How to earn additional yield by minting MNYe tokens and LPing

The Market Neutral Yield ETH token from the Index Coop automates a continuous basis trading strategy that returns a price-neutral yield to token holders. Built using Set’s integration with Perpetual Protocol on Optimism, MNYe contains a fully hedged ETH position, with equivalent spot exposure and short exposure via perps.

Token holders will earn a variable USDC return when the funding rate is positive while removing all exposure to price volatility of the underlying asset.

Swapping and Direct Minting on the Index App

Although there will be DEX liquidity at launch, large trades will be better suited to flash minting to reduce any price impact and/or slippage, ensuring the most efficient trading experience. This is a simple, straightforward, and low-cost process, as detailed below. If you have not used the Optimism network before, there is a simple UI available from Optimism that offers bridging assets from other chains, centralized exchanges, and fiat on-ramps. To swap or mint MNYe, you will need USDC on Optimism. To swap or mint MNYe, visit app.indexcoop.com/mnye and connect your wallet.

Once connected, switch the network in the top right-hand drop down from Ethereum to Optimism.

For trades sizes smaller than 10,000 USDC, it is recommended to do a simple swap from USDC to MNYe. This will be routed through the main Uniswap v3 pool. For trades larger than 10,000 USDC, it is recommended to mint. To do so, just click Toggle Token Minting.

Then simply enter the number of units needed. An estimate of the USDC required will be shown. Approval to spend the USDC will be required before minting. Approve Tokens, and then once that has been processed, simply click Trade. If the new units do not show in your Metamask wallet, do not worry. At the bottom of the Assets list in Metamask click import token and paste in the address: 0x0Be27c140f9Bdad3474bEaFf0A413EC7e19e9B93

Earning LP fees with Uniswap and Arrakis

Providing liquidity is one way of making the asset productive by earning swap fees, potentially further increasing overall yield. By pairing MNYe against another stable coin such as USDC, LPs can benefit from trading fees whilst the risk of “Impermanent Loss” is lower due to the stable nature of the pair. Below are two common examples of ways to provide liquidity for MNYe.

Option 1: LP via Uniswap v3

Experienced DeFi users will be familiar with LP’ing via Uniswap. A list of pools available for MNYe can be found here

To LP MNYe against USDC: Click Here

As MNYe:USDC is a stable pair, the UI automatically recommends the 0.05% aka 5bps pool. Input the price ranges at which you are prepared to provide liquidity. The Deposit Amounts will change depending on the range selected, the underlying price in the pool at the time, and your underlying available balances. In the example above, if the price of MNYe at the time in the pool is $100 USDC and the range is set to -1% to +2%, the ratio to deposit will be approx 2:1 in value. The tighter the range, the greater the proportion of swap fees across the pool the LP position will capture. The trade-off is that if the price goes outside the chosen range, no liquidity can be provided, and therefore, no fees will be accrued. It is important to note that as yield accrues to the product, the value and price will increase. As a result, it is reasonable to expect that over time a narrow range will find itself out of range and stop accruing swap fees. Consequently, users choosing a narrow range will likely need to actively monitor their LP position to ensure it remains productive. It is also important to note that as the value and price of MNYe increases relative to USDC, a narrow range LP position will trend to 100% USDC, further reducing the users' overall returns.

Option 2: Automated LP Strategies with Arrakis

It is possible to use protocols such as Arrakis to automate some of the management of Uni v3 LP positions. Their latest pools can be found here. The latest UI version allows users to sort by network and token. Use this link in the event it is not shown.

To view the TVL, APR, Ranges, and other pool details, click view.

You can see this particular pool has a wider range than the previous Uniswap example. Approximately 0% to +5% from 100 USDC. This position is much more likely to stay in range longer, requiring less rebalancing to keep in range and accruing fees. Another benefit is that fees generated in these pools will also automatically be redeployed into the pool, therefore, compounding returns. This particular pool is managed by Arrakis; when the price approaches the upper bound of the range, the pool will be rebalanced with new ranges to ensure it does not go out of range and therefore always remains productive. Simply follow the intuitive UI to add liquidity to the pool. If you are new to Arrakis, the LP position differs from Uni v3 positions because you receive an ERC20 as a receipt for your assets in the pool. In the future, it may be possible to then use these ERC20s with other DeFi protocols such as borrowing and lending platforms where you could use them as collateral, etc.

For any issues with swapping, minting, redeeming, or providing liquidity, please visit the Index Coop Discord.

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