Weekly Gauge #70: Entering the era of composability for Warlord
Trade the vote incentive yield
This week marks a significant milestone for Warlord as it celebrates its first birthday. Over the past year, Warlord has achieved impressive statistics: distributing approximately 56.5 ETH with an average APR of 52%, and engaging over 110 unique users. These achievements underscore the platform’s growing influence and effectiveness in the DeFi space.
But what’s Warlord? It is one of the latest Paladin’s products which automates the management of Convex (CVX) and Aura (AURA) positions. Through a seamless process of depositing and minting WAR tokens, users can stake their assets within the system to earn revenue from protocol rewards and vote incentives.
Warlord distinguishes itself as the first governance index that enables users to access vote incentives from both the Convex and Aura ecosystems. This dual-exposure approach significantly reduces the risk and volatility typically associated with being confined to a single vote market, offering a more balanced and secure investment strategy.
After a year of development, Warlord is now poised to embark on the path of composability. As highlighted in the Weekly Gauge on yield trading, new platforms are emerging, and with Spectra now live, the era of permissionless yield trading has begun. This evolution enables users to speculate on the voting incentive market through the yield trading of thWAR. Let’s dive in!
What is Tholgar, why a WAR compounder ?
Tholgar is an advanced auto-compounder vault for Paladin Warlord's $WAR index token. This innovative protocol iteration is designed to maximize yield accrual by automatically compounding rewards generated by the index’s underlying governance tokens. When users deposit $WAR tokens into Tholgar, they receive tWAR tokens (thWAR in the v2), which serve as both a receipt and a representation of their shares in the auto-compounder vault.
The value of each share increases every time rewards are harvested, ensuring that users benefit from continuous compounding. Upon withdrawal, users receive their initial principal plus the share ratio of the accumulated rewards. ThWAR, the second version of the vault, offers improved future-proofing and gas efficiency compared to tWAR, the first version. By the way, users can migrate from tWAR to thWAR at any time, ensuring they can take advantage of the latest enhancements in the protocol, if you haven’t done so, please do!
Tholgar is now users’ favorite platform to deposit WAR with more than 51% of the supply and 217k WAR locked.
Why Trading Warlord Yield is a Game Changer
2.1 First Time It’s Possible to Speculate on CVX and AURA voting incentive Markets
The opening of a thWAR pool on Spectra introduces a plethora of opportunities for yield trading enthusiasts.
First, by leveraging YT-thWAR, traders can speculate on the yield generated by $thWAR and by extension speculate on the whole voting incentive markets round by round, potentially enhancing their returns through strategic trading. This dynamic trading environment allows participants to capitalize on voting incentive market movements and optimize their yield strategies effectively.
For those who prioritize stability, PT-thWAR offers a more predictable yield with fixed rate returns, mitigating risk while still taking advantage of the strong performance of $thWAR. This dual approach caters to both risk-tolerant traders and conservative investors, providing a versatile platform for yield optimization and a new yield opportunity rather than simply hold thWAR of stkWAR.
Additionally, by supplying liquidity to the thWAR pool, participants can earn substantial rewards, with the potential to achieve up to 310% APR. These impressive returns are primarily paid in $APW, driven by emissions directed by $veAPW holders, and also include native yield from $thWAR. This lucrative incentive structure encourages active participation and boosts overall yield potential.
Now let’s take a look at a concrete example of sophisticated plays the new Spectra pool could allow you to do. With already $250,000 of $thWAR in the LP, liquidity is now decent to allow for mid size trades. Let’s consider a scenario where CRV prices drop (feels familiar?), leading to a decrease in weekly Curve emissions in dollar terms, which subsequently causes the bribe market to shrink and $WAR APR to decline in the next epoch. A strategic response to this situation could be to sell YT and buy more $WAR, thereby positioning oneself advantageously for future yield opportunities.
By selling YT you are literally shorting the yield for the next epoch and by using that to buy more WAR you are positioning yourself to get the most out of the yield for the next epoch when others parties will acknowledge the CRV price drop and adjust their voting incentives. As shown on the picture, with an implied APY of 22.54% shorting YT means you think that the yield for the next epoch will be lower than this number.
This exact strategy also works the other way around with a CRV pump.
In summary, the introduction of the thWAR pool on Spectra not only enhances yield trading possibilities but also offers diverse strategies for maximizing returns, ensuring that both speculative traders and stability-seeking investors can find profitable avenues within the ecosystem.
2.2 Historical vlToken APR, a good material for Yield Trading
The yet sustainable APR track record of vote-locked tokens provides a robust foundation for yield trading. Warlord’s governance index, with its consistent and high-performing vlToken APR, ensures that users have a reliable basis for their speculative activities. This stability in yield generation makes Warlord an attractive option for traders looking to capitalize on predictable and lucrative returns, further enhanced by the automated compounding of rewards.
Furthermore, both vlCVX and vlAURA market seem to have reach maturity in terms of incentive volume, it makes the APRs more predictable considering that the compounding rate of CVX and AURA emissions into vltokens as well as the participation rate are available data during and after every voting cycles.
2.3 Avoiding the Warlord Exit Queue
Finally, one of the significant advantages of trading Warlord yield is the ability to bypass the exit queue associated with the traditional staking and unstaking process. This flexibility allows users to enter and exit positions with greater ease, optimizing their strategies and responding swiftly to market conditions. The streamlined process not only saves time but also reduces the complexity and potential losses associated with delayed exits, making yield trading on Warlord a more efficient and profitable endeavour.
Furthermore, to diversify even more the yield opportunities in the WAR ecosystem, Paladin has now introduced the first WAR liquidity pool on Balancer allowing everyone to bypass the exit queue. This pool will be incentivized starting next epoch and will provide a new yield opportunity paid in BAL and AURA this time.
In conclusion, Warlord’s first anniversary highlights a significant milestone, demonstrating its strong market fit with remarkable achievements such as distributing 56.5 ETH, maintaining an average APR of 52%, and generating over 35 ETH in buying pressure for CVX and AURA through its zapper. As Warlord continues to expand, it is poised to enhance its composability and further solidify its position in the voting incentive landscape.