[Proposal] Diversify REF Treasury by Lending Assets into Pembrock

Background

Overview

This is a proposal to further diversify Treasury by deploying more assets into Pembrock Finance. We’ve discussed for several weeks now how we must be resilient in the face of challenging conditions.

Why Pembrock

As a Leveraged Yield farming protocol, Pembrock is a strategic partner that provides a lot of TVL and volume to REF. The only limit to increasing this TVL is the high cost of borrowing of certain assets.

Lending assets into Pembrock (equivalent to single-sided staking) creates an opportunity to earn yield without the risk of impermanent loss.

Opportunity

Current yield on wNEAR is over 10%, and stNEAR over 4%. It is expected for these yields to come down as we add liquidity, but the lower the cost of borrowing on Pembrock, the higher the TVL that comes back to REF in the way of new positions being opened by users.

Benefits

  • Additional revenue stream. Increase Treasury balances for hard assets such as NEAR and stNEAR.
  • Bootstrap TVL - activating otherwise idle assets to increase Defi Ecosystem overall TVL.
  • Deeper liquidity on REF (important specially on Stable Pairs such as Linear)
  • More trading volume and txs as Pembrock is constantly rebalancing positions.
  • More opportunities for end users, creating a thriving Defi ecosystem
  • Accumulate PEM token rewards (Treasury Diversification)

Would this dilute REF?

This is a common misconception. The short answer is no. The amount of REF is determined on a per pool basis and does not change whether the user engages in traditional farming or leveraged farming. Namely, it will cost us the exact same amount of REF, but by providing assets into Pembrock we can now earn extra revenue and potentially increase liquidity and trading volume.

Proposal

The final amounts can be discussed and can always be reviewed and increased or decreased as needed at any time. I propose we move ahead with deploying:

  • 50,000 wNEAR
  • 20,000 stNEAR

Risks

  • Contract Risk - Pembrock has been audited and has been in operation without issues for a while now.
  • Availability of Funds - in the event of very high utilisation rates, we will not be able to withdraw assets until users close out positions.
  • Impermanent loss - if there is a major event that results in widespread liquidations and major price swings, there may be a scenario where Pembrock ends up with bad debt (after unwinding the position, there are still not enough funds to cover the borrowed assets). This seems unlikely.

Other Considerations - REF v2

The only thing to consider and monitor will be the impact that the deployment of v2 REF (concentrated liquidity) may have on farms and subsequently on Pembrock. We can monitor this situation and make adjustments to the strategy as needed.

1 Like

I would propose to go for 100K Near + 50K StNear + 500K Ref