I’m not sure what “sustainable development” means. The endowment would be owned by the ENS DAO the same as the funds currently are; it would be managed by a fund manager, preferably onchain.
Most of these assets are in ETH, and we have seen drawdowns of >70% in ETH in bear markets before. TNL’s annual operating budget is on the region of $1.5M, and that’s before accounting for any DAO expenses.
I’ll apologize in advance for over reacting in my original message. Those words were way too harsh.
What I was getting at is that an endowment, from what I understand, would be a separate legal entity and I don’t understand how it will be owned by the DAO or even controlled on-chain by it.
Will it be a board consisting of members from the DAO that are bound by the Endowment to follow an on-chain vote, or how will that actually work?
My principle concern is that this doesn’t end up moving a very large portion of the treasury out to a separate legal entity that’s legally not within the control of the DAO.
My intention was not to suggest establishing a separate entity; just to set aside a portion of the treasury and manage it as an endowment (using an external fund manager, preferably with limited permissions to act onchain). It would likely be in a separate wallet, but still ultimately controlled by the DAO.
That alleviates my concerns greatly, and I’m not against that.
It sounds like this endowment proposal attempts to simultaneously meet 2 separate goals:
It’s clear why ENS would want to reduce market downside risk on its substantial eth exposure, but it’s not so clear why “making a return” is so important at this time.
Additionally, ENS is special because it’s one of the few “non-financial” web3 applications out there, and has historically stayed far away from the “financially engineered speculative gambling” use-cases inherent to most defi products. I’m worried that dipping a toe into the world of defi may sacrifice this well-earned moral high ground. Could ENS ask a future endowment manager to ensure that the requested 4%+ gains aren’t coming from the profits of speculation-fueled destructive behavior? Does the source of the returns matter at all?
Just had a passing thought about this. Maybe a 1% (or some small percentage) creator royalties going to an endowment account would be enough for this type of thing?
This is such an awesome concept and it seems to have really broad support.
It would clearly take a while to execute from a process perspective, but has it been picked up yet by one of the working groups for preliminary investigation?
I believe that some of the Meta-Governance stewards are preparing to draft and deliver an endowment RFP for the DAO’s treasury.
I’m not morally opposed to putting a royalty on secondary sales, but I don’t see any reason an endowment for core development should be funded exclusively from it.
This risk profile is quite like that of a traditional pension fund and the way this is achieved in TradFi is by buying downside protection in the form of put options. Unlike selling lots of ETH for stable coins to guarantee a long runway and thereby foregoing the potential ETH upside, this one-sided hedging protects the dollar value of the endowment without giving up on the upside. The option premiums could be cross-financed by selling upside calls – effectively guaranteeing the dollar value of funds stays within certain bounds – but this is not necessary.
My co-founder and I are building a protocol (greyswan.finance) which brings options on-chain with the kind of liquidity needed by DAOs like ENS. I had originally posted this thread:
but was asked to contribute here. We would be curious to hear what the community thinks about this idea?
The human element to the treasury funds management by fund managers, in my opinion Nick, limits the functionality of the ENS DAO and if sequence risk is your largest concern, perhaps something along diversification and double cost across the asset classes would promote the longevity, reduce human element, and preserve the treasury wealthstock.
Unless the capacity, tolerance, required risk voted by members would bring a capital management and consultancy onboard the Foundation, or the forward-looking scenarios are financially stressing the capital base, I can’t see why the treasury needs this.
Hi all, I’m Mona El Isa, the cofounder of Enzyme and the CEO and founder of Avantgarde Finance. We are hugely supportive of the creation of an ENS endowment and think it could set an important precedent for how crypto-native public goods are funded and maintained. ENS is in the enviable position of earning revenue in ETH and not being solely dependent on its native token for sustenance. Protecting that competitive advantage should be a high priority and we believe that a thoughtfully designed endowment can help to achieve that.
I’ll also take a moment here to suggest Enzyme as the solution to a few of the concerns raised throughout this thread. In particular, concerns raised around the operationalisation of this strategy. Enzyme was purpose-built as an asset management infrastructure for non-custodial asset management strategies called Vaults. In an Enzyme vault, investors always have access to their funds and can be confident that the vault’s manager will allocate them according to rules enforced at the smart contract level. Out of the box, those rules can limit the exchanges and protocols with which the manager can interact, slippage they can incur, leverage, what addresses can invest, what addresses can hold shares, etc. It’s also possible to write custom policies specific to the scenario; that’s something we’d be happy to help with. In short, the policies can be configured in such a way that the DAO has confidence that the manager will trade according to their mandate, but the manager won’t have to go through a DAO-wide vote on every trade.