Yield farming with unused liquidity

Sushinomics
#1

One of the biggest reasons people are deciding against providing liquidity on Sushiswap or AMMs, in general, is the opportunity cost of not being able to farm other protocols.

Sushiswap should lead the development and innovation of AMMs and design new smart contracts that allow unused liquidity to be deployed in other audited high-level yield farming protocols with low risk profile.

But what about the liquidity?

A certain threshold has to be kept inside the smart contract while the slippage will be based on the whole collateral also deployed into the yield farms.
Important hereby is that if the actual liquidity in the smart contracts falls too much that we can automatically redeploy the capital from the yield farms into the swap contract.

Of course this would only work for the biggest pairs with the lowest volatility but could be expanded on.

Key benefit would be the extra income generated for LPs, token holders etc.

13 Likes
#2

I quite like this idea, as long as the LP has the option to opt-in or out of that scheme, that would be great and could attract more liquidity without scaring away more conservative LPs.

#3

agreed, this could be an optional feature and expanded on in various ways such as including nexus mutual coverage etc.

#4

Agreed, there are some pools I would be interested in creating or being part of…but stay away as because the farming of Sushi is too beneficial.

1 Like
#5

I like this… it’s a waste to have that capital just sitting there…

1 Like
#6

I’m all for it. Can we have a proposal? Anyone on the technical side to update us on feasability?

#7

Good thoughts. This is in a way what Definer is doing, a new project. Too many unborrowed deposits in a lending pool are also a burden and reduce net yield. Definer use algorithms that automatically lend funds, that not borrowed in its internal lending to competing markets. This also means u could use a liquidity pool as SLP and maybe use the unused liquidity for a lending pool. This is just a thought. Maybe we could collab? definer.org

1 Like
#8

I bet there would be room to collab in one way or another, would be great if the core team could reach out and discuss a potential partnership.

#9

This is smart. But is it a fix to a temporary problem? Yield farming opportunities are diminishing quickly. This is a heavy technical lift.

#10

@marsattack
Unless you think DeFi will die completely, this will give us the edge with higher yields for LPs over other AMMs. It doesn’t matter if the APYs will go lower, as long as there is an extra income stream for LPs we will attract additional liquidity e.g. people who currently provide liquidity on other DeFi protocols could instead provide liquidity on Sushiswap and earn extra.

2 Likes
#11

agree with that. it is a nice feature. may not be as high priority for people in 6 months though, we should just prioritizie it accordingly- in the context that “yield” farming is in a bubble, and most users are not doing this to earn 15%/year. they won’t care about this feature if yields are much lower.

#12

i think this is a cool idea

although we need to keep in mind this would increase the risk of entering a sushiswap lp pool. I think if it was an option it would be great, though

#13

I want to mention that projects like Curve do this already with some of their pools (e.g. compound). The pools themselves benefit from trading fees but also lending fees since they are used by lending protocols behind the scenes. This in turn means that LPs on those pools get more fees.