Since the inception of the Protocol we’ve always had ideas of using the Basket to generate revenue for the Protocol and its users. The thought being, a key characteristic of the Protocol is that it is capital efficient, thus it would be a shame to just leave the assets in the Basket and not do anything with them. In theory we knew that the auctions would be efficient in restocking the Basket, in practice, this theory has been proven true. Since the launch of $FLOAT at ETH all time high, we have seen the Protocol accrue almost 1000 ETH into its Basket via the auctions over the past 3 weeks.
In general, we can do more. We can withstand some fairly aggressive movements (down 50% for example), and we can utilise at the very least 25% of the basket
One of the easiest uses that we envisage is using the ETH from the Basket for flash loans. The code for this is partly written already and could be implemented in v1.1 of the Protocol. A prime use case could be an arbitrager participating in the auction uses the flash-loans from the Basket to aid them in correcting the $FLOAT market price back to the target. The Protocol would take a fee (0.05%) into the basket.
We could swap a portion of the basket our to yield earning assets, preferably rebasing / compounding tokens (e.g. Lido stETH) which could naturally increase the balance of the basket.
Implementation-wise this shouldn’t be too challenging as long as we keep the assumption the assets are pegged to ETH (i.e. 1 ETH = 1 XYZ).
It would be great to hear the community’s thoughts on this and any ideas they have as we BUIDL the decentralised monetary system of the future together.