Building upon “Proposal #1 - Dion C. - Treasury Management & Advisory” by @0xTaiga . This is continuing the conversation from https://discourse.lilnouns.wtf/t/proposal-1-dion-c-treasury-management-advisory/27/25, which has deviated significantly from the original proposal.
Things that lil nouners generally agree on:
- Denominate and benchmark lil noun treasury in ETH, not dollars nor nouns.
- This is a treasury, not a trading or prop shop. Focus should be on deploying idle assets conservatively.
Proposal Test Run 1 (Cost: 2 ETH, excluding gas):
- Start with delegating 1 ETH to Lido via buying stETH straight from 1inch. This will provide a 2.25% discount instantly instead of converting 1:1 on Lido.
- With 1.0225 stETH and 1 ETH provide liquidity on Curve’s stETH pool.
Proposal Treasury Allocation 1:
- After successful Test Run 1, raise a new lil nouns proposal to allocate up to 20% of Treasury into Lido+Curve.
- Monthly Rebalancing within the first week of each month, reports to be announced on Discourse…?
- To do the same with RocketPool and Stakewise or other staking providers to diversify protocol risk. I reckon this is important because I myself was hurt by Terra ecosystem, yes it has its fair share of criticism being a ponzi but the ecosystem is strong and at one point ranked 3rd in Market Cap. My risk mandate of diversifying across protocols and ecosystems saved me from a total loss.
- To fully allocate up to 80% of the treasury pool in such low risk, ETH-denominated staking/farming activities.
- Profits can go towards hosting IRL nounification events, charity, entertainment sponsorship, apparels and so forth decided by lil nouns DAO.
- This may be personal, but i would love for some profits to be channeled towards web3 adoption via educational efforts and supporting web3 decentralised infrastructure projects such as Chainlink, The Graph and Pocket Network.
Full disclosure before I jump in - I work at Avantgarde Finance and we’re the lead maintainers of Enzyme, an asset management protocol. I’m a full stack developer, but I also run our asset management business and pitch in on the governance side of things (we’re delegates in Uniswap and Compound, and active in several other protocols). I’m not going to pitch using us for Asset Management services as I think that’s probably overkill for a strategy that is just “earn ETH on ETH”.
With that out of the way, I am in general supportive of earning ETH on ETH but I also think we should be thoughtful about how we achieve this operationally. My reasoning there is four-fold:
spraying ETH all over the place now will make it hard to track performance, non-trivial to holistically understand the portfolio’s allocation, and most importantly imo, difficult to change later.
We risk some governance fatigue. There’s already a bunch of proposals and it’s not super easy to keep track of what’s going on where. Asking a community that’s growing as fast as lil nouns “Should we deploy 100 ETH to XYZ” every week isn’t inviting critical decision-making on the part of our community members.
There’s no accountability for returns. For the vast majority of community members, this will always be an afterthought, and for those to whom it is not, it will get frustrating trying to get props through governance. The number of people who care will quickly dwindle.
The difference in ETH between what we’ll earn if we deploy ASAP and if we take a bit to think about it is pretty minimal, especially when you take the growth of the treasury into account (e.g. who cares about earning 10 ETH when you’re doing 100 ETH a day in rev).
My general thoughts on how this might work are below. This process, to my mind, makes a small group accountable for their returns, eliminates the governance fatigue factor, keeps all the assets in one place with an easily accessible on-chain track record and transaction history and allows for future flexibility as Enzyme adds more adapters to different protocols. I just bought my first lil noun over the weekend and haven’t time to properly formulate a proposal, but I will do so if there’s interest.
- Decide on target allocation to yield-bearing strategies (think this can just be snapshot)
- Create treasury management multi-sig (self-nomination in discourse and community elections? think this can be snapshot as well. Perpetual protocol ran a similar process last fall that we can look at)
- Treasury management multi-sig creates Enzyme vault with appropriate permissions
- Members of treasury management multi-sig create discourse proposal describing vault configuration and allocation strategy, ask “Should Lil’ Nouns DAO buy X ETH worth of shares in the Lil’ Nouns Treasury Vault”
- Going forward governance can ask “Should Lil’ Nouns DAO redeem Y ETH worth of Shares from vault” to fund expenses on an ad hoc basis or “Should Lil’ Nouns DAO buy X ETH worth of shares in the Lil’ Nouns Treasury Vault” monthly or quarterly or something.
A couple of notes:
- Enzyme’s security is top notch. It’s audited regularly and there’s a big Immunefi bounty
- Enzyme charges a 25 bps protocol fee
- Step 4 above looks daunting but it’s a fairly simple transaction
- The redemption part of step 5 would return WETH, though we could write a simple unwrap function (and in fact i think this has already been done and audited by one of the other DAOs using Enzyme)
- The mandate for the Treasury Management multisig should be specific enough to protect the DAO’s funds but still allow them to maintain a little flexibility to optimise. E.g. “Invest in ETH liquid staking protocols X, Y, Z” not “invest 25% in Lido, 25% in Rocketpool, 10% here, 5% there, etc…”
… and that’s my brain dump for the time being. If there’s interest in my fleshing this out with specifics, I’m happy to do so.
Very well thought out I agree with the simplification.
I know very little on the inner workings of the subject.
I would like to however suggest keeping a sizable expense portion in USDC. as well. that can also be staked etc. (i assume)
sounds like you and Dion C should put something together. I would love to be a fly on the wall .
just to put it out there
there is something sublime about naked ETH
particularly a lot of it
I think lilnouners will not be comfortable using Enzyme and tools that are not mainstream or highly adopted. If we are to use Enzyme, you will have to hold an AMA or educational series.
Nonetheless, I think lilnouns should get started with basic staking to utilise idle assets. Would be happy to discuss how we can start small to set a precedence for future management of idle assets.
What I don’t fully follow here is the urgent need to put the DAOs ETH to work at this moment. The DAOs liabilities are denominated in ETH and it has (unlike most DAOs) a strong stream of incoming ETH.
I don’t think it is an urge to put it to work, more a set up a sustainable path no matter the path. I think its imperative. (but i am a financial professional so biased.)
Its not an urgent need at the moment. But it signals our commitment to the merge Eth2.0.
Especially good right now when stETH/ETH is depegged. As long as we dont require the liquidity and cashflow, having staked ETH will cement our commitment to Eth2.0 and grow the treasury at the same time.