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.