Although the infamous Curve Death Spiral™️ remains elusive, much to the chagrin of thought leaders, we nonetheless observe the rise of a different form of Spiral.
Spiral DAO officially seeks to join the Curve Wars as they pursue a governance vote for their COIL/FraxBP pool.
To give you a sense how fast things can move in DeFi, Spiral DAO released their launch announcement less than one month ago. Their token was deployed on chain just two weeks ago. Now they’re readying for war.
What have you accomplished in the past month?
We’ll walk through some of the basics of Spiral DAO which we’ve gleaned from their online resources. This is based on our cursory glance of available materials. We’ve not thoroughly audited Spiral DAO, and therefore this is not an endorsement. Author has no position or exposure to Spiral DAO.
At the high level, Spiral DAO bills themselves as a “capital-efficient” DAO, with a mission to accumulate specific DeFi Tokens (ie $CRV, $BAL, $FXS) for the purpose of correcting what they describe as inefficiencies in their bribe markets, an opportunity they estimate is worth at least $30MM per year. The upshot for users is a new type of yield aggregator.
The core functionality is to provide users an interface that looks very much like a yield autocompounder, perhaps reminiscent of Concentrator.
The big difference is what happens under the hood. A typical autocompounder would sell off rewards and compound them for you. Spiral DAO will instead hoard the assets for itself, and give you a slightly higher amount worth of its native $COIL tokens in its place.
The $COIL token itself does nothing, but it can be staked to earn Spiral ($SPR) which holds the governance power.
The intent with the tokenomics design is for the backing of the $SPR to grow fast enough that it overtakes emissions after a period, theoretically insulating users from token inflation, at least to some degree.
We don’t know whether the tokenomics will follow precisely this path — black swans are overrepresented in crypto — but Spiral does helpfully provide a gorgeous transparency dashboard which can be verified against on-chain data. Current numbers demonstrate $COIL price is presently quite close to its treasury backing.
Another interesting facet of Spiral’s tokenomics is the reliance on occasional auctions of $COIL. Whenever the treasury desires a particular governance asset, if the COIL token is overcollateralized, the DAO may kick off an auction of $COIL tokens at a ~10% discount.
For those who care about token prices, CoinGecko listed it as of April 12th, or you can track its price since launch via its Curve v2 pool on Llama Airforce.
So to recap the plan…
Step 1: Acquire tokens
Step 2: ???
Step 3: Profit
In this case, the missing step 2 is to bring more efficiencies to bribe markets. The specific inefficiencies Spiral is referring to is a number we often harp on… the emissions per dollar bribes. On Llama Airforce, this is currently $1.25 worth of free money. The team expects that their large stash of governance assets will allow them to capture this opportunity.
For instance, the documentation describes their plan to “arbitrage” bribe markets.
At the high level, here is a graph overviewing the entire ecosystem:
The team already completed their initial treasury offering to everybody except Gensler-plagued burgers, in which they successfully bootstrapped their treasury to acquire ~$7MM worth of mostly $USDC, as well as $CRV, $BAL, $FXS and $SDT to fulfill their ambitions. For the latter of which, Stake DAO, they partnered directly and added the team to their multisig.
Now that they have a treasury, they have three goals in managing this treasury:
Maintaining Market Share
Balancing Treasury Exposure
Allowing Users a Fair Exit
The team completed an audit from Pessimistic, which identified some medium to high severity issues that the team corrected before launch. Unfortunately, there is no public Github repository, but the Solidity source code for their contracts are viewable on Etherscan.
With the protocol up for a governance vote, how should you vote? Well, it may be moot, with the overwhelming “yes” vote already passing quorum on Convex Finance.
That said, our default policy is nonetheless to recommend against voting for any gauge until the Llama Risk team has issued a report. Since Llama Risk has not released any such report, we’d advise voting against the gauge until they have time to review it properly.
However my tsk-tsk-ing aside, it appears as if the gauge is on track to pass anyway. And presuming the Risks team doesn’t retroactively raise any red flags, it looks to be a great addition to the flywheel.
We never particularly thought the free money being leaked through the birb marketplace would last forever. We knew a smart team would emerge to hoover up the opportunity, yet we’re still impressed to see the tight and comprehensive plan the Spiral DAO team assembled around the concept. Bullish!
It’s no surprise that top yield farmers already jumped all over this.
For more on the protocol, check out this great thread by 0xShinChannn:
Additional resources:
Website : https://spiral.farm/
Documentation : https://docs.spiral.farm/
Twitter : https://twitter.com/Spiral_Dao
Blog : Spiral DAO – Medium
Discord : Spiral DAO
COIL contract : 0x823E1B82cE1Dc147Bbdb25a203f046aFab1CE918