"Not doing your own research and YOLOing into a terrible investment because your time was worth more than your money is your problem." -
Twitter rejoinder to billionaire Mark Cuban calling for regulation after getting rugged
Power Universe: Thematic, Composable, Actively-Managed Pools
PowerPool enables broadly-diversified, composable, thematic investment via the Power Universe, community-managed thematic token pools anyone can invest in. Defining thematic investing options is part of active investment management. Although just diversification can be achieved by investing in very broad overall market indexes that attempt to track the crypto market as a whole, PowerPool believes that there is value in classifying different types of digital assets, and seeking to define the most promising diversified pools with trackable, frequently-updated weights based on investment postures suited to each pool. These thematic pools can in turn be held inside the flagship PWRPOOL vehicle, providing an actively managed, thematically balanced exposure to the crypto market in a single token.
For at least the next year, Ethereum will struggle to shift from energy-intensive POW to POS and most importantly to scale. PowerPool needs to launch a broader family of public pooled vehicles that communicate to sophisticated investors and provide ways to take systematic positions on the key investment theses of the moment. Looking forward, this year Bitcoin is already down from 72% falling towards 40% of crypto value, while its continued operation (together with ETC & other POW chains) threaten to roast the planet. Meanwhile, for at least the next year, and probably longer, Ethereum will struggle to scale. As a consequence, crypto market value is flowing towards both alternative EVM-compatible L1s like BSC (and many other EVML1 ‘pretenders’) but also towards Ethereum EVM-compatible L2/Sidechain (Polygon) and multi-chain Cosmos Network & Thorchain) solutions. It is possible than despite many EVM protocols moving to L2 roll-ups and sidechains, surges in transactions traffic and arbitrage bot spamming will keep Ethereum ecosystem gas fees too high for the average responsible investor to achieve a broadly-diversifed, thematically-balanced, rewards-rich and hedge-able portfolio on their own. The PowerPool value proposition posits that responsible investing in a sustained Ethereum ecosystem high gas fee environment is best managed by pooling together with thousands of other investors in actively-managed thematic pools.
The PowerPool DAO governance process of managing curated shortlists, weighting and launching new products with on-going sentiment and fundamentals-based directional re-weighting will be a continuing process. Relatively slow-changing weighted pools agreed with other DeFi protocols like PP-DEFI will be reviewed/revised . Other thematic pools based on DAO-curated lists, with fundamentals tracking and weekly DAO sentiment soundings will be adjusted weekly, and automated yield trackers like YLA will be re-weighting continuously potentially daily based on changing conditions in the liquidity markets.
Anyone can propose a new thematic pooled vehicle for the DAO to consider. If approved, the proposer(s) will earn rewards according to the attribution fixed by the Management Board members sponsoring the formal Proposal to the DAO. This includes only pools managed and marketed by PowerPool as part of the Power Universe, not externally-managed and promoted pools that operate on top of the PowerPool protocol.
Continuously adding value to what typical crypto investors can or should be doing for themselves requires PowerPool to seek out multi-chain opportunities, and finding ways to ‘front-run’ the emerging opportunities to extract yield with responsible hedging of capital values. The PowerPool DAO will have to decide what sorts pooled vehicles to add to the Power Universe product family following a disciplined product development process via Discord, this Wiki, the Forum Product development channels and eventually, given enough interest, formal voting on DAO Proposals.
When it comes to seeking public investors/TVL via marketing, PowerPool has to be careful not to offer too many confusing, difficult-to-blend options, while allowing investors to freely switch their personal portfolio mix of positions within the thematic, composable Power Universe to achieve responsible balance between growth/long/bull, auto-managed low-risk high-yield and defensive/bear hedged vehicles.
PowerPool has already established a market position in active, automated high-yield stable coin vehicles like YLA. YLA was the first of the Balancer-based automated yield-optimising products. The PowerPool product development team should continue to evolve products along this line. Stable/hedged yield is an important part of most investors’ portfolio allocations.
Hedged Neutral/yield products:
If PowerPool governance initiatives can convince/fund site like Beta Finance to launch a BSCDEFI synth with an inverse/short that permits it to be hedged, then PowerPool can launch not only ‘real’ rewards-rich Ethereum PPsDEFI and BSCDEFI long vehicles, but also related PPSHDEFI and BSCHDEFI as delta- hedged neutral high-yield vehicles farming (insane) rewards from the coming rewards battle between BSC forked startups and other EVM-based protocols struggling to retain liquidity. Although the farming rewards on the neutral hedged versions of PPSHDEFI and BSCHDEFI holdings will go into the pooled vehicles as yield, the rewards on the hedged position will go to the DAO, in part because they have a one-year vesting period.
In finance, delta neutral describes a portfolio of related financial assets, in which the portfolio value remains unchanged when small changes occur in the value of the underlying asset. Often when yield farming in DeFi, you want to reduce your exposure to price volatility in the farmed asset and the asset used to farm. People value stablecoin farms with consistent stablecoin APY because they are less volatile. However, most stablecoin farming pools are oversubscribed and still suffer from the volatility in the farmed asset. You can mimic the behavior of a stablecoin farm in a non-stablecoin farming pool by shorting the asset you are using to farm.
For example, you want to farm the 1,200% SHIB APY, but only have 100,000 USDT, not SHIB. While you do not want to take a directional view of SHIB, you need to buy and get hold of SHIB to enter this farm. What you can do is to simultaneously buy $30,000 of SHIB and short $30,000 of SHIB on Beta Finance using 70,000 USDT as collateral. Your position is now delta-neutral as long as your collateral assets fully cover your borrowed assets, maintaining the LTV requirement. You are now able to take SHIB tokens to farm the higher-yielding SHIB pool while being delta-neutral. By maintaining a delta-neutral position, you collect the difference between the SHIB farming APY and the Beta SHIB borrow APY.
Activist Meta-governance-Coordinating Listings
Once it is possible to trade PowerPool thematic pool tokens across multiple DEXs, borrowing/lending, mirroring (inverse) synthetics and perpetual derivatives, then leveraged bull AND bear strategies become possible and additional liquidity is sucked into an arbitrageur's paradise. On most lending/borrowing sites, anyone with governance token holdings and liquidity can vote to whitelist and then seed lending pools, but providing pooled liquidity for borrowing flash loans also opens the door for persistent hedged bears/shorts borrowing and selling. In many cases, PowerPool will hold enough whitelisted tokens to propose a token of interest on a borrowing site, and even initially seed the new lending LP pool as a lender while more complementary listings on other sites are sought to add value/liquidity to the red-listed opportunity token. However, if the tracked fundamentals of a red-listed token lag or DAO sentiment changes significantly, the DAO may vote to shift that token from the red governance intervention list, or the white/bull/long list, to the grey borrow/short list. This reclassification by the DAO signals the PowerPool protocol to consider borrowing on a persmissionless lending site like Kashi (BentoBox), rather than lending/staking the newly grey-listed token. Activist, strategically-coordinated sets of listings across DeFi sites can create myriad options for borrowing and otherwise shorting via inverse synthetics and derivatives of those lagging performers on the shortlist whose fundamentals are being tracked.