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.
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.
- 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
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.