.

Locking yield is at around 200% apy of mostly stables. This should more than compensate for expected IL, and dramatically reduce our CB for both the UwU and paired eth.

1 Like

Voting is now over!

[TMP #2.1] - Authorize Treasury Council to Lock UwU-Eth LP Tokens did not pass.
https://wl-l.ink/Snapshot/TMP-2-1