Bringing $ARSE to PieDAO as a sub-DAO

Originally posted at Mechanaut’s Substack.

I’ve been chatting with Alex about bringing an $ARSE (AAVE RUNE SNX ETH) index to the system. He suggested continuing the line of discussion so that the community can contribute.

The main concern I raised was around the structure around the $ARSE token and community. I could talk in much more depth about how I think it would ideally work, but for simplicity here’s what I think a good model for this index is currently:

  • $ARSE – mcap-weighted basket
  • $ARSEDAO – yield from $ARSE management fee pass to a treasury, governed by $ARSEDAO holders. Some yield passes to PieDAO treasury.

So $ARSE is the token which represents an underlying basket of $AAVE, $RUNE, $SNX and $ETH. It charges a small operations streaming fee. That fee gets passed to a treasury which is managed by $ARSEDAO.

I understand that this isn’t really how PieDAO is currently set up. Currently, all yield for all Pie assets goes to and is managed by $DOUGH. But my proposal would be that PieDAO considers making this kind of setup possible, effectively taking a platform-for-funds approach.

I suspect there would be many technical and economic synergies with Balancer v2 Asset Managers in taking this approach.

The main benefits for asset managers here are 2-fold:

  1. users can get precise exposure to $ARSE yields, rather than needing to buy in to the success of all other $DOUGH linked assets
  2. contributors can congregate to make precise governance decisions about expanding the $ARSE ecosystem – e.g. how to promote it, how to extend the product line. The alternative is going via $DOUGH governance, extremely difficult with mixed interests.

This in turn would create the ability for PieDAO to find and scale interesting asset management products, building revenue for $DOUGH from each.

Alex asked the following questions on Discord:

  • Who would rebalance the ARSE Pie in this vision?
    • the $ARSEDAO certainly could, using funds gathered from management fees. I think the ideal solution would be for the underlying platform (PieDAO) to provide the infrastructure to execute the rebalancing, whilst leaving the costs to ARSE Pie.
  • Assuming a sub-token is created to manage a single pie, would it be used for rewards?
    • $ARSEDAO tokens definitely seem to make sense for rewards, to build liquidity around the yield token. Again, it would be very valuable to have that infrastructure built into the sub-DAO.
    • Ultimately the $ARSEDAO tokens could be used to reward and incentivise other behaviours too – marketing initiatives, governance procedures, new product development etc.
  • Why do you consider $DOUGH governance to be of mixed interests? I guess I don’t really understand that point and would appreciate if you could elaborate.
    • To clarify, I wasn’t insinuating anything wrong with $DOUGH governance. My point was just that the focus of $DOUGH governance is improving the state of PieDAO, which has many more inputs and considerations than merely ARSEPie. The benefit of having a single-purpose ARSEDAO token is that it can focus community and governance on boosting the ARSEPie business, without needing to consider the interests of $DOUGH. The opposite is true – $DOUGH can then focus on governing the platform as a whole, whilst reaping the financial benefits of ARSEPie’s success.
  • What would be in your opinion the main benefit of this approach besides incapsulating revenues to a third token?
    • Crowd-Scaling $DOUGH Revenues – if PieDAO goes down this route it opens itself up to the innovation of all crypto, rather than just the creators who are already in the community. PieDAO becomes a platform for building asset management communities, rather than a collection of funds managed by a single community. PieDAO upgrades itself to manage the platform, leaving creation and management of individual funds to other impassioned communities.
    • Better Growth Prospects for ARSEPie - with a dedicated governance token, a community can form which is purely focused on expanding the ARSEPie business. Rather than trying to create a sub-community out of $DOUGH holders, and try to incentivise them to flesh out ARSEPie, ARSEDAO holders will naturally be incentivised to build out the ARSE ecosystem – custom ARSE marketing campaigns, specialised R&D focused on existing holders of $ARSE etc.
    • More Precise Positions for Investors - as an investor I might only want access to $DOUGH yields, because I don’t believe in the $ARSE basket at all. Similarly, I might want to only hold $ARSEDAO, because I believe there’s about to be a big inflow to the $ARSE basket. Given the sub-DAO token model described in my post, this fine-grained choice can be achieved.
    • Competitive Advantage - since I’ve posted my originally post, members of more than one competitor community has approached me about bringing this idea to their forums. The asset management space is competitive and there is an opportunity to build network effects with the platform approach described here.

Hope those answers help, Alex! Do they make sense? Happy to receive critique/feedback.