Scope:
Request DAO approval to increase the protocol exposure for UwU Lend to a maximum of 20% of the total treasury.
Current Governance Limitations:
By voting yes on this proposal, the DAO would be giving permission to exceed the current 10% protocol exposure limit in the Treasury Allocation Proposal (WIP #26) to up to 20%.
Objective:
- Increase the exposure limit to UwU Lend to 20% of the total treasury. If this limit is exceeded due to directional price movement, the Treasury Council will remove assets to maintain exposure under the 20% limit.
- Allow the Treasury Council to adjust the allocations within UwU in accordance with the 20% limit.
- This limit will include UwU tokens held and tokens in the LP.
Plan/Strategy:
The team is requesting a mandate from the DAO to deploy treasury assets into Uwu Lend not to exceed 20% of treasury value. The initial proposal looked at increasing the exposure up to 16% of treasury assets, but excluded the UwU and LP tokens. The percentage was increased to 20% to leave some additional wiggle room for deployment of the UwU-ETH LP position, as we acquire more UwU from farming and vesting.
The TOs plan is to allocate roughly 16% towards stablecoins. The remaining 4% will be reserved for UwU and UwU-ETH LP tokens as well as a small buffer to help adjust the position, as we acquire more UwU from farming and vesting.
The UwU-ETH LP will only be deployed if TMP 2.2 is approved by the DAO, allowing us to lock the UwU-ETH tokens for 8 week periods.
Rationale:
The current strategy is to maintain a sizable treasury allocation on UwU Lend farms while the yields are high, since there are currently limited high yielding farms in DeFi. Furthermore, the Treasury Operators (TO) due diligence shows that the risks of deploying on UwU Lend are lower than other protocols with comparable yields or newer, unproven protocols which may have elevated smart contract risk relative to UwU Lend. This strategy will allow the treasury to earn yield on a higher percentage of its assets with relatively low risks while keeping stable assets.
Increasing the exposure limit aims at reducing the cost basis. The TOs estimate that farming and locking into the LP is a better alternative versus selling UwU to lower the cost basis further. The impact of selling UwU could cause a significant price decline in UwU which would have a negative impact on our vesting UwU from the OTC deal and the indirect exposure to UwU through our SV investment. Furthermore, this would impact UwU Lend’s ability to attract TVL, limiting long term yields in the LP which would otherwise benefit Wonderland directly and indirectly through SV.
For clarity, there will be no further acquisition of UwU other than by farming. Further acquisition of UwU by other means would require a separate proposal.
‘Farming’ refers to activities that generate a positive yield partially or totally in UwU, e.g UwU-ETH LP, providing credit on UwU Lend, or future vaults on UwU Lend.
Snapshot:
https://wl-l.ink/Snapshot/TMP-1-2
Voting options:
- Approve Increased Exposure
- Deny Increased Exposure
UwU Lend Background:
UwU Lend is a liquidity market that offers depositing, borrowing and its lending market is forked from Aave V2. Users earn interest on deposits and pay interest to borrow. The protocol was founded and is actively managed by Sifu.
More details available here:
Website: https://uwulend.fi/
Docs: https://docs.uwulend.fi/
Risks:
Price Risk:
UwU price could decline and farmed tokens need to be vested for 4 weeks to not incur a penalty fee. Our current cost basis for UwU tokens farmed so far is $9.60 and will continue to decrease as we switch from looping to supply-side. This cost basis can be lowered further by farming rewards in the UwU-ETH LP, which requires a separate approval of TMP 2.2.
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. UwU Lend has completed its independent audit with Peckshield for all contracts, including the upcoming vaults and results will be published soon.
Liquidity Risk:
The LP for UwU-ETH is incentivized and helps in the short term with price stability due to the 8 week lock. However, as the weeks pass, we will 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.
Disclosure:
Some moderators and team members at Wonderland are also team members at UwU (Alice, Bamchicka, Catalyst, ruian, Vayu). The proposing TOs have experience with the platform and also hold exposure to UwU Lend.
Re-vote of the TMP:
This TMP has been voted on in a similar form before and each previous vote showed that there was need for clarification. We ask our voters to check the various links to previous discussions in the #TMP channel on discord and invite you to @ the Treasury Team to clarify further, before voting.