Overview
As of RIP-000-005 the REN community decided to set aside a portion of Darknode rewards to give the evolving DAO its own treasury. These funds will be used to further the aims of the REN community as it sees fit. At present, no efficient systems exist for approval of disbursements of said funds (though the creation of a Treasury Committee is currently being discussed). And when these systems are developed, it is unlikely 100% of funds will be spent each epoch. And so, funds sit unused and unable to serve the primary aims of the community.
It is therefore important that these funds be put to the best secondary use possible when un-allocated, while maintaining capital preservation as the primary directive.
I propose that the single best use of funds not yet earmarked for disbursement is providing liquidity to renAsset pools in the defi ecosystem. I further propose that if REN develops a Charter or Treasury Mandate, that we discuss this concept as a provision to be contained therein.
Background
In our community chats, we often hear that renAsset pools are smaller and less liquid than many competitors. A second complaint is that they often do not offer as large a yield as other options, which is likely in part due to 1) a lack of “bribe” APY rewards supplied by REN as opposed to other projects and 2) overall less demand for renAssets.
While community funds would likely be unable to make a dent if used for directly increasing yield for renAsset pairs on DeFi platforms, improved liquidity may help with demand at least to some degree. It is also a relatively low-risk and very liquid method of storage, as long as platforms are well-vetted and we avoid pools that may lead to impermanent loss.
Method
We build a short list of DeFi platforms containing renAsset pools/yield farms
that we are willing to officially provide liquidity to. I would recommend we focus on security over yield, since this use of funds is secondary. Curve is an obvious choice. Though we may, in the future, wish to provide liquidity to pools that are of strategic importance, such as on a low-fee Layer 2 that is particularly friendly to renAssets but has not yet build much liquidity.
We create a set of guidelines as to which approved pools will be chosen for allocation at a given time. This, I think, should be a measure of risk-adjusted return vs strategic importance. We should also probably have a minimum position size (call it 1 renBTC) to avoid being spread too thin and creating more management burden.
We decide what percentage of the community fund should be deployed to LPs. I recommend starting with 75%, or a bulk of the funds, and then revisiting once we have developed an allocation cadence wherein liquidity requirements are more knowable.
Our Treasury Committee (or somesuch multi-sig group) allocates to and from the approved LPs as needed. If they wish to change the strategy, they would poll the community
Discussion
View this RFC as one component that I propose should be part of an overall living charter for REN; a proposed provision for our proposed Treasury’s core mandate. It would be very productive to begin discussing other such provisions as separate RFCs and/or RIPs so that we can build among us a set of expectations for how funds will be used, who will deploy them and where our focus should be.
Which renAsset liquidity pool isn’t deep enough and doesn’t meet current demand?
Very roughly, what degree would you assume are we talking about if we infused 200-300k in a single pool? What about 100k in 3-4 pools? Maybe 50k in 5-6 pools?
Currently I don’t know of any. But such flexibility would be useful in the very beginning of new pools. We could, for example, have a simple application process for dApp platforms wanting early liquidity for a new pool, which has the added benefit of providing a new market for said renAsset at the same time.
At any rate, that’s the best case for impact we could have with today’s numbers: the zero-to-one staker. But this is only a secondary focus. Really, I like the idea of keeping most of the treasury in renAsset pools for the low risk factor and the honor it would bring us to reap what we sew first and foremost. I don’t know about you, but I would view giving the treasury license to buy risk assets as a liability…
Think also of what we could accomplish when our fund is fat and our liquidity is deep, in farming governance on other platforms. We could grow a very substantial voice for our DAO, over time.
This is an interesting proposition, and I’m open to the idea of putting the funds to work to try and grow them (unless we vote to spend them of course).
However some well researched, verified examples of current pools lacking in renAssets would be useful for future community members checking by this RFC.
I share your last point about the long-term future growth of the funds though, when the CEF is potentially making millions a month. Diversification will be a luxury we can afford at that point, and we should seek to include liquidity pools/supporting RenAssets as part of our allocation strategy (along with integration incentives, marketing etc.)
This is an excellent proposal. Thanks for writing it up Liberty.
I would go further and suggest we invest 100% of CF funds into trustworthy pools. When funds are allocated they can be withdrawn from the pool and transferred to the recipient. If we are talking about blue chips like Curve and Aave I see no reason not to leave all of the funds in there to accrue returns while waiting for allocation.
Governance farming is also very interesting, both in terms of capital and the ability to represent the Ren community as a voting bloc in other protocols.
We might even reach a point where income from pools makes the CF self-sufficient, or even profitable.
Nov 16, 2021 - 6:00 pm GMT #Treasury-Discussion channel community members Discord chat notes
We had a loose discussion about some of the recent topics/conversation in #treasury-discussion and prior to that #governance-chat. Most of the topics we covered over a few hours were the following:
- Ideas around forming a loose working group whose aim was to discuss Community Fund (CF) assets while learning how to do work together toward current and future goals of a fledgling DAO
- Working toward a “quick win,” finding an achievable objective that could be proposed and provide value to the community
- Storing CF assets in a yield-farm to grow and compound them while the funds are not being actively used for ecosystem expenditures
- Those funds’ prioritization being for 1.) accelerated growth, 2.) supporting the Ren ecosystem (using Ren assets or Ren-adjacent assets and our partners’ platforms)
- Preliminary conversation around where to deploy those assets with most discussion involving Badger and Curve
- Conversation about how this practice itself of working through these questions may help show the need for some form of organized body/bodies to do the work needed
- Liberty has an existing RFC in place where we can gravitate to for further thoughts.
Outstanding questions/issues:
- Further investigation of pools/places to place funds. Arviee volunteered to research and report back in a week with options, continued discussion via #treasury-discussion channel on Discord.
- How to implement deployment of funds - Snapsnap vs multisig vs other options, which method would be most-appropriate for given goal/scope of this request, yield plan/strategy, or choosing a strategy based in part by its ability to be implemented with a given method. Ex: Will we propose to grant funds to a manager or group to place them in a yield for a given amount of time that could steward them in the best manner for growth or would we prefer it set up so that an RIP would be required to be voted on for each interaction with the funds – strengths/concerns around each option
- Scope of the authority requested, timeframe, guardrails
Next steps/follow-up proposed:
- For the sake of keeping momentum, meet to chat in approx. a week to discuss the farming options, what we’ve learned, further discussion. Nov 23, 2021, 6:00 pm GMT likely
i will place some devil’s advocate here: it seems the focus has shifted a lot towards yield farming with the CEF. i do understand of course, because it is better to have more CEF than less. it’s a quick win. it erases part of the feeling of being idle.
BUT if we have nothing better to do with our funds than lending them out for yield, why do we need a CEF in the first place?
we should not delay any progress of REN that we can achieve by spending the money instead! finding good ways to spend the CEF should be our priority!
The discussions that have been had don’t go against spending money on useful projects, it’s primarily has been centered around doing something useful with the funds until we know better what to do with it. Growing the treasury will allow us to spend more of it on useful things.
Nov 23, 2021 - 6:00 pm GMT #Treasury-Discussion channel community members Discord chat notes
After our Nov 16 call and chat inside the #Treasury-Discussion Discord channel, we had a follow-up call to discuss the yield pool approach and then the rest of the call discussing the structure of this yield working group, some details specific to this yield working group, and how this structure could model other working groups that would handle other DAO issues/interests going forward:
- Briefly discussed the ibBTC vault and Sushiswap LP vaults on Badger, the yields, how we might re-allocate 1/3 or 1/2 of funds to maximize our yield at Badger, whether the 1/3 or 1/2 would be made up of BTC-exposed Digg or BADGER governance token. More discussion to be had …
- We turned toward discussion about the working group structure itself and related issues
- In line with our previous call, we discussed how the needs of deploying these funds to a pool would bring to light the structural needs not only for this working group but illustrate the needs of future working groups. To that end, we would consider this yield working group’s needs as well as how it would model future working groups. Related, DNOs would want to know more about this structure anyway as we move through the RFC and toward RIP.
- We had conversation around structuring the RIP toward requesting the authority from DNOs to operate within a narrow set of guidelines but broad enough that it would involve beign able to act to execute that vision without a required series of votes. For example: This yield working group’s mandate might be to maximize the yield (within constraints) a defined chunk of the Community Ecosystem Fund (CEF) by placing it with a pool at one of our partner DeFi sites. This vote would free the funds up to be used by that group to carry this out. But should the initial pool’s yield change, the group that the DNOs authorized to steward these funds could move it to another yield pool under the same initial constraints. This is in contrast to the RIP being so specific that should it be necessary to change pools, a new vote would need to be required at each stage.
- We briefly discussed if compensation would be appropriate at this stage. Further discussion needed.
- We discussed the need in the future (or now?) to seek expertise that we don’t have in the areas where it’s needed, whether that’s CPA / CFO-expertise or general DAO expertise.
- We discussed that we’ll need to determine which kind of multisig we’d need and preliminary conversation around how to determine who those signatories would be. Further discussion is needed.
- We discussed the need to continue reaching out to the wider community for contributions and participation, how there are a limited amount of people out there that would want to devote time and resources to this but that we don’t want anyone to be left out that wants to contribute.
- Finally, we discussed further elements of the working group structure that need more conversation and development, possibly in sub-threads inside Discord:
a.) Overall strategy
b.) Reporting
c.) Guiderails / mandate
d.) Makeup and requirements of the multi-sig for this working group
e.) Communication strategy: As we continue to work through these issues, the RIP, what ongoing communication would be necessary
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For anyone that is interested but has missed it, detailed discussions around the governance proposals have mostly been happening in the Governance section of the Discord server
