As an extension of the Aave cellar, Sommelier can also optimize choice of stablecoin LP positions across various stablecoin tokens and AMMs. Many yield seeking users are largely indifferent to which stablecoins and AMMs with which they have exposure, and simply prefer to earn the highest APY available to them at any given moment.
For example, a yield farmer may be LP’ing USDC/FRAX on Uniswap and staking on Frax for 11% but notice that they could be earning 17% by LP’ing UST/USDT/USDC/DAI on Curve and staking on Convex. Time spent monitoring APYs, gas, and accurately predicting future APYs are all barriers that may prevent this farmer from attempting to adjust their position, or from adjusting correctly and profitably.
A Sommelier Cellar can manage every step of this process from constant observation and analysis of the market through execution of a position change. This Cellar strategy is not available to static vaults because the amount of computation required is not possible to profitably execute on-chain. Cellars unlock massive potential as the freedom to analyze/adjust positions are largely unconstrained.
This cellar invests users funds into the best performing stable-coin vault on Convex. For example, a user can deposit USDC into the cellar, and the cellar will swap and then invest the USDC into a DAI-vault on convex. If the APY on the DAI vault drops significantly relative to say a FRAX vault, then the cellar will withdraw its funds from the DAI position, swap DAI to FRAX, and deposit FRAX into a FRAX-vault on Convex. This allows the cellar to dynamically capture revenue from the most profitable vault at any given time.
Similar to the Aave strategy, the strategy will reinvest the Convex liquidity mining rewards into the current position.
Benefits To Users
Users benefit from this strategy because the cellar yield farms on Convex on behalf of the users, saving users precious time from needing to monitor all the positions and swapping between them. Further, since the Cellar re-positions its funds as a whole, gas-fees are effectively spread across all users, making the cellar much more gas-efficient than performing transactions without the cellar. Next, the cellar is managed a sophisticated strategists which selected by the validators. The strategist can perform a collection of off-chain calculations, and push the action to the cellar. Moreover, early users will be rewarded Somm tokens for using the Sommelier protocol.
This ability to alternative between different vaults on a platform like Convex, is a powerful showcase of the Sommelier protocol.