An Interest-Bearing DAI ETF is a balancer pool that uses traders who want to arbitrage to balance the pool. This is an improvement over rate-chasing protocol where they use gs for balancing and we gain trade fees.


Created At


Project Description

This project was made in two parts.

Part1 : DyDAI

To add DyDx Protocol to the Interest-Bearing DAI ETF we would need to tokenize the interest just how aDAI and cDAI.

DyDAI can be used in many more use cases such as Lowering of gas cost, Adding to SET Protocol, Providing oDyDAI tokens via OPYN, Viewing real balance in Trust wallet, Adding into Melonport and Betoken. Also DyDAI can be used in Blazar and Swap rate.

We created a Balancer Pool with aDAI, cDAI, DyDAI with 33% weight each. Holding this ETF allows you to hedge your DAI interest rate position into all 3 protocols. On top of always maintaining 33% of each protocol we gain a 0.2% on each trade done within the pool.

What about Impermanent Loss? There shouldn’t be any! There are many rate-chasing protocols like RAY(Staked), Idle Finance, and yDAI (iEarn Finance) which will eventually balance out the Interest rate between these 3 protocols. All these interest rates eventually tend to a similar number. All these rate chasing protocols use up gas which again lowers the profitability. Whereas this ETF increases profitability because of the 0.2% swap rate.

What about the future? Add CHAI and a DDEX interest bearing token to the ETF. Dynamically change the rate according to discrepancy in interest rates by creating a private pool. Implement this into other balancer pools and SETs. Add the ETF to trade against DAI in UniSwap if there is enough liquidity.

How it's Made

Part1 : DyDAI

How it works:

Miniting DyDAI

DAI is sent to our DyCrowd smart contract. Our contact deposits it into DyDx.

DyDAI is minted in the users wallet using the formula.

The DyDAI rate is calculated by (DAI in DyDx deposited using our contract)/(Total supply of DyDAI).

Burning DyDAI

Burning works in the same way.

DyDAI is burnt.

Our contract removes the DAI you are owed (according to the formula) and sends it to you.

We had to use the smart-contracts of DyDX for depositing and withdrawing. We created our own alogtrithm for finding the rate of DyDAI, how much should be minted, how much should be burned.

This took up most of our efforts. Once we had DyDAI ready we used the CLI to create a Balancer Pool with the needed tokens to create the Interest-Bearing DAI ETF.

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