[READY] [GF: Phase 1] Overnight.fi

[lafe]

Project Name: Overnight.fi

Author Name: @lafe

Number of OP tokens requested: 250,000 OP

L2 Recipient Address: TBD

Relevant Usage Metrics: (TVL, transactions, volume, unique addresses, etc.) as of 25 June

Latest TVL can be checked on DefiLlama
Unique holders: 1383
Volume traded: ~1.9M (last week)

Targeted deployment date: July/August 2022

Highlights:
USD+ is USDC that pays yield daily via rebase. USD+ stablecoin can be instantly minted and redeemed to USDC 1:1.

USD+ includes 3 components:

1. Pegged to USDC 1:1

• 100% collateralized with assets immediately convertible into USDC
• ‘Risk-first portfolio’, i.e., assets are picked primarily to avoid losses on a daily basis (3-4 sigmas away from 0), no exposure to algorithmic stables
• USD+ can replace USDC in pools and lending protocols

2. Yield generating

• Collateral consists of yield-bearing strategies, including lending and stable-to-stable pools
• Portfolio allocation decentrally controlled (community proposals, veto power by token stakers/insurance providers)
• Portfolio strategy executed decentrally via smart-contracts
• Profit paid out daily in USD+ via rebase

3. Insurance (soon)

Optimism alignment:
Because of its cutting-edge technology and the Optimism collective’s overall mission, Overnight sees Optimism as one of the most promising scaling options. It’s fascinating because this can develop a story beyond just producing money. We consider Optimism to be the ideal basis for creating the most cutting-edge decentralized exchange in the world.

The magic of USD+ is that this extends to Liquidity Pools and makes Yield-Farming even more profitable. This opens the gateways to a new era of Yield-Farming and reduces the reliance on Gauge Pool rewards (farming tokens) as a primary incentive for LPs as USD+ contributes to making them more lucrative:

1. Users provide liquidity into USD+ pools and get USD+ yield on top of LP fees and rewards
2. Everyone can pair token with USD+ and passively grow token’s price thanks to the USD+ yield-bearing nature.

Liquidity Pairs with USD+ have an advantage over other stablecoins like USDC owing to the APY generated via its Yields.
Think of USD+ as essentially USDC, it’s liquid, hassle-free, pegged to USDC but with an added bonus of passive income. When paired in Liquidity Pools, USD+ generates increased returns for Liquidity Providers. Overtime, increased returns on Liquidity Pools can be increasingly rare and at often times, unsustainable — this gap is filled by USD+.

As well USD+ achieved #3 on Polygon dApps with the highest weekly trading volumes (a net of max. ~$5.1M). We believe that USD+ on Optimism will lead to an increase in trading volumes on both the Velodrome (following the example of Dystopia) as well as on Uni V3.

Proposal for token distribution:

How will the OP tokens be distributed?
OP tokens will incentivize LPs USD+ pairs on Velodrome, such as USD+/USDC, USD+/OP, and USD+/ETH. This consists of adding extra incentives on top of the auto-compounding LP tokens and USD+ rebases. This will provide above-market APYs to the pools and be seen by Overnight users, making them want to bridge to Optimism.

How will this distribution incentivize usage and liquidity on Optimism?
USD+ is designed to make liquidity mining makes even more profitable. Offering USD+ rebases, and incentives specifically on Optimism will encourage users to move their assets to Optimism for better return rates. Since USD+ acts as an add-on for many projects, people coming to USD+ are not only using the USD+ platform - They’re interacting with DEXs, liquidity protocols, and more. That means users have a breadth of usage on Optimism, not just on a single dapp.

Why will the incentivized users and liquidity remain after incentives dry up?
Liquidity Provisions are ever-more profitable with USD+. LPs with USD+ reap APYs from USD+ as well, massively increasing profitability and returns on Yield-Farms. USD+ APYs result in both sides of tokens with the said LP increasing in $ value. This auto-compounded effect increases LP token quantity allowing you to grow position and earn more rewards from Gauge Pools with the very same set of LPs without any of the leg-work involved.

Over what period of time will the tokens be distributed?
We cannot set a deadline for distribution because it is directly impacted by the fees the protocol generates.

How much will your project match in co-incentives?
Overnight’s stablecoin, USD+ is a yield-bearing asset generating rewards for its holders on a daily horizon via a rebase mechanism. These rewards are financed via Overnight’s carefully selected Yield-Farming strategies

[Andrea]

Hey everyone,

I’m new here but happened to work closely with the Overnight team in the past during the development of the ERC4626linearpool for Balancer.

I can’t speak highly enough of the professionalism of the team.

Just my 2 cents

[solarcurve]

would’ve been great if they decided to use Balancer on Optimism for some of their liquidity though

[sowily]

This team seems to be making the most headway and working strategically to create a product that will have the potential to support and impact many others in a positive way.

[Cryptofit]

I am a member of many discords but have learnt the most from Overnight team through their discord, twitter, blogs, AMA’s etc

The team is super talented, very professional, top notch in their research and very eager to educate the community.

Transparency is name of their game, discussing their strategies with the members, asking for feedback and using those feedback to better their strategy if waranted.

This team is definitely what Defi needs to bring trust back into a space that is being looked at suspiciously.

[shinra00]

Overnight Finance is an amazing defi platform. The team is crazy talented and dedicated to the community and best interests of it.

The amount of information and knowledge they share is incredible. Couldn’t be happier to have them managing my funds.

[OPUser]

Where can i find stats for OP chain ?

On your platform I dont see an option to connect to OP chain, are you live yet ?

[lafe]

Hey,

we’ll deploy our product on OP chain in July/August. Right now we’re live on Polygon and Avalanche, you can see stats here

[OPUser]

Thank you.

Couple of suggestion, project is not live yet, $OP requested will be distributed as LP incentives and no co-incentives. Unfortunately, I would not be able to support this.

[lafe]

@OPUser

, project is not live yet, $OP requested will be distributed as LP incentives and no co-incentives. Unfortunately, I would not be able to support this.

thanks for your feedback.

We provide passive yields where there were none before, users just need to replace USDC with USD+ stablecoin – these are our co-incentives.

$OP requested will be distributed to the new and existing Optimism users, so we are able to provide a high yield as we do right now on Dystopia. After incentives dry up users will still receive USD+ yield on top of LP fees and rewards.

[OPUser]

@lafe

We provide passive yields where there were none before, users just need to replace USDC with USD+ stablecoin – these are our co-incentives.

Sorry to bother you on this one more time but this passive yield you will pay for LP on velodrome in the form of OP, right ?

This statement only apply if answer to above is yes, then what are offering an co-incentive ?

[lafe]

@OPUser

Sorry to bother you on this one more time but this passive yield you will for LP pain on velodrome in the form of OP, right ?

This statement only apply if answer to above is yes, then what are offering an co-incentive ?

thanks for getting back to me.

Let’s start over. USD+ is USDC that pays the users’ yield daily via rebase. The advantage of yield-generating stablecoins is that nothing is required from the holder – no staking, nor unstaking – the yield just accumulates in one’s wallet daily via positive rebases.

USD+ offers increased returns & unique benefits for Yield-Farmers & protocols respectively as USD+ is a self-appreciating token via its rebases. More info: https://blog.overnight.fi/the-in-liquidity-pools-why-liquidity-pairs-with-usd-are-more-capital-efficient-f4e45298d7ff

So, the answer is no. With the grant we can provide APY above average. Our co-incentives are to generate yield with USD+ rebase to OP users and the high trading volume for protocols.

[Mike]

This is interesting project w/ what appears to be a strong team. Increasing stablecoin liquidity on OP is always desirable. Ask seems reasonable.

I would hesitate as the project is not yet deployed on OP. Additionally, I would be interested in a rough idea of the breakdown for LP pairs incentives, specifically how much team intends to incentivize USD+/OP pool relative to other pools.

@lafe

OP tokens will incentivize LPs USD+ pairs on Velodrome, such as USD+/USDC, USD+/OP, and USD+/ETH.

Proposal lacks co-incentives, but incentivizing this pool could benefit OP due to rebase mechanism.

[solarcurve]

I’m abstaining as voting on a proposal that allocates 100% of OP towards liquidity on a competing exchange to Balancer/BeethovenX could be perceived as a conflict of interest.

[Max_plus]

USD+ rebases in the pool (the tech has been developed on Dystopia on Polygon and is certain to work). The yield is paid in USD+, but not as a reward, but as a USD+ balance increase in the LP

an important point: we would love to offer co-incentives, however, our governance token does not exist yet. hence, we attract users by offering yield in LPs. We applied this approach on Dystopia (very similar model to Velodrome), without veNFT airdrop, and have been able to outcompete multiple higher profile projects by generating trading volume and incentivizing people with yield only.

[Max_plus]

Dear Mike, if the grant request is successful, we will look to split incentives approximately the following way:

• 50% - OP/USD+
• 30% - ETH/USD+
• 20% - USDC/USD+

our strategy is to drive trading volumes on Velodrome and crypto-USD+ makes most sense from that perspective.

[Max_plus]

Please don’t))) As mentioned previously, we had worked with Balancer (with Andrea, Greg, Rab, Alan and others) on making boosted pools 4626 compatible. Hence, Balancer are still considering a grant to compensate us for that work, we proposed to spend it all on OP incentives on Beets/Balancer.

Also, the way USD+ works, is that collateral backing USD+, is deployed across lending and stable-to-stable LP. Since Beets implemented daily reward claiming, we cant wait to deploy a chunk of that liquidity into Balancer’s stable/boosted pools. we also look to start a boosted pool on balancer as well.

All that being said is that USD+ launching on OP would benefit the entire ecosystem and would generate 2nd and 3rd order effects that would benefit Balancer, Uni v3, Velodrome, AAVe, curve and generally everyone. So please vote))

[tongnk]

Whilst there’s some issues with proposal (not deployed to OP, no co-incentives) I do still think that it’s a very interesting experiment for a stablecoin. Will be voting for.

[lefterisjp]

Hello @lafe

Thank you for your proposal.

One important (for me) question:
Is all your code opensource? Smart contracts? UI and frontend?

I see a couple of issues.

1. Where is the yield coming from? I went to your website and tried to understand how the system works.

What do you mean by assets immediately convertible to USDC? Which assets are that?

Drilling further it seems that these assets are other yield bearing tokens? Like say cUSDC and aUSDC in Compound and Aave respectively?

Can you explain the “Profit paid out daily in USD+ via rebase” a bit more? So you wrap various yield bearing tokens in a new token. You call it USD+ … and then how do you generate more yield for your users on top of the standard yield that they would get from the normal yield bearing tokens? “Via rebase” does not really explain it.

EDIT: Okay for this question got some answers in Twitter: https://twitter.com/LefterisJP/status/1545884720914890753

2. Why not wait with the proposal until you are live on Optimism?
3. Why not wait when you can offer co-incentives? You mention you will have a governance token soon.

[_Max_plus]

yes, everything is opensource: overnight.fi · GitHub

the yield comes from lending strategies (like aUSDC indeed), but most importantly from high quality stable-to-stable pools, like USDC/USDT/DAI. Stable-to-stable pools tend to generate higher yield than things like AAVE, but also involve certain costs that require careful portfolio management. Yield generated by the collateral is paid out via rebase, meaning that when the value of the collateral exceeds 100% of USD+ in circulation, the USD+ is rebased for the collaterization to reach 100%. Below is the picture of USD+ portfolio on Polygon - we run online mark-to-market valuation of the portfolio and contrast it to the amount of USD+.

2. it is very quick for us to deploy on Optimism (1 week or so), but we won’t be able to launch successfully unless there is an incentive program we are certain about. We missed on veNFT distribution by Velo, otherwise we would be live by now. maybe, the way to go is approving the funding subject to our deployment? i.e. funds are disbursed only after the product is live on OP?

3. we planned on issuing the governance token but won’t do that soon because of the market conditions. this has been delayed until the end of the bear market essentially.

when talking about incentives it is important to understand our model: we do give incentives to USD+ holders, simply in the form of the yield they receive via rebase. the way to think about it could be that rebase is actually an incentive in USD+ stablecoins. Users absolutely prefer stablecoin incentives to those in governance tokens.

this is also important to understand why other stablecoins provide incentives, in particular, lending protocols like LUSD or Qi DAO. Their model is to generate revenue from lending and issuing the stablecoin is like issuing the ‘variable coupon bond’, i.e. the funding mechanism. They take revenue from lending and pay out çoupon’ in the form of token incentives (or at least thats how it is supposed to work sustainably). Because of the differences in the models, we believe, a different standard in terms of incentive matching is appropriate