As the adoption of Decentralized Automated Organizations (DAO) accelerates and DAOs start increasingly diversifying their treasury assets in search of returns, we wanted to shed light on the viability of Overnight’s products as an asset for prospective DAOs to consider.
What makes USD+ stand out is that its peg is made to be war-tested; even during times of market turmoils and excessive sell-offs, Overnight has managed to sustain its peg, stringently. The secret? Fully-Collateralization and on-chain redeemable for 100% of the collateral.
Since its inception, USD+ has portrayed a remarkable and consistent peg. It champions the true principles of DeFi and fosters the needs of an ideal DeFi economy. In this blog post, we’ll elaborate more on what makes USD+ the perfect candidate for a given DAO’s portfolio, the mechanisms to acquire USD+, and its lucrative Yield-Generating aspects.
A Safer Choice for your Treasury: What is USD+?
When we at Overnight set out to build USD+, we perceived navigating DeFi and managing Yield-Farms to be cumbersome. What we delivered was a tremendously Capital-Efficient Stablecoin and the ecosphere’s very own version of a Money-Market equivalent. Holding the Stablecoin on its own generates a staggering 8–12% APY from its strategies. The yields are also passed on to LPs making them tremendously more profitable than what they already were — another unique proposition. This renders USD+ as an enticing Yield earning potential that DAOs could potentially tap into. For the basics on how the Stablecoin works, refer to the image below.
Lately, it’s commonly seen for DAOs to hold their own tokens & liquidity yet nothing beats pure, liquid cash. However, they are hesitant to acquire tokens apart from their own due to their associated risk — they are in turn, solved by Overnight.
One such risk is a lack of collateralization. The influx of Algorithmic Stablecoins has had wide-ranging implications for the ecosphere with the most severe being the brutal crash of the UST token from Terra Labs — an estimated $30 bln in market cap was wiped out within a matter of days. Hence, Overnight’s USD+ is fully Collateralized by the most secure Stablecoins (USDC, USDT, DAI, etc) and redeemable for its collateral at any given time should a user choose to do so.
Another risk is actively monitoring the Yield-Farms that the DAO has invested in. Given that DAOs aren’t robust owing to governance requirements (every deposit/withdrawal involves governance consultation), navigating DeFi may be a hassle — the space evolves daily. As a result, DAOs would need to constantly monitor the underlying protocol of other Yield-Farms that they’re actively invested in to ensure nothing will go awry. By holding USD+, they mitigate this risk as the Overnight protocol automatically does this for them. Its Due-Diligence team has a 6 step process implemented to ensure the safety of its assets. All of this is completely on-chain which means that DAOs can track the collateral of USD+ at any given time.
Overnight has unparalleled transparency and champions such principles — its collateral can be viewed here
When it comes to treasury management, DAOs should feel comfortable with the assets held on their balance sheet. Simplicity is key and Overnight provides simplicity on all fronts; this makes it intuitive for DAOs to analyze the benefits and risks of holding and using it — all the data that they need can be found via Overnight’s dApp at the mere click of a button.
Grow Your Treasury: The Yield-Generating Narrative
Having liquid cash available on your treasury’s balance assets is always a good thing; you can deploy your stables at a given notice. Nevertheless, it’s even better if those stables are earning yields. With USD+, this is made as simple as buying and holding it; it has consistently delivered 8–12% APYs — holders earn daily yield payouts from its strategies. After all, a DAO that manages to deploy its treasury in an efficient manner and manages to grow it is a winner after all. The perfect match for the two scenarios mentioned above? You guessed it, USD+! Here’s the historical breakdown of USD+ APYs.
The collateral for USD+ is the major factor contributing to stability. In case its peg on DEXes is affected, potential arbitrageurs can benefit from the difference. For instance, if USD+ trades at a discount on a DEX, arbitrageurs can buy it and redeem it for the collateral of 1 USDC at a moment’s notice — ensuring that the peg remains untouched. If a user calls the “redemption” function for USD+, Smart Contracts liquidate positions held (e.g, USDC on AAVE or Stable LPs on Synapse) to facilitate the redemption in a seamless manner.
Similarly, the Yield-Generation aspect is also applicable in Liquidity Pools where it has had tremendous success. LPs earn yields from USD+ in addition to Swap Fees & Gauge Pool rewards making Yield-Farming ever more profitable. In an economy driven by chasing the highest APRs one can get their hands on, Overnight aids DEXes in achieving this — think of it as Balancer’s boosted pools but with tremendous capital efficiency.
On the other hand, Yield-Generation with USD+ LPs also has the added benefits of “forced appreciation” for a protocol’s native token should they choose to pair their token with USD+. This implies that passive yields accrued from USD+ increase value on both sides of the LP; protocols paired to USD+ benefit from forced appreciation whilst benefiting from the stability of stablecoins.
In addition, to benefit protocols that pair their tokens with USD+, Overnight provides custom integration along with setting up arbitrage bots to boost volume generation if need be.
For projects wanting to get the most of out their liquidity, this is their optimal choice — refer to the image below for a visual representation of this.
Why Pair USD+ with Your Token
Higher Yields with Lower Risk: Delta-Neutral Strategy: ETS
The ETS (Exchange-Traded-Strategy) is an additional product launched by Overnight that eliminates the hassle(s) of volatile LP Farming. To partake in the usual Yield-Farming puts an individual in a dilemma. Should they choose to proceed, they’re vulnerable to the downside of the volatile token, therefore, decreasing their overall portfolio balance. Similarly, not partaking in Yield-Farming results in them losing out on the opportunity costs (i.e, the Yields that they could have gained).
The solution? Hedging against market volatility; Overnight executes this via borrowing the volatile token (ETH, MATIC, BNB, OP, etc) via a Money Market and proceeds to Yield-Farm on a DEX via the borrowed volatile token — pairing it with stables. It also executes vigorous rebalances to ensure that the Health Factor stays intact (the HF has never fallen below the target at a material % owing to the stringent process). Frequent rebalances serve the purpose of erasing any Impermanent Losses (ILs) should they realize as ILs increase exponentially. By eradicating them first-hand through rebalances, the strategy maintains its profitability despite market volatility — this is illustrated in the diagram below.
How Overnight hedges via its ETS for OP/USDC
When comparing the ETS with regular Yield-Farming, the benefits amount to be considerable. The result has been consistent APYs ranging from 10–25% with no negative payouts since inception — a feat of the product. To put this into perspective, even on days where BNB has plunged by 3–5%, the ETS has consistently delivered around profitable APYs.
ETS vs Yield-Farming: The Benefits
DAOs hesitant to gain exposure from volatile tokens can opt for Overnight’s ETS as a better alternative.
Treasuries that hold Overnight’s Products: USD+ & ETS
In order to earn yields from USD+, a treasury must acquire it first. The easiest way to do so is via Overnight’s dApp via USDC. The greatest part about this swap is there’s no slippage and the swap ensures users get a 1:1 ratio. The swap fee is 0.04% and is redistributed back among holders of the Stablecoin — acting as a deterrent in front-running the day’s payouts.
In addition, to benefit protocols that pair their tokens with USD+, Overnight provides custom integration along with setting up arbitrage bots to boost volume generation if need be.
Where the process begins: Acquiring USD+ is as simple as a swap
If a DAO wishes to acquire Overnight’s ETS, it can simply deposit the USD+ into it to initiate the process after which Smart-Contracts take over and implement the Delta-Neutral strategy.
Minting its ETS is as simple as buying USD+
Sphere Finance
Sphere Finance dubs itself the S&P 500 of Crypto whereby holders enjoy exposure to a diversified portfolio of cryptocurrency projects. Sphere’s ultimate goal in this regard had been to grow its treasury and achieve forced appreciation for its native token — $SPHERE.
What better way to do so than pairing their token with USD+? In doing so, USD+ allows Sphere to benefit from the stability of Stablecoins while still benefiting from being paired with an appreciating token. Moreover, Sphere has invested over $500,000 in USD+ on Optimism where the average APYs are a tad above 15%. The move to USD+ is highlighted as follows by the Sphere team.
“Pairing to USD+ was one of the boldest, yet the most successful moves we’ve made in our project’s development. Even though Overnight was still a growing team, our Sphereans immediately saw the potential their stablecoin has. A steadily growing stablecoin which yields pretty good returns. What better way to stabilize your Liquidity Pool?”
~Simsala, founder of Sphere Finance
Otter Clam
Following suit from Sphere, Otter Clam too paired their native token — $CLAM — with USD+. Not only are their Liquidity Providers enjoying boosted yields from USD+ but the protocol simultaneously benefits from Forced Appreciation; this acts as a small yet passive buyback every time yields from the stablecoin are accrued. Had they been paired with vanilla USDC, they wouldn’t have reaped this advantage.
Their motive for doing so boils down to removing the need to perform cumbersome acts of optimizing their assets as Overnight automatically does this for them.
Hybrid Finance
Hybrid Finance has been an avid supporter of Overnight and has acquired positions in some of Overnight’s best-yielding ETS as well as USD+; their dedicated Infinity Pool serves exactly this purpose.
Their monthly yield has consistently ranged around 2–3% with most of the value accrual (85% of total treasury) arising from Overnight’s products. In doing so, it plays a crucial role in fostering treasury growth without any of the hassles required.
Your DAO
While the examples above could be useful, they’re surely not the only way to benefit from USD+. If you’re a DAO looking to add USD+ to your treasury assets, we’d be happy to discuss ideas for how to make that happen — the possibilities with USD+ are endless!
What to do Next
As outlined previously, we’re happy to have a conversation with any DAO looking to diversify their treasuries into USD+ and reap its benefits. We would love to expand more on its mechanics, why it’s a Game-Changer within DeFi, and why it upholds the ideals of fostering capital efficiency. Should you want to get in touch with the team, hop on our Discord/Telegram or drop us a message on Twitter.
