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Understanding DIVs
Decentralized Investment Vehicles
Overview
Decentralized Investment Vehicles (DIVs) are a collection of LP tokens that provide the collateral to mint portfolio tokens ($HAID). In exchange for depositing LP, you will receive $HAID. Since $HAID can only be minted by depositing real underlying assets, $HAID has intrinsic value relative to the underlying value of its collateral. Simply put, DIVs are stores for LP tokens and are thus a big tank of collateral. This provides the collateral against which the protocol can mint $HAID.
Why should I use DIVs?
Are your LP tokens sitting idly in your wallet? You can put them to work by depositing them in a DIV. This guarantees a minimum APY of what you were previously receiving, plus APY from $HAID/$AVAX LP, plus $DAMO boosts. For the same amount of risk, you can receive additional APY of real assets, not farm tokens. All LP rewards are routed back through the protocol to the depositors, so by depositing your LP tokens, you allow the protocol to access an additional demographic (risk-averse investors) who are interested in purchasing a single collateral-backed token to provide exposure to the whole DeFi sector.
How do DIVs work? Too good to be true?
We must admit, it sounds very ponzi-like to claim that the same asset can earn yield in multiple places. But allow us to explain:
This works because HAI DAMO leverages the same asset for 2 different demographics (or in other words, 2 different inflows of capital). The first demographic are traditional DeFi users who trade on DEXs. This is where we achieve our base APY, the APY you currently receive from LP'ing. Secondly, the $HAID token, whose price is reflected and backed by all the LP tokens in a DIV, is targeted at demographics who want to purchase a single token to achieve exposure to an entire sector. Plainly, one group of users (and the base chunk of APY) will simply trade the token pairs like normal, and a different demographic will be buying $HAID to hedge their risk in the DeFi sector, likely larger players and institutions.
The worst case is if zero $HAID is ever traded. If this were to happen, then you would only receive your base APY that you normally receive from your LP.
What are the Goals of DIVs?
The main goal is to accumulate enough LP tokens to generate an optimal amount of $HAID. DIVs can be thought of as the pool of collateral behind which $HAID is supported. Within that, there are two main goals.
- 1.Provide a convenient mechanism for facilitating optimal exposure to the most promising crypto assets in the sector
- 2.Provide deep enough liquidity in $HAID to establish a highly stable, collateral-backed portfolio asset
If the protocol can achieve these 2 goals, then $HAID will be a substantial investment vehicle for investors looking for a conveinent way to optimize their risk, and a simple way to generate additional yield.
Last modified 2d ago