PermaLP Position Unwinding Report

The DeFi Collective has unwound its permaLP liquidity initiative. This post is a comprehensive report on this two-years adventure which will explain why and provide all the receipts. This initiative was conducted with four projects in total: Liquity v2 BOLD (through a PIL initiative) - on BOLD, Possum Finance - on PSM, PoolTogether - on POOL and Botto - on BOTTO.

What the PermaLP initiative achieved

The Perma-LP (Permanent Liquidity Provider) initiative was created by the DeFi Collective primarily to provide a guaranteed, ever-growing foundation of liquidity for its partner protocols. There were multiple reasons why those Perma-LP positions were implemented:

Cost-free liquidity

Maintaining liquidity can be expensive for DAOs and builders. By permanently committing these assets into dedicated pools, the Collective ensures that our partners maintain this foundational liquidity without ever incurring any ongoing monthly costs for it

Also, one of the main barriers when creating a token for a DeFi protocol is the price impact, which can discourage users from taking an interest in the project and can be very costly when liquidity management is inadequate.

Sustainable growth through Compounding

These permanent positions receive ongoing voting support from the Collective’s liquidity-driving positions—such as our veVELO and veAERO—and the generated yield from the perma-LP is harvested monthly

By compounding these yields to grow the underlying liquidity, we guarantee sustained and increasing liquidity growth for the supported pairs over time

Operational and Accounting Clarity

This reason was more related to the Collective: By migrating these permanent positions out of the main treasury and into a dedicated perma-LP multi-sig wallet, we enable much more efficient accounting

This separation provides a crystal-clear overview of the Collective’s treasury balances, making it immediately obvious which liquid assets are still available to deploy and support additional protocols in the future

Why are the Perma-LP positions paused

The decision to suspend Perma LP was particularly difficult, given our expertise in liquidity management and our commitment to promoting genuinely decentralised DeFi protocols.

In the end, a multitude of factors motivated this rational decision:

• DeFiScan: DeFiScan is the Collective’s flagship initiative, as it is the most visible and impactful one. That said, DeFiScan also represents the Collective’s largest current recurring expense, which is incompressible since we are actively working on DeFiScan V2.
• Current market conditions have rendered certain positions unviable: some positions caused significant impermanent losses, while other positions were subject to bribes whose efficiency was no longer sufficient (more info below).

However, there is one positive lesson to be learned from this decision, namely that the Collective’s treasury management was never questioned in the decision to discontinue the perma-LP. Our Treasury Management Policy has remained unchanged since the Collective was founded, and without it, the situation would have been much more difficult.

The Perma-LP Impact

The pause in perma LP provides an opportunity to take stock of their impact on the assets we have supported through these positions. Each asset that has been subject to a perma LP has its own unique situation, so it is best to assess each case individually.

POOL

The Collective’s journey with POOL began in late 2023, when we focused on enhancing the POOL token’s liquidity on the Optimism network. Harnessing our substantial veVELO voting power on Velodrome, we seeded a POOL/ETH pool, consistently directing weekly veVELO votes and OP vote incentives to this pair.

Following our initial success on Optimism, the collaboration reached a new milestone. Through proactive governance outreach, the PoolTogether DAO successfully passed proposal PTBR-16, allocating a generous grant of 244k POOL tokens and 25k PTaUSDC to the Collective

With the newly acquired POOL grant, the treasury management team set out to scale POOL’s liquidity across leading Layer 2s:

• POOL/LUSD on Aerodrome (Base), utilising our veAERO to drive sustained liquidity
• POOL/WETH on Ramses (Arbitrum)

While Ramses/Arbitrum is a dead protocol today, the Aerodrome pools were pretty successful.

Our biggest achievement with POOL is that we have successfully established LUSD and BOLD later on as the main route to swap POOL for stablecoins. Almost all DeFi tokens use USDC as their primary stablecoin, while the POOL token uses decentralised stablecoins as its primary route.

SIR

In March 2025, the DeFi Collective onboarded the SIR Protocol as its newest DeFi partner. To kick off the partnership, the SIR Protocol donated 6.7 million SIR tokens to the Collective. The treasury management team paired these tokens with 6 ETH from the Collective’s treasury and deployed the assets into the SIR/ETH Uniswap V2 pool on the Ethereum mainnet

Just weeks into the partnership, the SIR Protocol fell victim to a complex exploit. This vulnerability led to the total loss of the protocol’s Total Value Locked (TVL) and its liquidity. Consequently, the Collective position was lost.

PSM

Historically, the PSM from Possum Labs was our very first token to perma-LP in May 2024. Possum Labs donated $30,000 worth of PSM tokens to the Collective. The treasury management team matched this donation with $30,000 of LUSD from its own treasury and deployed the combined $60,000 as a wide-range concentrated liquidity pool on the Ramses exchange, boosted with veRAM voting power from the Collective.

The Collective added 0.6 ETH each month to the pool, and this allowed the PSM/WETH pool to see its size doubled.

Unfortunately, two factors will hasten the end of perma LP:

1. The near-zero drop in volumes on Ramses has significantly reduced the influence of veRAM holders on Arbitrum’s liquidity
2. The PSM (temporary) phase out when Possum Labs released a new product and initiated a token migration from PSM to CASH in February 2025.

Today, the Possum Finance project still exists in the form of a no-loss prediction market, and the PSM token still exists.

BOLD

BOLD was the biggest perma-LP position the Collective did, as Liquity was specifically built to be the most disintermediated stablecoin issuer possible.

Before BOLD even launched, the Collective set aside 100 ETH specifically to mint BOLD immediately after the protocol went live, and the treasury management team devised a clear allocation strategy for the BOLD Liquidity initiative they created for Liquity’s Protocol Incentivized Liquidity:

• 50% would be posted as vote incentives on Layer 2 decentralized exchanges (like Velodrome and Aerodrome) to increase the emissions directed to BOLD pools.
• 50% would be matched with the Collective’s existing treasury assets (USDC, LUSD) to directly supply liquidity to these pools

By May 2025, the treasury re-established BOLD liquidity across key Layer 2s:

• On Optimism (Velodrome): The Collective split its legacy LUSD/USDC position to seed both LUSD/BOLD and BOLD/USDC pools, backing them with massive veVELO voting power.
• On Base (Aerodrome): Similar BOLD/USDC and BOLD/LUSD pools were deployed, receiving significant vote and bribe support. This approach proved highly effective; by June 2025, the BOLD pools on Base had surpassed $5 million in TVL.

The thing is, overall activity on OP Mainnet was declining, while activity on Base remained high. The Collective, therefore, decided to focus its efforts on Aerodrome.

But another problem arose shortly afterwards: current market conditions led VELO and AERO’s respective prices to decrease, thus decreasing the absolute value of AERO emissions directed by the Collective towards the BOLD pools on Base.

The strategy made sense as long as the AERO emissions’ value was superior to the vote incentives paid by the Collective, but this ratio reversed at the beginning of 2026.

BOTTO

The Collective’s active support for BOTTO officially kicked off around August 2025 and launched a BOTTO/BOLD vAMM liquidity pool on Aerodrome. To fund this, BottoDAO provided $25,000 in BOTTO from its Protocol-Owned Liquidity, which the Collective matched with $25,000 in BOLD from its own treasury.

In addition, the Collective committed 100,000 veAERO in weekly voting power to the BOTTO/BOLD pool, and dedicated 20% of the BOLD it receives for Aerodrome bribes (via the Liquity V2 Protocol Incentivized Liquidity initiative) to incentivize other veAERO voters to vote for this pool as well.

Despite relatively competitive yields for a stable/volatile pool, the BOTTO/BOLD pool couldn’t be maintained due to the lack of efficiency on Aerodrome, which is the same problem as Liquity.

PermaLP Unwinding Details

To remain truthful to our commitment to transparency, and enable anyone to audit the onchain activity of the Collective, this section provides more context, on a project-per-project basis pertaining to the unwinding of the positions.

Each permaLP position was made of:

1. Some assets donated to the collective (ex: POOL)
2. Pairing assets coming from the Collective treasury (ex: BOLD)

Every single permaLP unfolding followed the same logic:

1. The LP position was withdrew
2. The Collective recovered its pairing asset component (often with sizable IL) and sent it to its main wallet.
3. The assets stemming from donations were consolidated into the grants wallet.
4. We reached out to each concerned community to determine what was the best course of actions for these assets.

Liquity v2 - BOLD

Per our BOLD PIL Strategy, half of the assets received from the Liquity v2 PIL system were matched with stablecoins from the Collective treasury, and supplied as permaLP on Velodrome and Aerodrome.

The LP position have been withdrawn, resulting in the recovery of 62 375.41 BOLD, sent to the grants wallet.

These BOLD will be re-injected into the PIL system, to maximize the long-term positive impact for BOLD. Each week until the balance runs out, the following will be performed:

1. 4000 BOLD injection into the PIL system itself
2. 1500 BOLD injection into BOLD/USDC Merkl campaign.

First PIL+Merkl re-injection – March 12

At the current pace, the re-injection should last about 11 weeks, but it could be a bit longer, since the Collective is still receiving BOLD from PIL.

IF YOU ARE A LQTY STAKER, PLEASE DO ONE OF THE FOLLOWING ACTIONS:

• Upvote another liquidity initiative, we can recommend Uniswap as it is currently one of the most efficient initiatives
• Downvote the DeFi Collective’s initiative

You can both upvote and downvote by splitting your voting power (see above).

PoolTogether - POOL

We’ve reached out to the PoolTogether community and discussed what would be the most appropriate course of action with the ~418k POOL concerned. The community voted burn. We decided to round the number up to 420K POOL using our own reserve for maximal fun factor, and proceeded with the burn on March 12.

Possum Finance - PSM

With the community’s avail, the Collective retained the whole position and bridged it back to mainnet on its main wallet.

BOTTO

A total of 223 000 BOTTO was remaining, and here we operated a fair split:

1. 100 000 BOTTO were burned
2. 70 000 were allocated to a key contributor in the Collective x Botto collaboration.
3. The Collective kept the remaining 53 566.9585 and staked them with the main wallet.

Conclusion

Despite today’s wind down of the permaLP positions, the impact remains overwhelmingly positive for the projects. They got the most cost-effective liquidity support available, by an insane margin. And each community got a nice bonus on the unwind.

Great results were achieved, making the underlying assets more attractive:

• The BOLD stablecoin is/was the main route for POOL tokens
• The BOLD/USDC pool had one of the most competitive yields among stable/stable pools on Aerodrome
• At some point in time, ~90% of POOL’s L2 liquidity was carried by the Collective itself.

We took the permaLP as far as we could, but we simply could not stomach its operating costs anymore. We thank each of the four communities for their trust in that adventure. Keep watching the Collective, the team is cooking with DeFiScan v2 upcoming release.