8 months ago ·
5 min read
For those of us overwhelmed with the constant flurry of activity in DeFi wanting something to “set and forget” while it earns for us, PieVaults might be the optimal solution. In this article I’ll briefly introduce index investing and then look at how PieDAO facilitates it. We’ll explore their shiny new PieVaults and what they can do for you. Lastly, we’ll take a look at their oven and how it can almost completely eliminate your entrygas costs when minting new pie tokens.
Index investing is when you have an asset that represents a basket of other assets. The idea is that by holding many goods the risk is diversified and mitigated. Put simply: if your thesis is that DeFi or crypto in general will go up but you don’t know which project in particular will outperform, then an index would suit you nicely. A well known example of an index fund is Vanguard's S&P 500 fund which tracks the top 500 most valuable publicly traded US companies. Index investing has been growing in popularity in traditional stock investing for decades reaching $10 trillion-in-assets.
As of recently, index investing has come to DeFi with a suite of improvements over its traditional counterparts. One innovative provider of index investing in DeFi, which we will be exploring here, is PieDAO.
To understand PieDAO, it’s easiest to start from scratch. It is a DAO (Decentralized Autonomous Organization) whose members propose indexes that could produce great returns, referred to as "pies". The community then backtests the indexes and research them further, weight them for risk and so on. Once satisfied that the pie would be valuable for investors, the DAO votes on whether to add it to the catalog or not. If the vote passes, a shiny new pie goes to market and can be traded on Uniswap or Sushiswap. More advanced users can also choose to directly mint the pies.
Now you have an idea what PieDAO is and how pies are created, let’s move to their newest, freshest pie using the brand spanking new PieVault tech.
PieDAO has just released a new pie, the Yearn Finance Ecosystem Pie (YPIE). The pie is designed to give its holders complete exposure to the Yearn network, currently including high quality projects such as: Sushi, Cream, Pickle and more. The secret sauce is in the PieVault tech powering this pie.
PieVault tech gives the pie superpowers of metagovernance, native staking, lending and interest bearing assets.
This means when you buy the YPIE token, the underlying assets held in the YPIE will be deployed across DeFi, accrue interest and bounce between various protocols for the best return. Because PieVaults access the underlying assets, it’s possible to participate in the governance proposals of each native protocol. For example, YPIE holders can use their AAVE tokens held in the YPIE fund to participate in Aave governance votes.
DOUGH, PieDAO's native governance token for, acts as a proxy to vote gas-free through Snapshot across all the underlying assets.
Let’s dive a bit deeper into what is happening once you own some YPIE tokens. Every YPIE token represents a share of the total pool assets and the rewards earned by the YPIE fund accrue to token holders in the base YPIE token.
As an example, if you hold one YPIE token worth $1 and the total pool value is $10, your token represents 10% of the pool's assets. As the whole pool collects yields from the various strategies it pursues, every share can be redeemed for an ever large amount of base assets. If you are familiar with traditional ETFs, this is similar to an accumulating ETF, where the dividends are rolled back into the fund, rather than paid out.
While the YPIE token puts the underlying assets to work earning rewards for you, in typical DeFi fashion, the token itself can also be staked to earn additional yield. YPIE is currently featured on SushiSwap’s Onsen menu, Sushiswaps new liquidity mining program, which means you can either trade or mint some YPIE and then stake it as a liquidity provider to earn $SUSHI.
Now for the cherry on top, it’s possible to mint your new YPIE tokens while saving 97.5% of the gas costs. To this end, PieDAO has an oven where the pies are baked. In practice, this means anyone can add ETH to the oven and once a 10 ETH limit is hit, the oven runs and mints new YPIE tokens with the gas costs being eaten by the DAO treasury.
The oven checks every 15 minutes and note that there is a 30 ETH cap for every baking session to minimize risk per bake, any remaining ETH is rolled into the next bake. Importantly, once your tokens are baked, you can withdraw your fresh wafting YPIE and go stake them.
Now let’s complete the journey, imagine some time down the track you’d like to take your profits. As alluded to earlier, when you hold YPIE you own the token as well as the underlying assets. That means when you sell, you are welcome to either directly trade the YPIE token for ETH or redeem it to receive the underlying assets. For those already investing in traditional indexes this must sound like a futuristic concept. Imagine holding a vanguard index where you can decide to redeem it against all the underlying assets at any point without any paperwork or other hassles. Welcome to DeFi.
To close the loop and offer a TLDR, PieDAO offers index investing with superpowers. The YPIE token is a complete portfolio of the Yearn ecosystem that empowers you to stake the YPIE token for Sushi as well as stake, lend, bounce and govern the underlying assets.
In 2021 PieDAO is looking to create more pies taking advantage of PieVaults, in discussion currently:
An aggressive yield farming pie that auto harvests and reinvests yield
A blue chip lending pie including Yearn, Aave, Synthetix and Sushiswap
Converting BCP (Balanced Crypto Pie) which is composed of 33.33% wBTC, 33.33% wETH, 33.33% DeFi into a PieVault to put the 33.33% of DeFi to good use lending and governing
8 months ago ·
5 min read
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