This proposal points out the reasons for removing the Risk-Adjusted strategy and replacing it with the built-in security features provided by the Senior tranche. The change would effectively provide risk protection, also solving inefficiencies currently generated by Risk-Adjusted pools.
If the proposal will pass the Temperature Check, Governance will vote on-chain to execute the deactivation of $IDLE LM from Risk-Adjusted pools.
Launched in May 2020, the Risk-Adjusted automatically changes the asset allocation to find the optimal mix between risk scores and yield.
The strategy was designed for risk-averse profiles interested in lending funds with a comfortable level of risk, and supports DAI, USDC, USDT pools.
With the launch of Perpetual Yield Tranches, Senior tranche represents the natural evolution of this security-first product. With this instrument, LPs can enjoy and participate in complex and exotic products, reducing the exposure to tail risks. Senior Tranches have a first lien on the underlying assets — they’re first in line to be repaid in case of default (hack, loss of funds).
These intrinsic features shape the suite of Idle products, making the Best-Yield the underlying core component of Senior and Junior classes. With that infrastructure, Risk-Adjusted pools do not represent a strategic component anymore and could be deactivated.
Furthermore, DeFi Score does not support the latest pools implemented in Aave/Compound and reduced maintenance activities. This unavailability generates counterparty risks with no actual benefits.
With the deactivation of Risk-Adjusted, the $IDLE liquidity mining on all Best-Yield pools would increase by 1.7% (at the current speed rate, Risk-Adj gets 58 $IDLE and Best-Yield 3242 $IDLE; then 3300 $IDLE will be allocated only to Best-Yield), making the flagship strategy even more attractive.
The technical implementation consists of:
- $IDLE LM removal from DAI, USDC, USDT pools (3 on-chain actions)
- Rebalance deactivation (no on-chain actions)
- Strategy deposit disabled from UI (no on-chain actions)
The migration plan will incentivize users to withdraw funds from Risk-Adjusted pools, and the protocol would leave remaining assets in Compound (with no active rebalances) until LPs redeem all the funds. By the way, there is no possibility to lose funds or get funds stuck in Risk-Adjusted smart contracts, as LPs could always redeem them.
With strategy deprecation, Governance can provide incentives (in $IDLE from Treasury League budget) for users that migrate from Risk-Adjusted (DAI, USDT, USDC) to Senior Tranche in a short period of time.
The reward would cover the risks of joining a product with a relatively short track record, even if the new pools would intrinsically embed fund protection.
The proposal introduces a proportional incentive, 0.5% of the nominal USD value at block 13275150, capped at $1k per individual reward.
The maximum allocated budget would be about $9k (only if all users migrate).
The incentivization phase would last for the entire $5m-cap period, until the reach of the cap limit.
The incentivized migration would act as a bridge to help current LPs while also generating new strategic value from the DAO perspective.
Members in this forum are both LPs and token holders, with direct sensibility about challenges as protocol users and owners. We are open to suggestions and we would like to hear community feedback!
We are going to leave this thread open for comments regarding these changes. In about 3 days, if there are no objections, we will launch the Temperature Check to move forward with the deactivation and migration plan.