WealthFront for DeFi

Project Description

What

APY Finance is an automated investment service that offers liquidity providers a way to “yield farm” autonomously across a variety of DeFi protocols using complex investment strategies in the back-end.

Instead of having to seek out DeFi yield farming opportunities for themselves or place their trust in asset-specific investment strategies offered by the likes of Yearn Finance, investors can simply make a single investment in APY Finance’s liquidity pool. In turn, the APY robo-advisor takes control and autonomously diversifies the capital collected in the pool across an assortment of deeply-vetted DeFi yield farming strategies.

APY Finance’s grand vision is to become a community-owned and community-managed robo-advisor for DeFi.

Why

Target Markets

  • B2C: DeFi novices that want exposure to yield farming opportunities but do not necessarily have the skills or time to research and assess risks. [APY’s go-to-market priority]
  • B2B: Institutional investors that do not have the resources internally to analyse yield farming opportunities and evaluate risk.
  • B2B2C: End-user focused web 3.0 application developers, e.g. Argent, Zerion.

Value propositions

  • Time-savings — APY Finance eliminates the need for liquidity providers to find yield farming opportunities and assess the risk.
  • Risk management — All investment strategies that the APY robo-advisor employ are thoroughly audited and abide by a standardised risk assessment framework.
  • Low gas fees — APY Finance uses a liquidity pool to achieve economies of scale and thereby saves gas fees per trade.
  • Low-performance fees — Unlike competitors, APY Finance does not bill users double-digit % performance fees.

How

Depositing money in APY Finance

Similar to how liquidity providers receive Balancer Pool Tokens (BPTs), APY distributes APY Pool Tokens (APTs) for those who deposit capital to the protocol.

During this process, liquidity providers are merely transferring the assets to the liquidity pool contract. Since there are no complex computations taking place, the gas costs are relatively low.

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Allocating capital across different yield farming strategies using risk-adjusted analysis

APY Finance automates asset allocation to each investment strategy contingent on the risk appetite accredited to the liquidity pool. The platform continually makes sure that the reward for the desired level of risk is maximised with automatic rebalancing.

Timeline

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To expand:

  1. Gauging the risk profile of each yield farming strategy — APY Finance uses the risk assessment framework proposed by ConsenSys to assess an investment strategy’s smart contract risk, financial risk and centralisation risk. Since there are qualitative elements to this process, risk scoring has to be done manually by a skilled professional. Today, the APY team is bearing this responsibility; however, there are plans to incentivise community members to take part in this process as the decentralised governance model formalises.
  2. Investment allocation — When capital is deposited in the global liquidity pool, the APY Robo-advisor waits till the next ‘rebalance’ to deploy any idle capital atomically to the yield farming strategies. Depending on the investment strategy chosen by the system, the money held in the liquidity pool is converted to the appropriate cryptocurrency using a decentralised exchange (DEX).
  3. Rebalancing the portfolio — Changing from one investment strategy to another is contingent on a certain rebalancing threshold being reached. The rebalancing threshold takes into account three factors:
    (1) the transaction costs associated with changing the strategy employed;
    (2) the potential gain in yield should the new strategy be deployed; and
    (3) how long it will take to recoup the transaction fees for the change.
    The rebalancing threshold today has been hardcoded by the APY team; however, the APY team plans to encourage community members to decide on changes to its parameters once the decentralised governance model formalises.
  4. Rebalancing computations — The rebalancing process requires the system to continually check whether alternate investment strategies to those that are currently deployed offer a better risk-adjusted return than the existing. If performed on-chain, this process can be computationally intense and expensive. As a result, the APY system is being designed to allow users to conduct the computational heavy lifting off-chain on centralised computers. However, to avoid the risks caused by centralisation, the APY robo-advisor can deterministically verify — on-chain — whether or not the newly proposed strategy offers a better risk/return when compared to the pre-existing strategy employed by the system.

Adding new investment strategies to APY’s consideration engine

APY Finance aims to allow anyone with little-to-no programming experience to design and propose new yield farming investment strategies to the system without writing a single line of code.

A “generalised strategy architecture” platform is currently being developed, which aims to allow individuals to implement new investment strategies by simply pushing arbitrary commands and, therefore, without having to code or deploy a new smart contract.


APY Governance Token

Short term fundamental value drivers

In a bid to bootstrap community engagement during the early stages, the system will start incentivising members with APY tokens released from the treasury.

Activities that the system aims to incentivise are, but not limited to:

  1. Changing the rebalancing parameters, i.e. determining the liquidity pool’s “risk appetite.”
  2. Designing and proposing new yield farming investment strategies.
  3. Auditing the smart contract code and determining the risk score using the APY Risk Assessment Framework (inspired by ConsenSys’ DeFi Score).

Long term fundamental value drivers

As the network progressively (or aggressively) decentralises and the APY treasury reserves drastically deplete, token holders will have the authority to hold a vote on whether or not to introduce a fee to be paid out to the governance token holders, i.e. introduce cash flows.


Competition

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Key Differentiators

Unlike projects similar to Yearn Finance, APY Finance does not offer liquidity providers with a wide selection of investment strategies to choose from. Leaning on liquidity providers to perform this task for themselves is time-consuming and requires trained insight.

Instead, APY abstracts away this complexity by offering liquidity providers a way to invest in a single capital pool that fits their risk tolerance profile. Upon doing so, the APY Robo-advisor diversifies the capital collected in the pool across an assortment of deeply-vetted DeFi yield farming strategies.

In summary, APY Finance’s key competitive advantages are:

  1. Lowers barriers to entry — Liquidity providers do not need to spend copious amounts of time investigating the risk/reward on multiple pools. They can expect to “set it and forget it” and presume that the APY robo-advisor to assess the risks and rebalance the portfolio of strategies appropriately.
  2. Lower fees attributable to economies of scale — a single pool allows for capital to be aggregated to make batch transactions, which in turn dilutes the transaction fees necessary to take part in the yield farming strategies.
  3. Mitigation of yield dilution — When too much capital is allocated to a single strategy, too much yield is eaten up. Most strategies have a limited amount of yield being distributed to those supplying liquidity. APY Finance mitigates this issue.
  4. Diversified smart contract risk — Since multiple strategies are employed across several yield farms at any given moment in time, the risks are diversified.
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Team

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  • Will Shahda | CEO & Founder | 32 years old | Full-time
  • Chan-Ho Suh | Solidity Engineer | 41 years old | Full-time
  • Dina Deljanin | Front-end Engineer | 25-30 years old | Full-time
  • Shun Bhark | Full-stack Engineer | Part-time
  • Jonathan Viray | Solidity Engineer (self-taught programmer & legal attorney by training) | Full-time
  • 1 more developer (not disclosed due to external obligations) | Part-time

Key Metrics

  • Founder
  • 5 full-time & part-time team members
  • 1,322 alpha tester registrations (via company website)
  • 2,216 telegram members

Key Highlights

  • ETH HackMoney (April 2020) — The HackMoney DeFi hackathon was the birthplace of the APY Finance project. Formerly known as DALP (Decentralised Autonomous Liquidity Provider), the project initially was designed to maximise the yield liquidity providers could earn on Uniswap. The project was awarded the HackMoney second place prize. Note — the project later pivoted away from seeking high yielding opportunities via Uniswap to develop a product that encompasses a wider variety of investment strategies following the popularisation of “yield farming” thanks to the launch of Compound’s governance token.
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Stage of Maturity

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Token Development

  • Token generation event – end of September (subject to change).
  • Short term objectives consist of using the token to help bootstrap the growth of the APY Liquidity Pool through a liquidity mining campaign (more details in the Token Distribution section below).
  • Mid-to-long-term governance utility features still in development.

Product Development

  • Alpha launch expected by the end of October 2020.
  • At inception, APY will feature only one capital pool.
  • The alpha launch will use Compound recursive strategies first. As TVL grows, there will be an expansion into other protocols, including Balancer, Curve, and Synthetix. Strategies involving these protocols are in the early stages of development.
  • In a bid to bootstrap development, the APY team is considering integration with Yearn Finance and xToken. Will (CEO) is currently in talks with xToken and exploring how they could potentially incorporate their xToken’s farm in APY’s library of strategies.
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Current Presence


Token Metrics

APY Finance is selling ~35.75% of the total token supply of 100,000,000 APY in two private fundraising rounds:

  • 26,150,000 APY (26.15% of total supply) are to be sold for $0.09. Therefore, the total amount raised in this round will be $2,353,500100% of this round is sold out.
  • 9,627,778 APY (~9.6% of total supply) are to be sold for $0.135. Therefore, the total amount raised in this round will be $905,000Approximately 67% of this round is sold out. 

Investors in both rounds will receive 17.5% at the token generation event, while the remainder is vested linearly over 11 months after that.

Public Sale

The team will sell an estimated ~0.37-0.74% of the total supply (370,370.5-740,740 APY) via a public bonding curve sale. The pricing and platform details are not known yet, and the amount is subject to change. All public sale tokens will be liquid after TGE.

Community Initiatives

A total of 12.3% of the total supply (10,800,000 APY) will be used for community incentives. These rewards are yet to be allocated but will be used to reward early supporters in the APY.Finance ecosystem, alongside the public liquidity mining rewards. 

Liquidity Mining Rewards

APY Finance will further reward product users from the community with APY tokens. The first public liquidity mining rewards announced will allow users to lock their assets into the initial APY.Finance liquidity proxy contract and receive APT liquidity provider tokens as an IOU (similar to Balancer BPT tokens). When strategies are enabled, this contract will deploy underlying capital to other contracts and begin yield farming, but for now, it is a staging ground for early supporters. After TGE, the team will distribute APY tokens to holders of APT LP tokens. The team hopes to incentivize a fair distribution of APY in this manner to the community. 

The team allocated 31.2% of the total supply (31,200,000 APY) for this purpose with a release of 520,000 APY (~0.52%) over multiple years. At this time, the emission schedule for these mining rewards has not been announced. 

Team and Advisors

The team and advisors will receive 20% of the total supply. They are all on a long-term vesting schedule. The team tokens are vested over four years.

Several advisors are vested over two years and for other longer-term strategic advisors, over four years. For the former group, there is a monthly release of 73,888.89 APY (~0.074% of total supply) from month seven onwards. For the advisors on the four years vesting there’s a 6-month cliff, followed by linear vesting for the remaining 3 ½ years.

It is worth mentioning that there is a more significant release happening in month 6 when 442,500 APY (~0.44% of total supply) release to advisors.

Summary and strategic timing of releases

In summary, the initial circulating supply is estimated to be 8mm tokens with a circulating market capitalisation upon release (at the private sale price of $0.135) would be $1,086,349.30.

All vesting schedules result in a healthy and sustainable emission schedule as there’s no sudden considerable increase in supply, except for month six. Moreover, the community initiative rewards are negligible.

Furthermore, the liquidity mining reward schedule tells us a lot about the strategy of APY Finance. The goal is to create sustainable long term price action and an extensive community reward program. Therefore, we do not expect to see the token experiencing outrageously high and unsustainable APR as we have seen from recent “farming” projects. 

Investors will receive a more significant portion of tokens in the first month before the official product launch. As a result, the first month will be fueled entirely by speculation, whereas subsequent releases can be supported by actual traction of the product and TVL achieved.


This overview has been prepared solely for informational purposes and is not to be considered as investment advice. It does not purport to contain all of the information that may be required or desirable to evaluate all of the factors that might be relevant to a potential investor, and any recipient hereof should conduct its own due diligence investigation and analysis to make an independent determination of the suitability and consequences of any action.