Thread by @MonetSupply

Introducing the Basepool: a proposed partnership between @MakerDAO and @CurveFinance that offers unrivaled capital efficiency for stablecoin liquidity pools

Read the draft proposal here (split into two options, A & B): docs.google.com/document/d/1Yy…

TL;DRs in the tread below

1/19

The core of the proposal is a new Curve stableswap pool, consisting of $DAI, @circlepay $USDC, @PaxosGlobal $USDP, and @Gemini $GUSD

This provides a variety of fiat on<>off ramp options for users, along with linkage to the DAI credit system and vaults

By including only minimum risk stablecoins within the pool, it should be possible to build up substantial liquidity from risk averse investors

🦺 Lower risk = higher risk adjusted return 📈

MakerDAO already assigns an effective 0% risk premium against these stablecoins and integrates with each through PSMs

This enables Maker to onboard the Basepool LP as collateral with 50x leverage and borrowing costs as low as 0%, significantly boosting liquidity and LP returns

Each $1 billion in pool LP would require only $20 million in initial user equity, while users would also see up to 50x the standard pool return

Curve TVL and LP returns go brrrr

The Basepool could serve as a pair asset for other stablecoin metapools including $FEI, $FRAX, $DOLA, $MIM, and others

The low risk of exposure to Basepool LP should flow through to lower cost of capital for these stablecoin issuers to maintain deep liquidity

Maker would also consider collateral onboarding for metapool LPs paired against the Basepool, with maximum leverage and borrowing costs determined on a case by case basis depending on risk

This should further increase these projects' liquidity and reduce their cost of capital

Let's take @feiprotocol as an example

Current $TRIBE incentives for the fei-3pool are ~8%

If maker offers 10x leverage at 1% borrowing costs, the same level of incentives could yield nearly 5x the pool liquidity

`8% return = 1.7% base yield * 10 - 1% cost * 9`
8%/1.7% = 4.7x

Version A of the proposal would set up the Basepool with unique parameters:

- 0.009% to 0.01% swap fee
- 20% admin fee
- no CRV incentives

This could maximize Curve's net earnings (admin fees - incentives) and share of stablecoin volume, while keeping LP returns attractive

Metapools paired with the Basepool would continue to use the standard fee rates (0.04% swaps / 50% admin) and apply for CRV gauge support and allocations through CurveDAO governance process

But the Basepool itself would not divert CRV incentives away from existing pools

Version B of the proposal would more deeply integrate MakerDAO as a core member of the CurveDAO governance community

The Basepool would maintain standard admin fee rate of 50% and apply for CRV gauge support

Rather than seeking risk compensation stability fees on Basepool and metapool LP vaults, Maker would withhold a share of CRV earned by LPs

Over time, this would be accumulated into a long term reserve of CRV, giving Maker a greater incentive alignment with the Curve ecosystem

Maker would seek whitelisting to be able to max lock all accumulated CRV into veCRV

Gauge voting would focus on boosting the Basepool and linked metapools, while DAO voting would seek to support Curve's long term value accrual and sustainability

As a final piece of the puzzle, Maker would release a liquid CRV wrapper (mkrCRV) and linked vault

Maker would gain additional voting influence, and CRV holders would be able to unlock value from their holdings while continuing to earn yield from admin fees and Maker vault LPs

While this would create a new competitor in the battle for Curve influence (currently dominated by @ConvexFinance, @iearnfinance, @fraxfinance, and @StakeDAOHQ), I believe this would also create significant opportunities for collaboration

For example, these DAOs could build yielding strategies/wrappers on top of Maker's Basepool and metapool LP vaults

This would automate position management and reduce gas costs for users while giving these protocols an additional source of management or prop investing revenue

Curve is a foundational piece of the Defi stack, and has played a key role in Maker's success over the past 2 years

The relationship between Curve and Maker stretches back all the way to 2019, before the launch of Curve protocol or multi collateral DAI forum.makerdao.com/t/introducing-…

I'm excited at the prospect of deepening collaboration between these two ecosystems

I'll be seeking feedback on the proposal version from both communities, with an intention to launch formal proposal and begin moving this partnership forward in the coming weeks

Thanks for reading, and I'd really appreciate any feedback on the draft proposals!

Defi is strongest when we work together toward common goals 🤝

docs.google.com/document/d/1Yy…

🍻/fin