scDAI

Blockchain: Ethereum

Overview

scDAI is a strategy almost completely similar to scUSDC but with DAI & sDAI as the deposit tokens.

Mechanism

Here's how the scDAI strategy operates in a streamlined manner:

  1. Initial Deposit: Users deposit DAI or sDAI into the scDAI vault and are issued an equivalent amount of scDAI shares.

  2. Loan Creation: The strategy engages one or multiple lending markets (currently just SparkLend), utilizing sDAI to secure a loan in ETH.

  3. Yield Generation: The borrowed ETH is allocated to the scETH strategy, thereby generating yield through leveraged Ethereum staking.

  4. Yield Conversion & Compounding: The yield generated in ETH is converted back to sDAI. The process is then iteratively repeated, leveraging steps 2 and 3, to compound interest.

Portfolio Rebalancing

To maintain a healthy Loan-to-Value (LTV) ratio, the strategy employs a process known as "rebalancing." This is triggered when:

  • The LTV deviates by 5% or more from the target.

  • Additional new deposits are made into the strategy.

  • The yield crosses a predetermined threshold.

Gas Efficiency

We prioritize gas efficiency at every step:

  • Deposits: Minimal gas is required as it only involves minting scDAI shares.

  • Withdrawals: To minimize withdrawal gas costs, an amount equivalent to 1% of the total assets managed by the strategy is readily available for immediate withdrawals. Exceeding this limit may incur additional gas costs.

Risk Mitigation

Smart Contract Risk

Despite undergoing rigorous testing and audits by Trail of Bits, it's important to acknowledge the residual risk associated with smart contract vulnerabilities.

Liquidation Risk

Borrowing ETH against sDAI carries a liquidation risk, especially in volatile market conditions. To mitigate this, our backend system offers 24/7 monitoring that triggers an immediate rebalancing process if the LTV increases by 5%, thereby adjusting the loan amounts to align with target LTV values.

Invest wisely and leverage the power of scDAI to optimize your yield generation in a secure and efficient manner.

Audits

Audited by Trail of Bits. The only changes made in the scUSDC contracts to have it ready to support DAI for scDAI was

  • Address changes of the deposit tokens & oracles

  • Change of the swap routes to support sDai to eth swaps and vice versa instead of usdc to eth swaps.

  • Addition of a new depositDai() method to support DAI deposits.

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