PEP-1 : Recap of the actions taken to avoid the DAO liquidation.
Summary:
Actions taken by the treasury committee to avoid the DAO liquidation.
Context:
In April 2022, the PGM-10 was voted to take a 500,000 agEUR under-collateralized loan from Angle Protocol and pairing it with 500,000 PAL to have a 1M € pair on Uniswap v2.
In October 2022, the PGM-XX was discussed to refinance the loan with Atlandis by borrowing 300k agEUR but was never voted on as the market conditions changed considerably.
In January 2023, this solution was no longer possible, and the core team spent some time negotiating with lenders to find another taker for the refinancing which led to the PEP-1 topic to discuss the available options.
Emergency explanation:
As the deadline to repay the debt was close, the DAO was at risk to be liquidated, which would have sold more than 1M PAL on the market, creating a huge impact on incentives created by Paladin. This post will recap what happened to avoid a massive PAL sale on the market, which would have hurted the economic activity of the protocol.
Rationale:
The PEP-1 discussed the available options which were:
- Discuss with Mimo as potential lender
- Sell DAO assets
- Community debt pool
- Higher APR paid to lender
As seen on snapshot, option 1 was voted for a 320K USDC loan to Mimo Labs at 15% APR for 12 months and collateralized by part of the treasury.
However the urgency of the situation led to many actions taken by the treasury committee which were not voted on.
I) Treasury Preparation:
One of the solutions mentioned was to gather & swap the non strategic assets held for USDC (This represents Quest fees & some rewards generated)
- Transfer all Quest fees & Warden reserves to the Community Multisig:
- Transfer APW, FXS, 3CRV & SDT rewards from Warlord Multisig to the Community Multisig:
Ethereum Transaction Hash (Txhash) Details | Etherscan; Ethereum Transaction Hash (Txhash) Details | Etherscan ; Ethereum Transaction Hash (Txhash) Details | Etherscan ; Ethereum Transaction Hash (Txhash) Details | Etherscan
-
Creation of the Collateral Multisig mentioned in PEP-1 comments: Ethereum Transaction Hash (Txhash) Details | Etherscan
-
Approve & Swap all non strategic assets for Warlord to USDC (48632$ total):
3CRV:Ethereum Transaction Hash (Txhash) Details | Etherscan
INV:Ethereum Transaction Hash (Txhash) Details | Etherscan
SDT:Ethereum Transaction Hash (Txhash) Details | Etherscan
ALCX:Ethereum Transaction Hash (Txhash) Details | Etherscan
T:Ethereum Transaction Hash (Txhash) Details | Etherscan
LQTY:Ethereum Transaction Hash (Txhash) Details | Etherscan
LDO:Ethereum Transaction Hash (Txhash) Details | Etherscan
FXS:Ethereum Transaction Hash (Txhash) Details | Etherscan
SNX:Ethereum Transaction Hash (Txhash) Details | Etherscan
SILO:Ethereum Transaction Hash (Txhash) Details | Etherscan
II) Part of the treasury sent to cover the loan on the Collateral multisig.
The assets in collateral accepted by Mimo are: 54k sdCRV + 100K CRV in st-yCRV and 60% of the POL in PAL-ETH. The total DAO collateral is currently worth 521,000$.
There are also 12k CRV & 300 CVX from the last reward claim.
Transfer of the sdCRV, CRV & PAL-ETH LP to the Collateral Multisig:
sdCRV:Ethereum Transaction Hash (Txhash) Details | Etherscan
CRV:Ethereum Transaction Hash (Txhash) Details | Etherscan
PAL-ETH:Ethereum Transaction Hash (Txhash) Details | Etherscan
III) Debt Repayment from Community multisig:
- Reception of the 320K USDC on the community Multisig
Test:Ethereum Transaction Hash (Txhash) Details | Etherscan
Loan:Ethereum Transaction Hash (Txhash) Details | Etherscan
- Approve & swap of 327,048.65 USDC to 305,800.28 agEUR
- Repayment of the 305,800.28 agEUR loan to Angle
Test:Ethereum Transaction Hash (Txhash) Details | Etherscan
Loan:Ethereum Transaction Hash (Txhash) Details | Etherscan
IV) Actions taken by the Collateral Multisig for the Paladin DAO:
- Restake PAL-ETH LP on Convex
- Approve & deposit 100k CRV on Yearn for st-yCRV
- Claim Convex Rewards
The remaining sdCRV will be converted to st-yCRV, the CRV rewards might be compounded to st-yCRV to increase the collateral and the CVX rewards will be transferred back to Warlord Multisig to follow the PGM-25 strategy.
The current stable balance of the DAO is 44,150 USDC, allowing to pay 11 months of interest if no anticipated payment is made. (4000$ *11 months =44,000$)
Means & Technical Implementations:
No means & Technical Implementation described in the rationale (Collateral Multisig)
Next Steps:
Paladin DAO:
- Open a PGM topic to discuss how to maximize USDC with non strategic assets to reduce its debt exposure over time
Collateral Multisig:
- Swap sdCRV for st-yCRV according to PGM-25
- Swap CRV claimed for st-yCRV to increase the collateral ratio
- Send CVX claimed to Warlord Multisig
Thanks to the Core team & Treasury Committee for handling this situation.
(Ps: Lmk if I forgot anything i’ll add it)