Minting DIVs
Decentralized Investment Vehicles
Minting DIVs
Minting is another way the DAO accrues value. The process of minting occurs when a user deposits an approved ERC-20 into a collateralized vault. In exchange for the approved ERC-20 token, the user will receive their desired DIV token. Initially, minters will be rewarded with DAMO for generating DIVs. This reward in DAMO will be temporary as a liquidity mining event aimed at distributing tokens to more active users.
The vaults are over collateralized to maintain a price floor. The user can elect their ratio for collateralization however, the DAO will vote on parameters such as minimum & maximum collateralization per ERC-20. If the vault reaches liquidation, 5% of the collateral goes to the treasury, 5% goes towards DIV reserves and left-over collateral is capitalized for DIV tokens at a discount.
How do they work?
For the end-user, the DIV tokens are primarily a store of value. Its value fluctuates in accordance with the allocations of the assets it represents. Therefore, we can rely on the end-users to be long-term holders for the purpose of gaining long-term exposure through a safer vehicle. We can predict that yield farmers as a whole will not want to hold DIVs, and will either sell it to the market or provide it as liquidity, therefore the generation of DIVs will be congruent to the demand for DIVs on secondary markets. The additional generation of DIVs will be incentivized naturally by the arbitrage opportunity between minting it and buying it on the open market. Because each token is collateralized, a price floor exists at the real price of all underlying assets in respect to their allocations. Therefore, a demand of 0 will only cause the price to reach its floor, whereas a demand that is greater than 0 will be balanced by the arbitrary opportunity to the yield farmer and will thus incentivize further DIV token generation.
How does we find the NAV?
To arrive at the value of our DIV upon launch, we take a simple calculation to find the Net Asset Value (NAV):
where Q is the quantity of each token and MP is the market price. We then arrive at the allocation (A) through
Note that holders of the DAMO token have the power to vote on changes to the A of an asset by changing the Q.
How are DIVs Backed?
Decentralized investment vehicles are a key product within the DAMO protocol. These DIVs are what allow the user to gain exposure to multiple assets, across multiple chains. Two key actors within the DIV's respected ecosystem are the minters of DIV tokens and those who participate in capitalization. All DIVs are backed by user-deposited vaults & a portion of the HAI Treasury. To mint DIV tokens, the user can deposit approved ERC-20 tokens as collateral. With this DIV token users can HODL, provide liquidity, and capitalize for discounted collateral. Capitalization is a key function of the protocol that allows users to trade their DIV token back to the protocol in exchange for discounted ERC-20 over a 5-day vesting period. Unlocking discounted collateral provides the user with an incentive to go around redemption fees while enabling the protocol to protect the integrity of each DIV by burning it.
Backing
Each $HAIBC in circulation is backed by user-deposited vaults and the Treasury. The assets within the vaults and treasury are approved ERC-20 tokens.
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