Authors
Clearstar Labs
Background
gm mETH heads,
We are Clearstar Labs, a Swiss-based technology and research company specializing in market-neutral strategies for digital assets, such as DeFi yield generation. Throughout the past two years, we have developed infrastructure to actively manage DeFi positions and created a live track record with our flagship product - the “Clearstar Proton Fund”. Our team brings a perfect mix of TradFi boomer knowledge combined with crypto degen left-curve analysis, with more than 16 years in private equity knowledge, 6+ years in crypto having enjoyed and survived multiple booms and busts,witnessed the birth of DeFi in 2020, and a bunch of math, machine learning, market making, blockchain forensics and fund management right-curve knowledge.We are backed by a fully regulated asset manager in Switzerland.
Clearstar Proton Fund is a multi-strategy portfolio with a focus on quantitative, market-neutral return generation through a mix of in-house DeFi liquidity provision strategies and externally managed quant trading strategies. This includes allocations to HFT market making, statistical arbitrage (relative value), trend/momentum following, among others. The portfolio construction aims for positive skewness and low correlation between the sub-strategies to generate a robust return throughout a full market cycle. Further details are provided in the attached pitch deck.Our team’s core expertise is running DeFi Strategies and we have an extensive network of partner builders and protocols with which we work to deploy new integrations and products and make sure they are supplied with liquidity so that operations can run smoothly.
We would like to dedicate a section to specifically highlight our risk management framework. On the DeFi side, we have developed a strict due diligence questionnairewhich needs to be completed and get Investment Committee approval before any funds are deployed into a protocol or token. Things we check for are:
- Blockchain Risk (including bridge risk)
- Smart Contract Risk (software and architecture documented, code coverage, tests, and more)
- Oracle Risk (frontrunning and flashloan susceptibility, oracle architecture, and more)
- Admin Controls (upgradeability, ownership structure, pause/timelock controls, and more)
- Economic Risks (faulty tokenomics or logic)
Furthermore we implemented Hypernative for block-by-block monitoring with automated logic to unwind or derisk from positions in case suspicious activity or active exploits are detected. There is always a base-layer of inherent smart contract risk which cannot be avoided but can be mitigated effectively with our system.
On the external manager side we leverage our 16+ years of experience in the sourcing, screening, and evaluation of fund managers. This involves quantifying risks to minimize downside with an extensive due diligence protocol containing topics ranging from team quality to operational and market risks.
Proposal
We write this proposal in the context of the approved MIP-28, which has a section titled: “Strategy: Subscription to Market Neutral Liquid Funds”.
We believe that Mantle could benefit from allocating a portion of its treasury into this product, as it offers a source of diversified and market-neutral returns with a favourable monthly liquidity profile. Thus, the product can be suitable for cash management while generating above-market returns on the idle funds… We can allocate large amounts of capital by leveraging our network to strike high, long term yields. We are proud to be working closely with reputable teams such as Dolomite, Gnosis, Reserve Protocol, gTrade, Conclave, in between many others.
Moreover, we bring the great advantage of working with a regulated asset manager in Switzerland which carries with it a distinct sign of quality and assurance about the professionalism of our operations.
The risk-adjusted returns we can offer thanks to our setup, experience in crypto and network is hard to match.
Next Steps
Have a more in depth discussion with the Mantle EC to explore how we can best suit the needs of the treasury. We read the criteria stated on the approved MIP and while the “Clearstar Proton Fund” cannot give daily but monthly reporting(due to the external manager component), we believe this is a fair compromise when the management is handled by a regulated entity… In any case, a bespoke solution through a separately managed account (SMA) through a SAFE multisigthat only deploys DeFi positions can be offered as an alternative.
Supporting Information
- Benefits to Mantle:
- Diversify the treasury, boosting returns, Sharpe ratios and positive skewness
- Boost the Mantle DeFi ecosystem to make it more liquid and enhancing activity
- Synergies with Mantle products
- We work closely with Mantle native protocols, such as Aurelius and Cleo among others. Our ability to negotiate private incentive deals and possibility of bringing new integrations/deployments to Mantle (from our partner protocols)can boost Mantle’s metrics by stacking more DeFi Legos.
- Risks
- The main risk as with any on-chain operations is smart contract risk. We have a very strict DD process as well as direct lines of communication with the protocols we deploy funds in to guarantee the safest deployments of assets.
Furthermore, we have Hypernative integrated as an active layer of defense which monitors onchain activity and allows us to withdraw funds before any exploits occur with very high accuracy.
- The main risk as with any on-chain operations is smart contract risk. We have a very strict DD process as well as direct lines of communication with the protocols we deploy funds in to guarantee the safest deployments of assets.
- Costs
- Depends if it’s a direct investment through the Clearstar Proton Fund or an SMA. Cost structure will follow industry standards.