TMC-1: Pipeline to sell stETH at regular intervals for DAI
Strategy
Set up a process to secure 12mos of stablecoin working capital each time the available stablecoin balance reaches 3mos remaining, based on the average monthly stablecoin disbursements over the past 3mos
Objective
Set thresholds and EasyTrack motions to seamlessly transform surplus stETH into stablecoins (DAI) to secure enough stablecoin working capital to support ongoing needs without overindexing on stables in the treasury
Intended on-chain action
1. Deploy an EasyTrack contract, triggerable by the TMC multisig, to sell specified amounts of stETH for DAI, subject to quarterly, modifiable, limits; 1a. Execution can be triggered in staggered batches of transactions to prevent slippage and front running
Impact on treasury liquidity
WIll transform stETH holdings to DAI for use in grants and funding, execution will be done directly from stETH to DAI without withdrawals
Execution complexity
Selling stETH for DAI through Aragon will require interactions with venues such as Cowswap, which may be complicated to execute in practice
Maintenance complexity and overhead
Minor, may require maintenance and updates of the limits from time to time
Summary of possible risks
- Tail event risks on DAI will impact the ability of the protocol to continue funding maintenance grants → we recommend the TMC continue investigating potential stablecoin allocations and research the benefits and drawbacks of various stablecoins
Summary of potential benefits
- Ability to update and maintain stablecoin runway from the surplus generated by the protocol
Compliance with Treasury Management Principles
Yes
Proposer
Steakhouse
Agreement
Pending from TMC poll
Perform
Steakhouse
Input
Pending from community
On-chain execution stage
Proposal
Other notes
- Query to see the months of runway based on stablecoins only - Query to see the months of runway based on stablecoins and stETH in the surplus - The amount of stETH to sell will be calculated based on the prevailing stETH price at the time, the TMC will not try to ‘time the market’ but just execute an algorithm to raise greater than or equal to 9mos of runway each time the stablecoin balance is less than or equal to 2mos of runway - This motion does not affect the ability of the DAO to employ other strategies or Aragon votes directly to raise stablecoins
Poll for Treasury Management Committee Members
End date 04-Aug-2023
TMC-1: Pipeline to sell stETH at regular intervals for DAI
Securing the runway for protocol development should be a key focus area for every project and DAO, and we support this TMC. We are glad to contribute to the sustainability of Lido.
It’s a proposal for a hard stop threshold, in practice, to avoid slippage, the TMC multisig could trigger it at more frequent intervals.
Setting a collar like this between 3mo and 12mo is an idea for the future automation of this execution to remove the TMC execution component altogether.
What’s the advantage of this approach vs continuous/rolling DAI accumulation that tracks ongoing stETH/DAI exchange rate? Isn’t it better to always have stable runway on-hand from a constant flow (always 12+ mo stablecoin working capital) than to trigger batch swaps when you hit 3mo?
Both approaches are possible under this strategy. A continuous or more frequent function running in an automated way could be an end point. In the meantime less frequent and more discrete functions will have to be called manually by token holders first, followed by the TMC.
Aragon motions, less frequent
→
TMC EasyTracks, slightly more frequent
→
Automated execution, more frequent
Implementing semi-automated approaches appears to be a sensible and balanced strategy, effectively managing complexity and financial risks. I like an approach with cowswap + easy track
EasyTrack motion to fill 17 stETH to the Stonks stETH → DAI contract address
Stonks execution to follow if the motion is approved
150 stETH to DAI
Will first file an EasyTrack motion, followed by execution
As a reminder, this pipeline is fully non-custodial (assets always revert to Aragon Agent) and subject to multiple levels of LDO token holder oversight, who can veto EasyTrack funding motions to trigger Stonks and who are in control of the Aragon Agent anyway.
At first, the TMC multisig will be in charge of executing these motions to swap. However, the setup is primed to allow a permissionless Keeper to trigger these swaps provided thresholds are met for minimum stablecoin balances on Aragon.
Researching this execution is the object of TMC-2, approved by the TMC through off-chain voting.
Stonks contracts are all open source and available under an MIT license for any DAO that wishes to create minimalistic treasury swap setups without the need for a third-party manager or complex setups with SAFE multisigs that take custody of assets.
The average price impact across all three executions landed at less than 50bps, done within minutes of each other.
stETH
Date/Time (UTC)
0 PI Out
Actual Out
Actual Price
0 PI Price
PI (bps)
ETH (Binance)
PI vs ETH
stETH vs ETH
DAI
1,100
Jul-19-2024 15:21:23
3,809,267
3,794,503
3,450
3,463
-39
3,468
-53
-15
USDT
1,100
Jul-19-2024 15:28:47
3,787,938
3,776,103
3,433
3,444
-31
3,444
-32
-1
USDC
1,100
Jul-19-2024 15:40:59
3,794,967
3,788,992
3,445
3,450
-16
3,457
-36
-20
3,300
11,392,172
11,359,598
3,442
3,452
-29
3,456
-41
-12
All in all, a successful test of Stonks, a showcase of CowSwap’s versatility and power and a remarkable demonstration of stETH’s liquidity in action.
Future TMC proposals should research whether there are suitable candidates for atomically swappable yielding products corresponding to each of these stablecoins. An EasyTrack proposal could then hold stablecoins in their yielding counterparts and swap them out atomically to withdraw to grantees. This would entail redoing existing EasyTrack deployments, so much more research and consideration is necessary.
UPDATE
Added PI relative to ETH at Binance as a data point. All 0 PI data points are taken from TradingView (agg for stETH, Binance ETH/USD for ETH)
You may notice a slight oddity in the past two months as the latest Stonks operation crossed over a month. i.e. the outbound transaction is shows as an ‘expense’ and the inbound side of the swap as a ‘negative expense’ but over different months. Neither of these should really hit the P&L and instead should hit reconciliation to surplus. We’ll implement this change among others over the coming weeks.
