Hello Summerfi community,
In the light of recent events in DeFi, with a dozen of yield-bearing tokenized funds experiencing massive withdrawals due to either issues with solvency or fear/fud on the market in general, BA Labs proposes full liquidity reallocation to curated low-risk ARKs (Aave v3, Compound v3, Fluid, Sky sUSDS, Spark, and similar).
Full list of ARKs proposed to be deposit in is available here, labeled with “YES” in the “To be deposited in” column.
This comes from the identified non-negligible contagion risk across DeFi, especially considering the SummerFi’s extensive collateral list (over 240 different collateral assets among all ARKs listed), as BA Labs advises for precautianary measure, like this one.
We believe chasing for marginal APY improvement, especially in the current state of the yield market, is not to be justified by the risk presented. Hence the proposal to limit the exposure to the minimum. Furthermore, it’s important to note we think Summerfi’s main value proposition as an yield aggregator protocol stays in tact even with just a few low-risk ARKs being available for rebalancing by keepers, while reducing the overall protocol risk significantly.
By doing this, SummerFi’s deposits would effectively be limited down to blue-chip collateral only, from potentially 240+ collateral assets that include exotic and risky collateral in both lower and higher-risk ARKs.
The list of curated ARKs (to be reallocated in) includes ARKs that BA Labs had previously proposed deploying, but are not deployed yet (labeled as “Not deployed”), with the main goal of having the option to derisk the fleet in cases like this. For those that are not deployed yet, we suggest deploying, but as a second order of action, after moving the funds to already deployed low risk ARKs, as per the sheet above.
To trigger the keepers more quickly, and after consulting with the SummerFi team, we’ll be setting caps of of other ARKs to zero, which would effectively result in liquidity reallocation to the curated ARKs.
We’ll make sure the caps for the curated ARKs are set properly to accomodate the new inflows. If any additional parameter adjustments happen to be required for the reallocations to happen, we’ll be on a stand by to be SummerFi team.
Note: The only fleet worth highlighting from centralization risk standpoint is the high-risk ETH fleet on Mainnet which is expected to go all in Fluid. While Fluid protocol will be able to absorb all the liquidity, we note SummerFI will be exposed to a single protocol 100%, which is not recommended, so here deploying new low risk ARKs, stated in the doc, would be a priority.