PGP-17: Treasury Management #1

TL-DR: Deposit CRV in lockers, lock BAL in Aura and sell CVX for treasury expenditure.

Context:
The DAO is currently managing 21.3M$, 1.3M$ of which are not PAL. We have also harvested 120,000$ earned over the past two months which now pushes us to ask ourselves how we should manage and allocate these ressources. A good allocation of our funds will enable us to create a sustainable organization, this should be our top priority as a DAO.

Previously, we have discussed a redistribution mechanism called the Chest. This mechanism currently being built can be efficient to accrue value to hPAL holders but won’t create enough volume at current revenue size to truly enable the flywheel we have envisioned.

I believe we should postpone the activation of a redistribution mechanism and focus on reinvesting revenue into the growth of a project, like any traditional organizations do.

Here are the core pillars of our treasury management I currently have in mind:

  1. Growth: reinvest as much as possible in scaling business lines;
  2. Resilience: accumulate a stablecoin war chest to become asymptomatic to volatility;
  3. Decentralization: start empowering high value contributors;

Rationale:
Let’s explore this vision of our growth as a DAO in a bit more detail.

  1. Paladin is barely making revenue, if we compare ourselves to Votium for example, we’re doing 1% of their volume. Using all means possible to grow our market share and stabilizing them should be a priority. This can only be achieved by pulling off a 10x better dapp and marketing it widely.

In order to get there we need to :

  • Grow our contributor team;
  • Invest or integrate other governance projects in our ecosystem;
  • Keep investing in R&D to always stay ahead of the curve.
  1. I highly recommend this article by Monet and Hasu. By nature, Paladin is a risky business of earning governance tokens. While this is totally aligned with our mission it is not operationally acceptable to have solely gov tokens in your treasury. If we look at the past 6 months, 99% of the tokens have lost 95%+ of their value. How do you continue to operate in such a situation ?

There are several ways of securing a war chest (I estimate our safety net to be at ~2M$), here are the ones we are studying:

  • Swapping part of our revenue to stablecoins;
  • Fundraising with our PAL;
  • Bonding with our PAL;
  1. As we keep growing, I am convinced expanding as a core team is dangerous and will directly conflict with the interest of the DAO. For this reason, the needs of development should be hired through DAO contributors, and as our DAO revenue strengthens, the pay of core devs should progressively come from DAO treasury (not before at least 12 more months).

Very quickly we are going to need a treasury manager and a general secretary who will manage the transparency report and the relationship between the core team, contributors and the community. We should also start thinking about an ambassador program where a community member can be elected to represent the DAOs interest as a delegate with the (upcoming) Sister DAO’s* voting power.

First proposals:

  • Sell the farmed CVX to pay the interests for the agEUR loan (5000 agEUR) and start accumulating stablecoins;
  • Deposit CRV in Lockers while we build the SisterDAO;
  • Deposit BAL in Aura while we build the SisterDAO;
  • Start directing our veAPW towards our pools;

Next Steps:

  • Build the SisterDAO;
  • Find a method to accumulate stablecoins;
  • Create a legal entity;
  • Hire DAO contributors as the need come;

*The SisterDAO was first suggested in the Chest tokenomics discussion. The main aim of it is to externalize all conflicts of interest within Paladin by delegating the management of governance power and wealth accumulation to a SisterDAO. That way Paladin can continue to be neutral infrastructure and not take sides within DeFi or focus on optimizing profit instead of its tech stack.

Voting Options:
Yes / No / Abstain

  • Sell CVX to pay off agEUR loan
  • Don’t sell CVX
  • Deposit BAL in Aura
  • Don’t deposit BAL in Aura
  • Deposit CRV in Liquid Lockers
  • Don’t deposit CRV in Liquid Lockers

0 voters

6 Likes

How to not agree ? :rofl:

selling the CVX to pay off the loan would be a good idea and it is obvious that the CRV and BAL should be deposited instead of being unused

1 Like

In favor. Thinking of the relationship with Balancer community, depositing BAL can be a choice rather than buying auraBAL.

3 Likes

Totally agree that we should work on building a good relationship with their DAO, but to lock veBAL ourselves we have to get white-listed, which is a significant amount of work, especially for only 2000 BAL.
The idea is to accumulate + work on the WL process as we go.

1 Like

Then we can consider buying auraBAL instead of depositing in Aura. auraBAL is ~5% discounted comparing to B-80BAL-20WETH.

4 Likes
  • Buy auraBAL at discount
  • Lock directly into Aura
  • Wait until we get a WL and don’t earn anything on the current BAL

0 voters

2 Likes

Thanks for this great proposal :fire:

Just to add it here because I already asked you, but the idea is to keep working on it to have it ready when we’ll need it

I think we need to aim for more if we want to generate revenues with it, instead of starting to use it in a few months, however I agree that’s a good start.
At 18M with a 8% APR, the interest would be enough to pay for the core team + the positions you mention later on the post.
I know we’ll probably not reach that in a year even if I wish us the opposite, but that’s what we should aim for imo.

Selling part of the revenues for Stablecoins make totally sense, however it depends which assets, I believe we should always keep some of them as we might need it in the future.

About the fundraising, would it be done by the DAO with the possibility for everyone to enter, a bit like Cowswap did, or more like the first one but with different investors ?

About the bonding, you mean selling Pal with a discount like Olympus, but to get Stables instead of some liquidity ?

Another solution could also be to consider deploying on other chains that can use one of the ecosystem if the DAO can earn grants for it

:eyes:

:eyes: :eyes:

Make sense to sell enough to pay for the loan, however the CVX is currently below it’s backing value (7.15$ vs 8.2$ in CRV + FXS locked), it can be worth waiting but i’m not against selling everything as you mentioned.

If we had veSDT I’d fully agree, because we wouldn’t have reduced voting power, but since the plan is to move it in some time to the sister dao, it may not be the best move to start accumulating another governance token

So by depositing without veSDT we should have around 0.8x the voting power + we need to consider the risk of the sdCRV peg in case of a bad event as it’s still a new product (4.8M$ TVL on sdCRV/CRV vs 94M$ in cvxCRV/CRV).
Right now the price impact is very limited, but the treasury will grow so we might deposit more before the next solution is ready if this is accepted.
However maybe we can buy some veSDT boost OTC (or add a new asset to warden if enough time for the devs) which would allow us to use a boosted voting power

We have the same exit risk on Aura as it’s still a new product too, but the liquidity is higher (13.3M$), the position is lower than CRV (79k$ worth of CRV vs 18k$ worth of BAL in the treasury) and there is no other option if we want to move it at some point so it can make sense

Should we plan a vote that will define a % of the votes between PT/Underlying and PT/FYT ?
Once it’s voted, if the vote stays the same, you dont need to re vote each week, only if you change it

:eyes: :eyes: :eyes:
I know I still need to answer on the Chest topic, and I’ll write a post about the sister DAO once the idea is clearer, but this is definitely exciting to keep exploring the possibilities and synergies :fire:

What are you considering for this, do you already have some ideas ?

Looking forward to see the evolution and really happy for the 100k+ milestone reached on the non Pal treasury :fire: :shield:

2 Likes

If the discount is still available by the time it’s voted yes good point to buy directly

2 Likes

No fundraising plans have been shaped up as of now, we are only eploring options for now.

Could be, again, just exploring.

I’m personally against deploying on other chains for no value except claiming grants. We will deploy on other chains when we can add value to them. If anyone in the community feels there is an opportunity, they are free do deploy the protocol there and get the grant to the DAO.

We have to pay the interests this week… I understand the frustration, but we’re not in the business of speculation. If we follow this logic, we’re going to have a really hard time in letting go of assets.

sdcrv has ~10% of the sdCRV in pool but a perfectly balancer pool and less than 0.05% slippage to exit currently. I feeel comfortable with the risk, anyone who doesn’t is free to offer a better solution.

We’re a bit short on time, but a proposal to kickstart this would be most welcome!

We’re entering braistorming session in fall to figure this out. We will deal with this internally and offer a fully packaged solution when it is ready to vote on.

1 Like

Proposal has been moved to a vote: Snapshot

1 Like

Yes but would both cases be possible ?

Interesting :eyes:

Yes but the interest are 5K$ and we have around 13k$ in CVX, I was only suggesting to sell what we need for now maybe

I’ll try to do it this week, maybe starting with a 60/40 ratio for PT/FYT and PT/Underlying and adjust over time if needed

1 Like

@Dydymoon on fire

There is also the IL of the pool, no ?

Would be better to discuss about it on another proposal, ask me if you need help to draft

2 Likes

Depends on a lot of legal parameters and valuation terms, can’t give an answer at this point.

No there is pretty deep liquidity for CVX because they are subsidizing the pool.

Would love controbutors to draft this as our badnwith is pretty slim lately

2 Likes

I meant our pool IL

1 Like

Yes, you are right, this is a potential problem. Honestly I believe we should keep the loan going until we stabilize the pool. We’ve been slowly eating back up the IL with fees and price going back up. Hopefully we could clear up the loan without by fall.

2 Likes

Agree, better if we can just pay the interests, renew and wait

1 Like

On the topic of the pool… what’s the plan going forward? Initially i think this was a temporary measure until other pieces would fall in place? Do we need more time?
From your answer it sounds like we’ll pay the interest and keep the liquidity in the uniswap pool until further notice.

I think the plan was to use this agEUR/PAL pool as a temporary measure and that it would also bring deeper liquidity for big players to buy the token. But unless i’m mistaken, it doesn’t seem like there has been much activity on the pool?
Also, wasn’t there supposed to be a max IL of 100k before we were supposed to pull the liquidity? (this is not a critiscism, i’m just trying to understand what is the situation now vs what we were thinking/expecting when we took out the loan)

If we pay back now the IL to pay back would be quite important, which is why it can be better to wait for a token price appreciation in the meantime

I don’t remember this, any info about it @Figue ?

There’s daily activity on the pool. I honestly believe having it live is and will keep being an essential pillar of our liquidity strategy.

First of all, for depth question, it worked, orders on aggregators are routed there and arbitrage is getting us more fees.

Second of all, the max IL was theoritical, we had a very strong dump day where the IL cap was passed in a few minutes. We had the choice to either close the position and take 100,000$ loss or keep the position running. Long term I am convinced we’ll go back up enough to close without paying the IL.
Considering the interest rates are at advantageous terms, i do’nt see a problem in maintaining the position, keeping the liquidity depth and transitioning to the solution we have found once this is done (our partner still needs a few months of dev to be ready).