Treasury Farming Initialization

Treasury Farming Committee

Monthly Report: June 2021

Overview

The Treasury Farming Committee exists to provide suggestions to PieDAO’s members on ways of allocating and utilizing the treasury. The Committee holds the following goals:

  • Diversify: Maintaining an allocation that lowers the risk of concentrated exposure and ensures operations can continue during bearish market conditions.
  • Positive inflow: Ensure returns on treasury farming and protocol exceed the cost of operation and bring value to token holders governing the protocol.
  • Aim for perpetuity: Creating the condition to enable the DAO to operate forever.

The treasury can be found here:

Relevant balances for our purposes include:
4,841 ETH
27.31 WBTC
16,582 BAL

These funds are largely positioned bullishly, as pure volatile assets.

Initial goals.

  1. Moving the treasury into a farmable state. This means migrating funds to a contract which can support this functionality.

  2. Establishing an initial position leaning more neutral.

Proposed Initial Positioning

Ethereum has had a terrific run, and our treasury is quite sizeable. However we must consider the possibility of a bear market and ensure we realize the value accrued.

The current balance of ETH is valued at around 12 million. We suggest that 1000 of the 4841 ETH should be progressively swapped into DAI. At current prices this is approximately 2.5 million. This opens the door to ~40% of our assets to gain a 33% yield.

Base assets:
3,841 ETH
27.31 wBTC
16,572 BAL
2,545,960 DAI

We can then invest:

  • wBTC and matching ETH in the wBTC:ETH Bal v2 pool earning 23%.

  • DAI and matching ETH in the DAI;ETH Bal v2 pool earning 33%

  • BAL and matching ETH in the BAL:ETH Bal v2 pool earning 58%

  • ETH remaining into the DAI SETH Curve pool staked in Convex earning 14%

This set up would give the DAI approximately $60,000 a week in BAL, CRV, and CVX rewards.

This set up would result in the following breakdown by asset:

And the following breakdown by dApp

The BAL rewards are currently used for buybacks, but I do think it may be a good move to kickstart this pool as planned single interruption to the buyback schedule as it would lock in ~6k a week for the DAO and its members. We still have a remaining ~$50k worth of BAL to proceed with the buyback this month.

We believe these changes to the Treasuries asset deployments provide a great base for further investments, and allow a strong return.

However there is one additional opportunity that can greatly increase our yields with minimal relative investment.

If we shuffle 125 ETH into ALCX and enter an LP we can increase our yield by 22%.

This would be a small investment of ~4.5% of our portfolio auto compounded via Pickle Finance, but would increase our projected monthly yield by nearly double…

This set up would result in the following breakdown by asset:

And the following breakdown by dApp

As you can see this small allocation of assets earns a significant portion of yield and should greatly increase general excitement about returns. We feel this will be an optimal starting position to begin the Treasury Farming journey.

Going Forward

Moving forward myself, and a committee will be meeting weekly; developing a framework for rating our exposure, as well as market conditions which may influence our decisions. We look forward to sharing these with you as they become more defined.

We will be working on further diversification, with likely suggestions of further shifting into stables for many of the reasons discussed in this recent article titled Treasury Building Blocks: Stablecoins, by Monet Supply.

I will be acting as a liaison with this committee and the community. I am excited for the prospect of discussing potential treasury positions with you all going forward, and believe together we can ensure an exciting level of treasury growth.

Linked is the spreadsheet where these graphs derived, .(Note all values have been replaced by static values since it needs an API key to pull prices as currently set up, and I can’t share that.)

Questions, comments, or concerns?
Leave em here, else I’m on discord/twitter and will be hanging in the PieDAO discord #Meetings voice channel Thursday 17-19 UTC if anyone wants to chat.

Do It
  • Yes
  • No

0 voters

7 Likes

Thanks for putting this together, it’s really well done. I think that both stating the goals and the goals themselves as very professional, and the way it should be done. Agree with dollar cost averaging into DAI.

A first question that comes up is wheter thera is a plan for the CRV, BAL and CVX tokens earned from the farming?

2 Likes

I like this!

Some things to consider:

  1. Keep a portion of funds in cold storage to keep safu and only to use if necessary

  2. Additional diversification across protocols. Looks like most of the funds would be invested in Bal v2, but maybe consider farming on other protocols to spread the risk. And for the Curve pool, maybe stake only half in Convex?

  3. Thoughts about cross-chain farming if better yields or stick to ETH mainnet?

PieDAO should use its own Pies as part (not all) of treasury diversification. Even if expected yield is lower than other opportunities, it creates governance incentive to improve Pie strategies.

I still like the idea of Balancer+other strategies to customize the treasury allocation, especially given PieDAO’s history with Balancer. Something like:

  • 20% BCP
  • 20% Defi++ and YPIE
  • 20% Balancer V2 Pools
  • 20% Sushi LP, Convex, Yearn, etc
  • 20% Static tokens (liquid, no strategy for now)
2 Likes

Awesome, this proposal has my full support.
I would suggest to move this to vote, so to proceed asap with the required initial treasury reallocation given the rough market condition.

3 Likes

Thorchain is giving a pretty good APY, with IL protection (1% protection per day). I would use (some) ETH and/or ALCX in Thorchain. Main things I’d consider about Thorchain is that (1) it is a new implementation and (2) right now deposits are restricted so we’d have to wait a very limited time window.

I agree with @gabo, considering the current market, I would make a vote to implement this asap.

Hi Pie Lovers, I’m excited to move this forward with a Snapshot vote on the following:

  • Establish the Treasury Farming Committee to provide suggestions to PieDAO on ways of allocating and utilizing its Treasury
  • Initial Committee Members subject to 3months probation: Federico Nitidi, @BlockEnthusiast, Nansen, @jnova
  • Migrate funds to a new 3-of-5 multi-sig where the rebalancing and farming strategies will be implemented requiring core dev approvals: Federico Nitidi, @jnova, @alexintosh, @Nico, @gabo
  • Committee will include a community liaison to discuss potential treasury positions and ensure alignment
6 Likes

Great to have you organizing things up here and moving it forward @jnova. I’m excited, let’s move the vote forward quick and start generating alpha.

6 Likes

Great to hear! Below some details on the proposed compensation framework (a+b+c) for Committee members:

a) 2k EUR/month
b) 100k DOUGH/year (12 months linearly vested, 3months cliff)
c) Monthly Performance incentives (bonus) = ONLY when Treasury value (end of month) exceeds the benchmark (initial value increased by a “risk-free” rate). Bonus proportional to the net alpha generated, paid fully liquid in $DOUGH.

2 Likes

What is meant here by suggestions to PieDAO members? Does this imply the treasury farming committee has no executive power and will only be preparing proposals?

How will proposals be committed? As snap shot votes? Or forum posts?

This does not align with the overview “suggestions to PieDAO’s members”, but instead indicates that technical activities and contract development will be performed. I am unclear on what the committees activities will actually include.

Why was this allocation of ETH, wBTC, BAL, and DAI chosen? Is it beneficial to even hold these assets going forward? Why not hold only stables and completely avoid risks associated with volatile assets. Why should the DAO even take the risks on volatile assets? These fundamental questions are unanswered.

Why not just have the DAO treasury hold PIE?

My final thoughts are that the purpose and goals of the PieDAO treasury are unclear and undefined, it is therefore not possible to to provide suggestions. This situation is akin to providing financial advice without knowing an individuals financial goals.

2 Likes

I would also add that the snapshot proposal appears to be different to the details provided here, and that the details provided in snapshot vote have not been comprehensively discussed.

2 Likes

Further to the consensus emerged from the snapshot vote, treasury funds were transferred to the Treasury multi-sig

2 Likes

Great questions.

I interpret this to mean that the committee really serves at the behest of the DAO. In practice, this means two things:

  1. Our multisig setup requires at least one signature from a core team member as a check against the committee going off the rails with short-term interests
  2. The DAO approved the committee and can change or revoke our mandate at any time through governance.

We will actively seek input from the community and communicate our strategy & performance, but we do not intend to bring every transaction to a vote. It’s not feasible and may actually jeopardize potential returns by opening us up to front-running.

@gabo just announced that funds were moved to a Gnosis Safe after an onchain vote, from which we will manage the treasury. Our activities are to research strategies that maintain and grow the treasury for the long-term benefit of the DAO, request transactions to deploy chosen strategies, continuously monitor performance to adjust to changing market opportunities, and solicit input from the community.

This is an initial proposal but it has not yet been discussed with the new committee, which was just approved 2 days ago and has not met yet. We intend to consider each of these questions before deploying any funds.

3 Likes

A new onchain vote is up to transfer 300,000 DOUGH to keep as a (few months) buffer on the Budget multisig for compensation of the Treasury Committee.

2 Likes