Governance Votes: Dividend Vault Funds
Meow’dy, furends! 👋😺
FISH governance voting has opened this week, for you to select which assets we should invest into with the Dividend Vault Funds (DVFs).
DVFs are used instead of direct burns, to promote long-term sustainability, dividend fund value, and consistent burning over time. Instead of immediate burns we put the funds into a vault to generate interest, only buyback-and-burning the fees generated by the DVF. DVFs help to reduce volatility based on transactional volume, spreading volatility out over time.
For more details on how our DVFs work, please check out our docs.
There are FOUR DVFs: one for each Risk Profile. As a result, there are FOUR proposals for you to vote on, head to our Governance DAO to check each in detail:
Currently the percentage split for Safe/Low/Medium/High Risk DVFs are:
Safe 10% IS3USD
Low 40% WMATIC-DAI
Medium 40% WMATIC-BANANA
High 10% ICE-USDC
The following criteria are applied for each risk profile:
- Safe: stablecoins.
- Low: ETH, BTC and stablecoins.
- Medium: Bluechips and stablecoins.
- High: LPs for larger, established tokens (i.e., QUICK, BANANA, etc.).
Note that percentages and risk profiles may change in the future via governance or otherwise.
We hope that bridging across two weekends will give busy felines plenty of time to decide and vote. 🗳🐱📅
The Proposals are open for votes until the end of Sunday 12 Dec (midnight, UTC).
- Start date: Dec 4, 2021, 00:00 AM (UTC)
- End date: Dec 13, 2021, 00:00 AM (UTC)
DYOR: A Short Guide
We were asked by some of you:
How can we DYOR (Do Your Own Research) and decide which option to vote for? 🤔 I’m not really into farming, and this is all so confusing!
Great question–fair enough! As promised, here’s some general guidance.
Note that this is not financial advice, but simply a light framework to guide your individual DYOR and decision-making process.
Each of the four proposals for voting contain various options: most of them are paired LP farms (i.e., MATIC-USDC on QuickSwap), but some are single asset stake (i.e., BTC on AAVE). We have provided source links for every option, to help you DYOR.
Regardless of the type of investment vehicle, some things should always be considered:
What’s the risk profile? Does it match?
- Picking a high-volatility degen token for the Safe Risk DVF would not be an appropriate match.
- Picking a high-volatility degen token for the High Risk DVF may be an appropriate match.
What’s the current yield?
- APR or APY?
- Is it sustainable?
How volatile is this LP/asset?
- Is it in line with your expectations as a DIVIDENDS fund?
- What about the Impermanent Loss? Is this pair subject to an acceptable level of IL for your risk appetite?
- What’s the past & potential future performance like? Any relevant history or upcoming events to consider?
- What are the relevant tokenomics?
- Is the token inflationary? Deflationary?
How is the yield split? Rewards vs Fees?
From the voteable choices, you may have noticed juicy higher APRs on QuickSwap LPs, due to the Dual Rewards mining programme. Based on APR (yield), they would make prime candidates for the DVFs. However, there’s more to bear in mind:
Most of the QuickSwap Dual Rewards come from sheer volume of transactions (fees), rather than QuickSwap rewards incentives.
Okay, but what’s the impact of that? Plain English, please!
As an individual farmer, it may not matter, but this difference is important when considering distributable dividends, such as with our DVFs:
- The FEES portion of the APR gets compounded and accumulated within the LPs, we can’t distribute those rewards as dividends.
- Only external REWARDS can be distributed as dividends, as we can harvest and sell them, to buyback PAW.
Considering the above: given 2 farms with the same APRs, the farm with the highest proportion of externally issued rewards vs. fees earned, allows for higher dividend APRs. Conversely, the farm with a higher proportion of fees earned grows itself quicker via compounding.
In the above example screenshot (MATIC-USDC, QuickSwap Dual Rewards):
- Although the APY is 155%, only $9,329 can be distributed as dividends (presuming that we own 100% of the farm, which is not the case).
- The remaining $126,901 are compounded, increasing the LP dollar value.
Hopefully, this guidance can help you DYOR, assess your risk appetite and decide which options you would like to vote for. If you have any further queries, feel free to join us on Telegram or Discord!
We want to thank you all for hanging in there, while we get these Governance cogs turning! ⚙🔧
In line with our long-term vision, the aim is to get to a point of regular monthly governance proposals to select DVFs, via the DAO. This will keep the DVFs optimised and aligned with expectations–as voted for by you, our feline community!
And a special Thank Mew to all the cats engaging with us in the governance discussions, Feed the Cat ideas, suggesting pairs for the vote, deliberating the best DAO/Proposal frameworks, rules, definitions, and moar! 💌
We are absolutely thrilled to see our community get involved: that’s the whole point, after all! You tell us how you want Polycat to work! 😸📣
Until next time, furends! 😽💦