Hi Avalanche Community,
I am Keith, a core contributor on Baklava Space protocol. Concurrently working in the Litecoin Foundation as operations director.
Baklava Space is a yield optimising protocol that has launched its auto-compounding vaults for LPs in Traderjoe and Pangolin since early 2022.
In 2023, we are developing more complex strategy vaults including leveraged and delta neutral vaults. We are building vaults based on top of protocols/staking token that provides real yields. For a start, we are looking to build vaults on GLP, which is one of the fast growing real-yield protocols on Avalanche.
We are building a leveraged GLP vault where users put in their funds and leverage up their positions in GLP. We are taking a page out of JonesDAO vault which offers similar vaults. The leverage ratio will be kept between 2-2.5x. Based on our backtesting, 2.25x leverage is the sweet spot for leveraging GLP and lowering the risk of liquidation. Our leveraged GLP vault is paired with a stablecoin lending vault, whereby users with lower risk profile can lend funds to the leveraged GLP vault. Such stablecoin lending comes with lower principle-loss risk with a lower portion of the returns from GLP (30-50% of yield). We have studied various GLP vaults model and assessed that this approach offers a good balance between the risk and returns. Vaults with a higher leverage comes with a higher liquidation risk. Based on our backtesting of the leveraged vault, the historical yield will be 34% Apr for the past 365 days and 52% Apr for the past month. Baklava Space’s GLP leveraged vault is targeted to launch in Q2 2023.
In addition, we will also be building a delta neutral vault for GLP and other real yield tokens that the vault supports in the future. Delta neutral vault is suitable for users who want to hedge their risk in the underlying GLP’s risk assets. The yields from the tokens will be used to pay for costs of hedging the BTC and ETH portion of exposures in the GLP. What is different is that we hedge using BTC and ETH perpetual shorts on a dexes such as Dexalot, GMX or MarginX. Target to launch our delta neutral vaults in Q3 2023.
Looking forward to offer more vaults in the Avalanche ecosystem!