DAO Endowment Submission Summary

[MakerMan]

@EvanVanNess Great post. I am replying to you but this is to those pushing this Endaoment agenda.

I spent a number of hours reviewing the remaining proposals. If I was one of the ones rejected I would be disappointed that NO reasons were given for the rejection. (I now see there was something posted on these by @nick.eth - thank you!). Hence even doing the review of the remaining myself I didn’t have clear reasons for the rejections.

Here is what I want to say on the remaining 3.

First when it comes to ADAM, these players while dealing with a large amount of assets are very new, and they intend to make the returns via leveraged trading etc. I don’t really believe their Chinese firewall will hold and don’t see how given their limited manpower that kinds of front running or collaborated trading won’t occur. I also don’t like the proximity to China here with its negative stance on crypto. My biggest concern is the huge reliance on BitMain and it is clear a number of the players have close relations with BitMain, which means when push comes to shove BitMain portfolio is going to get lions share of the attention. There are just too many negatives with both proposals and the team.

Karpatkey. Frankly Karpatkey didn’t even bother to answer some of the prime requirements of the proposal (like how they think they are going to get $4M/yr returns) and the fact that Gnosis portfolio has lost over 60% of its value in the past 12 months is a big negative for me. Ok they can claim Gnosis directed them to not diversify. I just don’t like that this team in their proposal didn’t really address the key issues laid out in the proposal and I am not convinced they are great managers. I used to think they did well but when I looked at the real results I just couldn’t justify this as great management.

The last one that actually addressed key issues of ENS in the same way that @EvanVanNess and myself that actually impressed me was Enzyme/Avantgarde. But they seem just too new, with not so much of a track record to rely on and very new contracts management. Even so they focused on the same issues regarding a need for ENS to focus on using ETH income to build cash (USDC…) as @EvanVanNess and myself are.

In conclusion I don’t think ENS should go with any of the offered Treasury Management proposals and I will be voting my delegated ENS against any such proposal.

My take on ENS financial and business status aligns quite a bit with @EvanVanNess etc.

@EvanVanNess

At the risk of ruffling some feathers, I would categorize the goal in the RFP of making $4m USDC per year without any loss of principal as very aggressive even if ENS were to risk using the entire treasury at the start. I realize the goal is to eventually get there, but I think the RFP anchors perceptions. Using the entire current capital of ~$55m, that’s almost an 8% return and the elephant in the room is that with any ETH exposure, your return will be extremely correlated with ETH and the general macroeconomic environment.

Completely agree with the above.

@nick.eth

The intention is certainly not that it would return $4M p.a. with the current size - only that it would eventually grow to a size where that is practical. Many proposals have pegged that around the $100MM mark.

Maybe but you should realize that to earn that $4M annually will mean putting what $100M at risk in some way. I think the focus should be on the next 3 years, not generating return for what has repeatedly been stated is a ‘public good’. I am going to leave this public good topic for another post when I can digest my own thoughts against the ENS constitution etc.

Right now ENS product while priced in $$ actually is being paid in ETH. This brings me to next key point(s).

@EvanVanNess

Start funding operations through doman sales by converting domain name sales into USDC immediately. I’m not entirely sure I understand the justification for keeping unearned in ETH and earned in USDC, but it seems obvious to me that the best place to start funding operations is through operations, rather than prematurely asking investment managers to aggressively manage the treasury to meet a specific goal.

I can’t stress the point above enough.

ENS RIGHT NOW needs to start converting earned ETH income into USDC and/or other stables to create a treasury of diversified stables. Goal here is to get to $12M stables in the bank to fund operations for next 3 years.

Get your operational funding and costs stabilized and under control for the next 3 years, then think about ‘investing for return’.

Because ENS is being paid in ETH for something priced in $$ this means it will always be earning ETH. ENS doesn’t have to worry about having assets pegged to ETH because unless it converts them it is always going to have ETH coming in. So forget about investing in ETH, your product purchasers paying for your product in ETH are already doing that for you. In fact your unearned income is going to be sitting in ETH anyway…

I know ETH price is $1250 but right now ENS should be considering taking ALL of their ETH revenue DAILY IF NEED BE and CONVERTING IT TO USDC/DAI/STABLES to get to the target of $12M of stables on hand. Now how much to have ‘on hand’ or to invest. Frankly I wouldn’t want to start investing anything until ENS had that $12M stables on hand today.

Now lets say we have that $12M or MORE than $12M Stables on hand.

What do I think ENS should invest in?

1. ETH-USDC v2 LP - I personally invest in this and using this LP with almost 40% of my portfolio saved me from a 75% drop in ETH price. This particular LP earns - consistently (over months) - at least 8% APR fees automatically compounded into the liquidity pool. This return is declining (but so far has been pretty consistent at 8-10% APR) even in the face of v3 and trading volumes and liquidity being diluted in the entire space. Whole point here is if you put $4M into this LP and the ETH price drops by 75% you only are down 50% in your portfolio. In fact during the drop from $4K to 1.2K here I earned easily 15-20% in fees making my LP only down about 30-35% which is still chunking away earning that 8-10%. IF ETH goes back to $4K I will more than double my current portfolio. This is one key way to earn compounding return, provide liquidity to markets and buffer ETH price volatility. I can’t stress the value of this enough. BTW: Even at 5% return on this LP if ENS ends up with 80M in there the $4M return is satisfied and I am shooting my own LP investment in the foot by even suggesting this to DAOs lately.

2. ENS-ETH or ENS-USDC v2 or v3 LP - I personally think it is important to every community to build up significant LP in their tokens. This is important in case they need to sell to raise cash but also to build up trading liquidity and earn fees. I have had a v3 ENS-ETH LP between like 10 and 200 ENS/ETH that earns easily > 10% APR - consistently. Now I don’t have $20M in liquidity in there but I do trade ENS and believe that more liquidity would enable larger trades, more liquidity, and better price discovery. I believe this is good for ENSDAO and good for the greater community for ENS to be highly and deeply liquid for anyone to enter or exit with large liquidity without significant slippage.

The above 2 single investments if funded with the amounts being suggested in the RFP would be more than sufficient to earn $4M/yr. It is highly likely the above 2 with only $50M in them could earn this return with very little ‘management’ required.

ENS doesn’t have to pay fees it just needs to figure out how to mechanically make the pretty simple investments suggested above.

I want to be clear here.

1. Raise 3 years worth of cash in stables (USDC whatever)
2. Once (1) is accomplished I would invest in ETH-USDC v2 LP to earn 8-10% return and provide liquidity to Uniswap markets. THis market is currently ~100M so it is easy to put 10-50M in there and still earn significant return.
3. Once (2) is accomplished or in tandem start putting up ENS-ETH or ENS-USDC v2 or v3 LP to earn return and build trading liquidity on uniswap for ENS.
4. Once returns hit $4M/yr (which should be do-able in that 3 year window provided by (1)) then think about expanding funding and growing public goods.

Sincerely,
MakerMan.eth
ENS Delegate #54