Exploring the Concept of a CRV Omnipool on Conic Finance

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#1

Objective:
The primary objective of this concept is to introduce a CRV Omnipool on Conic Finance, designed to provide diversified exposure to a variety of Curve liquid derivatives. This omnipool aims to enhance liquidity management and optimize yield opportunities for users while contributing to the stability and growth of the Conic Finance ecosystem.

Overview:
The CRV Omnipool seeks to revolutionize the way liquidity is managed within Conic Finance by allowing users to deposit liquid CRV, which is then allocated to various Curve derivative pairs. Unlike traditional liquidity pools where withdrawing liquidity reduces the deposited assets, this omnipool operates on a non-withdrawable basis. Instead, users receive a rebasing liquid derivative that has a liquid market built for exchange. This innovative approach ensures that the core liquidity remains intact, fostering a more stable and efficient liquidity environment.

Mechanism:

  1. Liquidity Allocation:
    When users deposit liquid CRV into the omnipool, the funds are allocated to various Curve derivative pairs. The allocation is governed by the current weightings set by vlCNC governance, ensuring that the distribution of liquidity aligns with the protocol’s strategic goals. Key market participants like Yearn, StakeDAO, and Convex Finance could be integrated into the omnipool’s strategy to maximize returns and stability, leveraging their expertise and established positions in the DeFi space.
  2. Yield Generation:
    A significant majority (exact percentage to be determined) of emissions from these derivative pairs will be distributed as yield to omnipool depositors. This yield distribution is designed to reward participants while also maintaining a small fee to support governance, protocol growth, and other operational needs.
  3. Market Dynamics:
    The non-withdrawable nature of the deposited derivatives within the omnipool creates a robust and stable liquidity base. This stability is further enhanced by the rebasing mechanism, which allows for the creation of a liquid market for the omnipool’s derivative tokens. Additionally, the flexible nature of this market enables liquidity to shift seamlessly, allowing protocols to rebalance their derivatives efficiently during depeg events. This dynamic liquidity management ensures the optimal utilization of available CRV in liquidity markets, benefiting both the protocol and its users. The involvement of participants like Yearn, StakeDAO, and Convex Finance further strengthens the omnipool’s ability to navigate market fluctuations and enhance overall liquidity efficiency.

Conclusion:
The introduction of a CRV Omnipool on Conic Finance represents a strategic enhancement to the ecosystem, providing users with diversified exposure to Curve liquid derivatives while optimizing yield opportunities. The non-withdrawable structure of the pool, combined with the rebasing liquid derivative and the involvement of prominent DeFi participants such as Yearn, StakeDAO, and Convex Finance, creates a more resilient and efficient liquidity environment. This concept invites the community’s input and support to further explore and potentially implement this innovative liquidity solution, advancing Conic Finance’s mission to lead in decentralized finance innovation.

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#2

Interesting proposal!

How do you plan on maintaining liquidity here? Why making it non withdrawable since funds are allocated in liquid derivatives? Wouldn’t it be much easier to allow withdraws and not have to incentivise / take the liability of a liquidity pair?

#3

I’ve been thinking over this more as well. The inherit design is to deepen liquidity for CRV for all derivatives where each corporation can share its liquidity based on needs across the space. Synergistic form of governance between protocols rather than competition. You are not wrong to point out that the new pool would need incentives of some sort. But this design differentiates itself from other models; (asdcrv would serve as the proto withdraw-able model, conic servicing as a multi derivative non withdrawal model). The space needs curve to be hoarded and recycled. But it does it at the cost of no one absorbing liquid derivatives.

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#4

The inability to withdraw your original deposit directly could be a downside for users who prefer flexibility. Once your funds are in, you’re locked in and can only access them through this special token. This adds an extra layer of risk, as the market for this new token might not always have enough liquidity for you to trade it easily. If there’s low demand or market instability, you could find it challenging to cash out when needed, potentially leaving you stuck during critical times. It’s enough risk as is with Yearn and Convex pegs being down 10-20% at times and now another token that requires liquidity to be tradable…

#5

Thanks for sharing this proposal. While I think this could potentially work as a separate product (if there is sufficient demand and incentives), I don’t think it would be a good fit for Conic, as it’s very different in design. The inability to withdraw the underlying (CRV) for the Omnipool LP token would make this very different from the current design of Conic Omnipools. Also, the nature of the supported derivative tokens could make rebalancing tricky. For instance, when allocation weights change and the underlying needs to be rebalanced, it can get quite involved (e.g., unstake and withdraw cvxCRV → swap for CRV → lock in Yearn, deal with slippage+depeg risks, etc.).

It also remains unclear to what extent LPs would be happy to hold a derivative token that wraps another set of wrappers, as it’s already quite challenging to establish a peg regarding these underlying derivative tokens.