QiDao<>Balancer Yield Strategy

Low Risk Passive Income Strategies with QiDao on Polygon

By YJN58 | Humble Farmer Finance | 5 Oct 2021

QiDao protocol has been making waves in protocol with a lot of solid fundamentals like a TREASURY:MARKET CAP ratio of 0.56 which is probably the highest amongst DeFi Protocols and a ROCE of 4.83% compared to 0.56% of Maker which is a similar type of protocol (Not including Token emissions here)

With the introduction of BAL as a collateral to mint MAI stablecoins, a whole new opportunity arises to make high yield with very low risk. This would be done by using balancers stability pool (MAI,DAI,USDT,USDC) as possible liquidation scenarios due to the price action of the underlying collateral in the camVAULT (in this case MATIC). The stablecoins can be withdrawn from balancer and used to repay part of the loan to bring it back to a safer LTV. Apart from this QiDao is incentivising deposits whose LTV ranged between 160% and 400% for camWMATIC and BAL with ~30% and ~120% in Qi Tokens respectively. This gives a huge boost to lending APY provided that the LTV is always maintained.

Below are the steps involved to execute the strategy involving Aave<>QiDao<>Balancer:

1. Deposit MATIC on Aave to receive amWMATIC (3.60% APY)

2. Deposit amWMATIC in the "Yield" section of QiDao to create a camWMATIC(3.80%  APY)

3. Create a camWMATIC vault (~30% Qi Rewards for LTV between 160%-400%)

4. Borrow 40% worth of the camWMATIC in MAI at an initial LTV of 250%

5. Deposit the borrowed MAI in the BAL stability pool (~18% - 15% BAL, 1.5% Fees, 1.5% Qi)

6. Since MATIC is a volatile asset we have to be careful of maintaining a safe LTV ratio (Lower: 200% and Upper: 270%)

7. If the LTV falls below 200% then part of the funds in the stability pool will be used to repay the loan to bring it back to 200%

8. If the LTV goes above 270% then we will borrow more MAI and deposit in the BAL stability pool to bring the LTV back down to 270% in order to ensure capital efficiency.

9. The BAL rewards get paid out every Wednesday and this is used to create a BAL vault on QiDao (~120% Qi Rewards for LTV between 160%-400%) and more MAI is minted at an initial LTV of 250%

10. Similar to MATIC the safety of the camBAL vault is ensured by maintaining an LTV range of 200% - 270% and repaying / borrowing MAI based on the situation.

11. The qi rewards from BAL and QiDao lending must be staked for 1 year at ~100% APR or can be sold to buy more MAI which is re-deployed in BAL stability pool (this depends on your risk profile).

12. The entire cycle goes on loop and the APY is directly propoertional to the price of the MATIC collateral as it influcnces the amount of MAI that can be borrowed.

The entire process is explained in a flow chart for your easy understanding


The detailed computation of the strategy is provided below for your reference:

Detailed Strategy Computation



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