Treasury Assets Management #1

Overview

Over the last weeks it’s been discussed in Discord different options regarding the Management of the assets in the PoolTogether treasury. It is estimated we are missing out roughly $300 in daily opportunity cost that could easily be earned with a low risk strategy on the stableassets held by the treasury.

In order to start making the best use out of them, the TWG has put together some basic actions that should be considered.

Withdrawal of Stablecoins from V3

Around 4.2 million $ (3.7M USDC + 0.5M DAI + 16K USDT) are currently deposited in V3 in the form of sponsorship or reserve. These funds are currently incentivizing people to deposit on V3 by helping grow prizes (they also give 50% of the yield to the treasury).

Incentivizing V3 pools should not be an objective of the DAO. Instead, we should encourage deposits on V4, the latest version of the protocol with improved features. To achieve this, the first step is withdrawing these funds from the V3 pools.

There are other assets on V3 pools being used as reserve in their corresponding pools (UNI, SUSHI, COMP). Given that each on-chain vote can only include up to a maximum of 10 transactions, and that the amount of these assets is really small compared to the stablecoins, they will be kept on their V3 pools for now. In the near future, some actions will be considered on what to do with these assets. USDT will also be kept on V3 for now due to these reasons.

There are also other assets such as TRIBE rewards from the Ondo-FEI LaaS program and accrued interest on Ethereum, Polygon, and Avalanche Aave markets in the form of AAVE, MATIC and AVAX. These will also be discussed in a different post.

Deposit stablecoins on V4 + Notional

Although many alternatives are being considered for the stablecoins, until a clear path of action is decided, probably the safest and smartest option would be depositing the 3.7M USDC on PoolTogether V4. These funds will not be eligible for prizes, as they won’t be delegated to any address (or in other words, they will be delegated to 0x0000). As a result, all the yield generated on AAVE by the USDC would be received by the protocol, which can be used to incentivize V4 prizes or help the treasury grow.

Given that V4 only has a USDC pool for now, the DAI cannot be deposited into V4 without previously swapping it. To have some diversification on our stableassts, instead of swapping the DAI for USDC, it could be deposited directly into Notional. This DAI would be earning roughly a 9% fixed APR on a low risk protocol (further analysis can be found regarding Notional protocol on the following document Notional Analysis by BraveNewDeFi).

Let me know your thoughts and let’s start making the most of our trasury!

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First off all: thanks to everybody involved in the TWG! I love being able to follow the conversations you conduct with the new Discord setup. It absolutely helps to understand the decisions you make and the options you weigh in.
I believe this is aiming to put our treasury to work as fast as possible and will help to build a foundation for the future set up. Also I trust your decisions as a working group. Let’s go!

6 Likes

I support this proposal!

Feedback:

You should max out the 10 tx limit in the proposal by pulling out as many assets as possible. Determine what transactions are needed, then pull out any remaining assets as space permits (such as USDT). Let’s maximize this proposal. For small amounts like the USDT you can just send it to the Exec team to have it liquidated.

Question:

I quickly scanned Brave’s analysis of Notional and was happy with what I saw. Why not put more funds in there due to the high APRs?

5 Likes

What do you think would be the ideal allocation to Notional?

While we have DAI in the above proposal, we could also add a portion of USDC as well.

I’d love to hear from the community with respect to allocating some reserve or treasury assets that could potentially be sent to the Exec team for liquidation into stablecoins. Community members can find the treasury here: https://info.pooltogether.com/

Since allocation and liquidation are both decisions the community should make, I’ll refrain from commenting on that too much, but we could deploy DAI and USDC into Notional, while still depositing into V4 with the remaining USDC stated in the proposal above.

All things held equal:

  • 2.7m USDC deposited into V4
  • 1m USDC deposited into Notional Finance V2 [June 26 2022 Maturity]
  • 500k DAI deposited into Notional Finance V2 [June 26 2022 Maturity]

@Brendan, I’ll defer to you on allocating all of the stables in the treasury to yield strategies, as I’m uncertain how much cash on hand in USDC or DAI we’ll need for the next few months. Withdrawing from V4 shouldn’t be an issue but there’s also the point of which chain (assuming Etheruem) we will deposit funds on if we deposit in V4.

Looking forward to the community’s discussion on these points and the proposal above!

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Ah I see: Notional locks-in a rate and term. Yes, we will likely need liquidity for stablecoins, so it makes sense to keep more cash liquid.

I’m inclined to do 1m in Notional; 500k USDC and 500k Dai as you mentioned. That gives us 3.2m in USDC in V4 on Ethereum, so we have plenty of liquidity.

5 Likes

thanks for writing this up and all the thought put behind it!

I also am for treasury diversification, and I think Notional’s platform and rates are super competitive.
Also, I believe that even though you need to wait until the term is over to secure the promised, fixed APY, its important to note that Notional gives lenders flexibility and liquidity. Meaning our stables won’t be locked in there.

+1 from me on this!

3 Likes

Thanks for writing this up! A few thoughts from my side:

  1. A whole heartedly agree with moving the sponsorship.

  2. I think moving the reserves is a bit more delicate as the reserve rate was explicitly activated with the idea of building the perpetual growth machine. One option if we are going to remove the reserves is we could correspondingly change the reserve rate to 0%. I think that is sensible and fair to those depositors.

  3. Generally speaking, I think we should prioritize depositing the stable coins into PoolTogether rather than alternative yield sources. The primary reason is this helps build the “perpetual growth machine”. It allows us to give out more prizes. Additionally, the complexity + risk of using alternative yield sources likely outweighs the reward. I do think there are exceptions to this, particularly if we are trying to build a relationship with another protocol but I think a strong default should be growing PoolTogether deposits so we can distribute the most amount of yield.

  4. To @BraveNewDeFi question, I’d advocate liquidating the GTC for USDC. I think we hold the COMP for now given how low the price is :slight_smile:

4 Likes

On #2

Looking at the USDC reserves:

  • USDC earns 1.64% APY on Compound w/ 0.89% in COMP rewards
  • DAI earns 2.26% APY on Compound w/ 0.86% in COMP rewards

Our current prize pool reserves hold 481,580.93 DAI and 952,316.75 USDC.

Given that, for USDC in V3, we’d earn 15,617.99 USDC in pure APY at the current rate and 38,092.67 USDC at 4% APY; we’d also earn $8,475.62 in COMP rewards (58.854385 COMP at current prices), which could increase or decrease in value depending on the market.

For DAI, we’d earn 10,883.73 DAI in pure APY at the current rate and 19,263.24 DAI at 4% APY; we’d also earn $4,141.60 in COMP rewards (28.7591139 COMP at current prices), which could increase or decrease in value depending on the market.

In V4 on mainnet, we’d earn 18,474.94 USDC in pure APY at the current rate (1.94% APY) and 38,092.67 USDC at 4% APY; we’d also earn $4,856.82 in AAVE rewards @ 0.51% (26.374205 AAVE at current prices), which could increase or decrease in value depending on the market. This is assuming we only use the current USDC in reserves in V4.

With the current agreed allocation, we’d be moving the USDC in Sponsorship and the USDC in the reserves to V4, with the exception of 500k USDC that is proposed for allocation to a fixed-rate, fixed-term lending position in Notional Finance V2. We’d also deposit DAI in Notional Finance V2, as we can’t deposit DAI into V4 and it’s optimal to have different kinds of stablecoins within the treasury/reserves.

The majority of the USDC is being allocated to V4 where it can be used to generate larger prizes and propel the growth machine forward. I do think the short-term benefit is greater for some assets to generate yield outside of V4 with the majority being used within V4.

500k USDC in Notional V2 for a June 26 tenor yields 16,318.125 USDC, while the same deposit in V4 on mainnet earns 3,637.5 USDC at the current rate (1.94% APY) and 7,500 USDC if the deposit earned 4% APY; we’d also earn $956.25 in AAVE rewards (5.192777 AAVE at current prices) at 0.51% rate of reward assuming the same 4.5 month time frame.

Total yield in Notional at June 26 maturity: 16,318.125 USDC
Total yield in V4 on mainnet at June 26 maturity [at current rates]: 3,637.5 USDC and $956.25 in AAVE rewards [Total of $4,593.75 at current values]
Total yield in V4 on mainnet at June 26 maturity [at 4% APY]: 7,500 USDC and $956.25 in AAVE rewards [Total of $8,456.25 at current values]

Opportunity Cost of depositing 500k USDC in V4 over Notional
At current rates: $11,724.375
At 4% APY: $7,861.875

Wrt the point about reserves and the reserve rate:
Total USDC between prize eligible deposits, sponsorship, and reserves is 21,723,500 USDC
At 1.64% APY, the total of the funds earns 356,265.4 USDC with 50% (178,132.7 USDC) being earned from the reserve rate. I don’t believe the USDC reserve is actually used to generate yield, but I’ll include it here for arguments’ sake, as the differential on yield earned is 15,617.9824 USDC in total.

Because we’re removing the protocol’s Sponsorship Capital and the USDC reserve, I don’t think it’s beneficial to turn off the reserve rate, as the remaining 17,929,184 USDC in Sponsorship Capital and prize eligible deposits would earn 294,038.62 USDC, of which 147,019.31 USDC would be earned in reserves over the course of the year. While we’re subsidizing prizes, I don’t think it makes sense to reduce operating revenue.

I’ve exlcuded the COMP rewards earned, as none of that contributes to reserves but is instead added to the prize pool. With the remaining USDC (SC and prize eligible deposits), the pool would still earn $159,569.73 in COMP (1102.53389 COMP) at current prices.

Each weekly prize would then be $5,895.94, or $1,179.19 split among the five weekly winners.

On #3

In the current PTIP, we do allocate the majority of USDC into V4 to generate yield for prizes, so the priority was to deposit funds into V4 w/ 3,290,000 USDC going into V4 and 15% of total USDC being allocated to a Notional V2 tenor.

On #4

We’ll likely review non-stable assets in the treasury/reserves in a later post. My opinion would be to hold AAVE, COMP, and any other governance tokens earned in reserves and/or treasury to maintain good relations with those communities. I’d be in favor of delegating our earned MATIC to a validator on Polygon to earn 8-10% in MATIC rewards. But I know the TWG will revisit this in the near term, likely once the last of the TRIBE rewards come through.

With other services like Tribe Turbo and emerging solutions for lending and liquidity, I do think we’ll have ways to utilize our POOL to earn on FEI or other stablecoins and add more stablecoins to our treasury, which can be used as fuel for the perpetual growth machine.

In the short-term, allocating a small portion of funds to offset existing prize pool subsidies and generate non-operating revenue for the DAO offers more reward than risk, imo.

If the community decides to default to depositing stables into V4, then the TWG can focus on other areas such as POL, using POOL to borrow and earn on stables, and possible overlap with the MWG.

6 Likes

im just new knowing,about how to make a bit of assets grow and hahe it.

1 Like

Great feedback @BraveNewDeFi !

1 Like