Proposal to add USDC/EURS, USDC/CADC and USDC/XSGD pools from DFX Finance as strategies on APY.Finance

Proposal Overview:
Add new yield farming pools from DFX Finance to the APY Finance strategies. These fiat backed foreign currency stablecoin pools provide 3 clear advantages to APY Finance:

  • Attractive yields (>20%)

  • A hedge against USD inflation (EURS in particular - Can Foreign Currencies Act as an Inflation Hedge?)

  • In the scenario (proposal phase 2?) where APY Finance adds Deposit support for each of the currencies you open a up a huge new group of users who hold EURS/CADC/XSGD and would be keen to have easy, hands off exposure to a broad group of yield farming strategies in USD - while safe in the knowledge that they will still have exposure to some strategies supporting their native currency.

Detail:
DFX Finance is a decentralized foreign exchange (FX) protocol optimized for trading fiat-backed foreign stablecoins, (CADC, EURS, XSGD, etc.). It runs on both Ethereum and Polygon chains, I will only consider the pools running on Ethereum in this post for optimal compatibility with the APY Finance platform.

Yield is earned by depositing into one of the USDC paired foreign currency pools. The optimal pools in terms of liquidity and native on/off ramps are Canadian Dollar - CADC, Euro - EURS and Singapore Dollar - XSGD.

These pools are currently paying APY’s of 20.7% (CADC), 26.% (EURS), 25.3% (XSGD) rewarded in the native DFX token when you stake your LP token to the staking rewards contract. The DFX rewards are unlocked immediately.

You can provide single sided or two sided liquidity for any pair. If you provide single sided liquidity (e.g. USDC only to CADC/USDC pool) the contract will automatically perform a swap for a portion of your deposit to other side of the pair, at the optimal % to balance the pool.

This proposal does involve exposure to foreign exchange rate variations through the conversion from USDC to foreign denominated stablecoin. There is a risk of IL based on FX rates at the time of depositing and withdrawing.

The contracts are:
EURS-USDC: 0x1a4Ffe0DCbDB4d551cfcA61A5626aFD190731347
CADC-USDC: 0xa6c0cbcaebd93ad3c6c94412ec06aaa37870216d
XSGD-USDC: 0x2baB29a12a9527a179Da88F422cDaaA223A90bD5
Pools on the DFX site: DFX Finance | App

Summary:
If successful this proposal would add the USDC/Foreign Stablecoin pools from DFX Finance to the APY Finance yield farming strategies.

In doing so it would provide exposure to non-USD denominated currencies offering a hedge against US inflation while earning yield rewards from DFX.

A risk of IL exists with this hedge, based on the foreign exchange rate of each at the time of deposit and withdrawing for each currency pair, this risk should be outweighed by the hedge and farming rewards.

A second phase of the proposal would add Deposit support on APY Finance for the same foreign stablecoins opening up APY Finance to a whole swathe of new users globally.

13 Likes

I agree

  1. Having these strategies would help people from different regions and walks of life save money and build wealth. Pairing their local currency with a stronger fiat currency, like the US dollar serves as a great hedge against inflation since the US dollar is generally more desirable due to its relatively low rates of inflation and its status as the world’s reserve currency.

  2. Stablecoins and CBDCs can coexist as stated by US Fed Chairman Jerome Powell so by listing or even just having support of these early-stablecoins APY FInance would have a first-mover advantage in on-chain FX strategies and also, like OP said, open up APY Finance to a whole swathe of users globally. There isn’t any excuse for non-foreign stablecoins to not have the same validity as US-backed ones.

5 Likes

Would be tremendous to see DFX Finance added to the APY Finance strategies! I echo the sentiment that the prevalence and utility of non-USD pegged stablecoins will only grow as the overall stablecoin ecosystem flourishes. Providing users yield strategies on these would be really valuable.

2 Likes

It adds currency risk - the chance that the underlying currency with deviate from the US Dollar. But it also adds diversification. I’m not sure how much it will act as a hedge against inflation. AFAIK all countries went loose with the monetary supply and all are having supply chain issues, so pretty much everywhere will see inflation rise. (Please correct me if I’m wrong.) Anyway I support the proposal for this strategy, weighted on the lighter side.

2 Likes

I use DFX Finance. As a Canadian I use DFX Finance to beat inflation, and I use the fx protocol to exchange currencies to remit back and forth to my friends and family abroad.

DFX has a growing suite of 1:1 institutionally backed stablecoins, (no-synthetics) meaning that they have a direct on/off ramp in their jurisdiction.

For example:
As a Canadian I can use PayTrie (Canadian fiat/crypto gateway) to buy and sell my CAD/CADC from my bank account. My family in SEAsia uses Straightx by Xfers to receive XIDR and XSGD I send and they exit to cash in their bank account.

This is true for every stablecoin available on DFX Finance, and opens up that entire concept and possibilities to users on APY.Finance who are unfamiliar with the options available for borderless exchange. Decentralization.

:ballot_box: I support the proposal :white_check_mark:

In the works: We are looking forward to a one-stop-shop on/off ramp aggregator in the future on the DFX platform. Making it even easier for adoption.

2 Likes

This makes a ton of sense for all of the reasons stated above (which I won’t restate). I will add that the platform will only grow and use cases compound on each other.

There is little doubt that individuals entering into the “cryptosphere” will already be a bit squeamish, trying to learn how everything works. This protocol allows them to remove one barrier to entry and use something they are familiar with - their own currency.

It’s a simple, brilliant concept and it would make perfect sense to join in.

3 Likes

Pretty much echoing exactly what @0xNegi is saying.
Having those local currency pairings are key and this would only help expand DFXs overall reach. Also, we have yet to see any of these foreign stablecoins really flourish and with 2022 being the “year of the stablecoin” regulation wise, this is a forefront moment to be ahead of the crowd. :+1:t3:

2 Likes

Majority of the comments here have hit the nail on the head. Non-USD pegged stablecoins will all grow as the stablecoin ecosystem expands and goes more mainstream. 2022 (and beyond) will be a huge year for growth in this area. It’s a smart yield strategy and diversifying into this ahead of the curve can only be beneficial. I support this proposal! :green_square::star:

1 Like

Won’t this introduce currency risk to our yields? Say there is a Euro-pegged stablecoin farm earning 10%, but the Euro drops 10% against the USD, this introduces a whole new layer of complexity. How does the platform allocate dollars across strategies? It should factor in risk-adjusted rate of return (probably doesn’t at this early stage) but incorporating non-USD pegged stablecoin then it would also need to factor in currency risks…

Alternatively if there was a USD/Euro/CAD mode in the platform where it accepts stablecoins pegged to that currency and allocates to farms denominated in those currencies, I’d be for that. Although it probably goes behind other platform priorities IMHO (such as cross-chain farming).