Idle Smart Treasury (deprecated)
The research article released by Placeholder VC in September 2020 proposes, for the first time, an automated buyback mechanism applied to Governance’s capital efficiency.
The process consists of deploying a Balancer “smart pool” (referred to as Smart Treasury for this use case) which acts as an automatic buyback machine and liquidity provider.
Since the $IDLE governance token launch, the forum has hosted several discussions on how to increase the on-chain liquidity of the token and provide new use cases. The community analyzed liquidity mining programs in decentralized exchanges but preferred a Smart Treasury approach to incentivize liquidity provision in the long run.
A snapshot poll confirmed the community decision in moving forward with this proposal, and a protocol grant assigned the code development task. Lastly, the peer review enabled safe program deployment that was executed with IIP-2.
A Smart Treasury contributes to increasing token liquidity and reducing swap slippage. The fees generated from swaps are added into the pool and re-invested back into the Smart Treasury.
In addition, the pool is eligible for $BAL tokens from Balancer, serving as an additional income stream for the Idle protocol.
The Smart Treasury is controlled by the IDLE governance, which can adjust parameters such as pool weights, token additions/removals, swap fees, and pause/unpause swaps.
The pool manages the IDLE-WETH pair, with a 90/10 token weights.
130,000 $IDLE from the Ecosystem Fund along with ~$40k in WETH from the FeeTreasury bootstrapped the Smart Treasury.
Protocol fees are now routed across these ecosystem contracts:
- FeeCollector: this contract collects protocol fees and swaps tokens (stablecoin, $COMP, $WBTC) into $WETH using Uniswap.
- Smart Treasury: it receives 80% of the profits received by FeeCollector (in WETH).
- FeeTreasury: it’s the old Governance treasury, and it receives 15% of the profits in WETH.
- Rebalancer: this contract manages funds allocation for Best-Yield and Risk-Adjusted streategies. Due to continuous protocol rebalances, this mechanism is expensive and required a seamless stream of ETH. It is currently receiving 5% of processed fees.
Example of fee routing scheme:
Smart Pool Parameters:
- Weights: 90 / 10
- Tokens: $IDLE / $WETH
- Swapping fee: 0.5%
Multisig TX to transfer FeeCollector ownership to Governance: 0xad11f1cd69f53acb729e243b82e2b1a706eaa82a4b032dea5ca726dd312e563c