Diversification of DAO Treasury

The DAO treasury currently holds around $600,000,000 in LDO and $50,000,000 in ETH. I propose a sale of some LDO tokens (around anywhere >$10,000,000) for DAI to be farmed in the case a bear market happens to ensure Lido is well-capitalized in all market conditions.

Edit:
People suggesting goals to be set.
How about $50,000,000 in LDO tokens to be sold over a 3 month period, which will be sold into USDC and farmed with yearn?

read this thread for more details:

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I strongly support this proposal, but I suggest discussing RAI as an alternative stablecoin

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I agree RAI could be a suitable alternative, but don;t know if liquidity is there yet…

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Generally in favor of this. A few thoughts:

Is there a reason to not spread across a set of stablecoins (e.g. RAI, DAI, USDC, UDST), which all have different risk profiles?

DAI may already give a fair amount of indirect USDC exposure given that the latter can be used as a collateral, but it would be worth analyzing the various options here.

As for the sale amount, it would be good to target a certain runway (e.g. “X years”) and time by which we want the sale to be completed to spread it over a longer duration. Gnosis Auctions may be a good fit for this, too.

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Lido’s got a fairly substantial non-LDO part treasury at this point, thanks to the recent deal with Paradigm and co. It might be better to diversify it further, but I think the better approach is to start with the goal (e.g. 2 years runway, or stability on bear market, etc) and find means for this, rather than start from the action we need to take.

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Hi Lido Community :wave:

I work with the Idle Finance DAO, and we have recently started similar discussions on the topic of treasury diversification. Diversifying the Treasury balance definitely seems to be a direction many DAOs are going towards, which makes sense as it helps to provide a clearer runway to fund the protocol’s growth with higher certainty as it removes the market risk of being completely exposed to higher volatile assets.

For those who are not aware of the Idle protocol, it is a yield aggregator seeking the best yield across multiple yield sources and assets. Currently, we are integrated with Aave (v1/v2), Compound, and DyDx; and we support large stables like USDC, DAI and USDT.

The Idle protocol is based on 3 pillars:

  1. :chart_with_upwards_trend: competitive optimisation technology (Dynamic Allocation Mechanism),
  2. :mag: focus on security (5 audits, $500k bug bounty program),
  3. :tada: and long track record (active since mid-2019, backed by Consensys).

The Best-Yield strategies maximises the returns while preserving high-security criteria.

FYR: The average DAI APY has been 10.81% over the past 5 months.

If Lido progressed with this diversification step into a stablecoin like DAI, we would be happy to provide a highly secured yield for Lido’s DAI assets :raised_hands:.

Good luck with this! :+1:

Agreed that the goal is more important to set before discussing action items. Is there somewhere we can see the current state of the treasury?

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In the case Lido farms with Idle, is Idle able to offer additional benefits? Idk i don’t have as much experience farming so don’t know which protocol would be most effective. Can anyone suggest ideas?

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Thanks @Donald_Duck

I’d say having at least a 3 year runway in stablecoins would be a great target. I’d love to hear @monet-supply’s input given this great piece on treasury management: Treasury Building Blocks: Stablecoins | by monetsupply | Tally | Jun, 2021 | Medium.

A side note, it’d be great to convert some or all of the ETH in treasury to stETH.

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Thank you, ill reedit the post based on a 3 year runway. Do you think $30 mil is sufficient?

Hey @Donald_Duck, there are definitely ways in which Idle and Lido could work together to get the best result for Lido’s treasury diversification goals.

For example:

  • Idle currently have a B2B Affiliate program that Lido could partake in. This would essentially enhance the APY, for example DAI would currently be 16.57% APY (we have a profitability calculator you can use to simulate some farming scenarios HERE)
  • Lido could stake the IDLE rewards that come with depositing assets such as DAI, USDC, etc. to get higher compounded growth (IDLE Staking launching imminently :slight_smile:)
  • The Lido community could also propose for Idle to support stETH as an asset (we would probably need more yield markets to go live before this makes sense)

I hope this helps

We don’t have a good balance sheet yet, but my hunch is that 3y talent compensation + operational expenses is way less than that (we’ve got a few smallish teams, not a huge organization). Currently, we’ve got $50m in ETH, so we might want to get some of that in stablecoins just in case, but I’d say we’re all set.

Liquidity incentivization and other initiatives that scale with the amount of eth staked - we’ll need way more.

We might want to diversify a bit to have warchest for acquisition/endowment fund, but that needs active management.

Hi all !

Remember how Vitalik convinced the Ethereum foundation to cash out 100m$ in the late 2017 bull run ?
This provided the ecosystem with some super solid footing to get through and grow during the following bear market. We should do the same.

20m$ sounds like a good number as this translates into 1% of total supply using current price. Even 10m$ if it’s a private sale with a 2yr lockup so as to avoid excess liquidity would be a good deal.

Cheers,

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Agree, a portion of Lido’s ETH should be converted in stEth. Personally believe the number should be small <20% to minimize interdependencies

Could be worth bringing in a specialist like Llama for further strategic advice / consulting on the matter. Llama recently proposed this for the arcX DAO: Introducing ARCx Growth Allocation I: Deploy Treasury Productively - Improvement Proposals - ARCx

https://twitter.com/llamacommunity_