Understanding DynaSets
Overview Of DynaSets A DynaSet is a dynamically managed set of assets. You can think of it somewhat like a basket of tokens that are automatically rebalanced to optimise returns versus holding the underlying assets.
DynaSet Types
Long-Only A Long-Only strategy takes only long positions and reduces volatility and downside risk by holding USDC.
Example: Consider a DynaSet composed of USDC and BTC. If signals indicate that BTC is showing signs of an uptrend, the DAM exchanges USDC for BTC. As BTC increases in value, the DAM watches for signs of a reversal, before swapping back into USDC thereby generating Alpha.
Leverage A derivative DynaSet is able to make both long and short trades while applying leverage as and when it is appropriate. The current iteration of a leveraged DynaSet, called dynDYDX, integrates with the dYdX protocol to enable these mechanics while trading both Ethereum and Bitcoin in a single set.
Unlike a long-only trading strategy, these DynaSets are able to generate Alpha in any market condition.
Yield Generating Yield Farming has become increasingly popular within DeFi. While popular, many are unaware of the intricacies involved in truly optimising stablecoin farming.
Yield is generated from trading fees or capital utilisation from lending protocols, among other things. That yield, while shown using average APR values, actually varies wildly from block to block based on volumes, participation levels, TVL and several other factors.
Monitoring all yield protocols and pools while actively positioning user capital between them is costly in both time and transaction fees. While being part of a larger pool of capital lowers those fees, the true power of DynaSets comes in their automation. SingularityDAO’s crypto asset management solutions mean that users no longer have to spend their time actively managing their portfolios, and stablecoins are no exception.
Yield generating DynaSets use execution bots to pre-emptively move between whitelisted protocols at high speed while leveraging AI algorithms that predict which of these protocols will be giving the highest yield in upcoming blocks thereby maximising the possible returns for the user.
DynaSet fundamentals
The Contribution Window This phase will involve a window of time where users can deposit within a list of selected liquid tokens to the Forges in preparation for the DynaSet to begin. Depending on the DynaSet, there might be a min/max token contribution required that the users can see while using the “Deposit” function. After the contribution window closes, all the submitted tokens will be “forged” together into the correctly weighted assets and the DynaSet will begin trading.
The Trade Execution Layer The DAM will monitor market & social media conditions, and if certain criteria are met, or AI signals are received, dynamically adjust between strategies and take appropriate actions. A complex layer of smart contracts will then analyse multiple DEX and Liquidity Pools, taking into account things like GAS fees, slippage and market depth. If all the criteria are met, a trade (or multiple smaller trades) will be executed.
The Forge During the contribution phase tokens are deposited in the forge. At the end of the contribution period the forge swaps all tokens deposited, into the DynaSets underlying assets, weighted based on the requirements of the DAM that are defined when initialising the DynaSets.
Trading Window After the forging, DynaSet LP tokens are allocated on the forges to the wallets which participated in the DynaSet. The contributed tokens are moved to the DynaSet contract and the trading window starts. From here the DAM can rebalance the DynaSet assets through the selected Decentralised Exchange Aggreggator (1inch) based on the signals it receives.
After the trading window starts, users are also able to redeem (burn) their DynaSet LP tokens in order to receive the underlying assets. The amount of assets received corresponds to the number of DynaSet LP tokens redeemed. Users have to select the assets they want to receive while performing the redeem action. If the user redeems during the trading window, they will face a capital cut (cf Redemption Capital Cut section).
There are two possibilities to redeem the tokens: either from the forge or from the wallet. This is due to the fact that SDAO is moving toward decentralisation and the users can decide to withdraw their DynaSet LP tokens to their wallet or keep them on the forge they contributed to.
Performance and Management Fees Performance fees are taken at the end of a trading window when a DynaSet has outperformed the hurdle rate. Should the hurdle rate not be met, no performance fees are taken. Performance fees and hurdle rates change depending on the DynaSet so be sure to read the description of the set that you are participating in. Performance fees taken are split between the DAM and DAO Participants. To become a DAO participant, users must have their SDAO tokens staked within the platform.
Management fees, unlike performance, are taken regardless of results. These fees are considerably lower and used to cover the running costs of a DynaSet, for example GAS fees.
Redemption Capital Cut Users who wish to exit a DynaSet outside of the pre-defined withdrawal windows are able to do so, however they will face a capital cut:
• 0-30 days: 5% • 31-60 days: 4% • 61-90 days: 2.5% • 90+days: 0%
Example: If the user redeems 100 dynBTC within the first 30 days of trading, selecting USDC as the redeemed token while dynBTC is holding 50% USDC, 50% wBTC. 100 * (5/100) = 5 dynBTC will be sent to the DynaSet controller (Managed by SDAO). 100 * (1 - (5/100)) = 95 dynBTC will be burned. If at the burning time the 95 dynBTC corresponds to 47.5 USDC & 0.00226 wBTC. The DynaSet will swap the 0.00226 wBTC to USDC. The user will receive the USDC amount resulting from the burning & the swap.