Comment on page

Fixed Yield Strategies

Disclaimer: The Midas Investment team has more than 30+ Yield generating strategies. On Midas Wiki, we present the description and risk policies for some of the strategies. More information about each strategy will be uploaded gradually. Last update 7 July 2022.

Providing Liquidity on Convex

mUSD+3Crv Liquidity Pool. mUSD is a stablecoin issued by mStable which is an autonomous platform for backed crypto assets. mStable launched in May 2020. Their synthetic “meta-assets” are combined from a basket of other assets. mUSD is 100% backed by USDC, DAI, USDT and sUSD and can be redeemed 1:1 into one of these assets at any time on mStable platform.
Available assets: sUSD, DAI, USDC, USDT
Annualized Percentage Yield (APY): 8-10% APY
Risks: Low.
In two years of its existence, the protocol has not been exploited. mStable contracts have been audited by Certik. The audit revealed 1 major vulnerability, as well as some medium-risk and informational vulnerabilities, most of which have been resolved by the team.
FRAX+3Crv Liquidity Pool. FRAX is an algorithmic stablecoin that utilizes a “fractional-algorithmic” model. One part of its supply is backed by collateral (USDC) and the other is algorithmic. Users can always profit from arbitraging FRAX whenever it’s below/above the peg.
FRAX can be minted for 1 USD worth of value within the system. The only difference is the ratio of USDC to FXS which is used to mint 1 FRAX. At the current collateral ratio of 86.72% minting 1 FRAX would require 0.8672 USDC and burning 0.1328 USD worth of FXS which is a native governance token. Users can also redeem 1 FRAX and receive USDC and FXS in the same proportion.
Whenever the price of FRAX goes above 1 USD, the collateral ratio keeps dropping and users might be less inclined to mint and buy an undercollateralized stablecoin. On the other hand, when FRAX trades below 1 USD collateral ratio keeps increasing until it eventually becomes fully backed by USDC again. It all comes down to the demand of FRAX and it can reach a 1 USD equilibrium at any collateral ratio.
Available assets: FRAX, FRX, USDC
Annualized Percentage Yield (APY): 5-8% APY
Risks: Low.
FRAX has first been audited in November 2020 by Certik and has received a 91 security score. All of the three critical issues, as well as most of the major ones, have been resolved. Contracts have later been audited by Trail of Bits (June and Dec 2021) and are currently also being audited by Trail of Bits and Shipyard.

Lending USDC on Maple Finance

Maple Finance is a decentralized corporate credit market. Maple offers non-collateralized loans to reputable borrowers. Depending on a borrower’s credit score, some form of collateral might be required but a borrower with a good loan record can ask for an uncollateralized loan.
Maple manages loans by assigning a Pool Delegate to each one of them. A pool delegate conducts diligence on borrowers and sets term, rate and collateral ratio for a loan they are assigned to. Delegates review borrower’s investment strategy and assess their reputation in a confidential review. In order to become a pool delegate, one has to have industry and credit experience. The Maple team is in charge of reviewing pool delegate submissions. Midas is in partnership with Maven 11 pool delegate, which has proven themselves as the most professional and trustworthy delegate and did not suffer from the recent events. The core funds borrowers are the major market-making companies, such as Wintermute, that are not exposed to directional trading and has the perfect borrower reputation.
Available assets: USDC
Annualized Percentage Yield (APY): 8-12.6% APY in USDC and MPL rewards
Risks: Low.
As of today, the protocol hasn’t suffered any exploits or loan defaults. Maple has been audited by Peckshield, Dedaub and CodeArena. The weakest link in the protocol, according to these audits, are the pool delegates. The audits revealed a number of medium-to-high-risk issues where a malicious pool delegate could exploit the protocol one way or another. The team’s response is that the pool delegates, in the current version of the protocol, are considered trusted actors.

Lending USDC on TrueFi

TrueFi is a dApp that allows issuing of uncollateralized loans for whitelisted entities. Midas lend stablecoins to TrueFi lending pools, which use predefined strategies to lend to creditworthy borrowers. The core funds borrowers are the major market-making companies, such as Wintermute, that are not exposed to directional trading and has the perfect borrower reputation.
Available assets: USDC
Annualized Percentage Rate (APR): 10-15% APR
Risks: Low.
TrueFi has not suffered any exploits since its inception and no funds were lost in loans so far. Considering the project’s been live for 1,5 years without issues, it can be viewed as fairly safe and their two-step borrowers whitelisting process (TRU holders votings + KYC/AML checks by TrustToken) has proved itself reliable.
Protocol’s smart contracts have been audited by Slowmist which has not found any vulnerabilities that pose a threat to the security of user funds.

Lending ETH on Liquity

We lend ETH on Liquity, mint LUSD and deposit into Liquity’s stability pool to profit from potential ETH liquidations.
  1. 1.
    Create a trove on Liquity, borrowing LUSD up to 200% collateral ratio.
  2. 2.
    Deposit minted LUSD into Liquity’s stability pool
Liquity Stability Pool is a mechanism for seamless liquidations of Liquity borrowers. Users deposit LUSD and earn 10% off every liquidation happening on the platform. During that process, depositors lose a part of their LUSD and instead gain an equivalent amount plus a 10% reward in ETH. On top of that, the protocol incentivizes users to deposit LUSD by rewarding depositors with LQTY tokens.
The idea is to benefit from massive liquidations happening in recent days. Should this trend continue, the APR is likely to remain high. The amount of ETH troves close to liquidation can be viewed here Liquity. If the overall platform c-ratio drops below 150%, these troves could be redeemed against as a result of Recovery Mode activation, which is a feature that helps sustain healthy collateral-ratio for the platform. As of now, Liquity c-ratio is at 200% and there is 2368 ETH worth of troves with <130% collateral ratio which would be the first ones to get liquidated and to be redeemed against should the Recovery Mode starts.
Available assets: ETH, LUSD, LQTY
Annualized Percentage Yield (APY): 8-14% APY depending on market volatility and the amount of liquidations happening on the platform. Current average 7-day APR, according to Liquity Dune dashboard, is nearing 150% APR.

How Midas hedges the DeFi risks

Midas has developed the monitoring tools for every protocol we use in our portfolio. We call them Alerts. Every protocol Midas uses has alerts for every significant liquidity or price action event. For example, Curve alerts signal each time the liquidity disbalances in Curve pools, which leads to depeging scenarios for stablecoins. Once the alert has been triggered, the automated system withdraws liquidity or our operationists receive the phone call to execute the exit from the position. Therefore every major position is monitored 24/7, which allows Midas to feel safe before depegs, market volatility, and hack scenarios that drain out liquidity over time (lending protocols, bridges, etc.).

Algorithmic futures trading of a target asset

The portfolio of non-correlated algorithmic strategies that trade derivatives on centralized exchanges. This part of the portfolio produces yields on volatile markets. Therefore, Midas favors volatility, unlike other CeFi platforms. Additionally, Midas has two trend algorithms that signal the major reversals of the crypto market, which helps us to calculate risks based on market conditions.
Available assets: BTC, ETH, major tokens with high liquidity and more than two years of trading on major exchanges.
Annualized Percentage Rate (APR): Up to 50% annual returns

How Midas hedges the algorithmic risks

The algo strategies are a small part of the portfolio and use low leverage, making it invulnerable to liquidation scenarios. Midas has created the risk module that evaluates in real-time how trading algorithms behave accordingly to their initial strategy. If the module sees that the market changed it pushes the red button and stops the trading for further investigation of the quants department