Proposal: Allocation of USDC to Aave

glorysk87

SDIP Authors: glory
Project lead: glory
Squad: Treasury
Creative approval: N/A
Time Required: < 1 Hour
Complexity: Simple

Abstract

We have a significant amount of assets sitting idle in the Genesis Wallet in a mix of USDC and ETH. We propose that $1.5mm of our USDC be deposited into Aave to earn a small amount of yield.

Motivation

Our treasury currently contains a combination of ETH and USDC totaling over $6.25mm. Operating expenses and potential investments will likely consume less than a quarter of that total amount over the course of the next twelve months. Current estimate of run-rate expenses:
$36k for fixed compensation monthly
25 ETH for acquisitions monthly
$14k for other uses/buffer monthly
Total $1.5mm per year

As such, we have a large pool of capital that will be lying idle for the foreseeable future. Placing $1.5mm of our USDC into Aave will allow us to earn a small return (estimated $30-40k in yield) on our treasury assets without jeopardizing operations (we’ll still have ~$4.75mm of assets in the treasury).

This is a conservative first step, and we can continue to refine this investment strategy over time to maximize risk-adjusted returns via future proposals.

Success Conditions

Deploy $1.5mm to Aave
Target a return of $30k USDC annually

Specification

Upon passing Snapshot, the Genesis Wallet multi-signers will transfer $1.5mm USDC to the Treasury Squad Wallet. Treasury Squad signers will utilize the Aave app on Gnosis to deploy the $1.5mm into Aave’s USDC deposit. Treasury Squad will regularly monitor performance of the investment.

This proposal considered other alternatives to using Treasury Squad wallet, but ultimately Treasury Squad wallet is best option.

Launch Details

No special conditions; specifications above

Costs

N/A

Rewards

N/A

moose

Proposal is looking great overall.

This is a big amount. Is there any prior governance that dictates any special approvals required beyond a standard SDIP?

Also, I like the new wallet idea for the sake of isolation. New wallets will necessarily be needed if we go the 'spicier' protocol route in the future. Glory can you comment on the need for more signers? Can these just be treasury squad or genesis signers?

glorysk87

I don't think there is any established rule or process for governance over a specific amount (as far as I know). Gregg might know better here.

Agree on new wallet - I think the tradeoff of convenience is one we should make for security.

Signers I figured would be treasury squad signers + a few more. I'd really like to make it minimum 3 signatures required but I'd also love feedback on this.

0xgregory

If we do this, it can be done directly from the Safe. No need to move the assets

I also don't really see the point. 30k/yr is inconsequential to the DAO, considering what we are planning for 2022 and beyond.

I'll ask for some feedback from the BSS and see what the consensus is over there

glorysk87

0xgregory I think isolating the safe from defi protocols entirely is best practice.

$30k is not a huge amount of money, but it's still $30k that we wouldn't have. I absolutely disagree that it's inconsequential. It takes almost no time or effort to generate that return. And generating incremental returns over time compounds and can create meaningful value.

0xgregory

glorysk87 It takes risk to generate this return that doesn't justify the reward. I don't agree with moving treasury funds into a multi-sig that is managed by so few people for the purposes of generating such a small amount of taxable income.

If there's enough support to do this, perhaps we can mitigate risk by doing everything from the primary multisig. That would address the primary risk, IMO