Real-World Assets discussion

[Steakhouse]

Summary

As it was already discussed (some Meta-Gov calls), Real-World Assets (RWA) are currently a hot topic in DeFi . We had plenty of internal discussions with Karpatkey on the topic.

It’s crucial to note that the yield landscape has transitioned from DeFi outpacing RWA yields to RWA now offering higher returns. The ENS community must decide whether diversification into RWA is a wise move. Karpatkey and Steakhouse are here to guide you through this process.

Tokenized T-bill Report

Steakhouse has been working over the last few months on a comprehensive review of the Tokenized T-Bill space. After discussion with Karpatkey, we both believe that ENS should consider starting to explore the RWA space. Emphase could be put on very low risk products before venturing into more complex and riskier products (which obviously provide a better yield).

Why focus on T-Bills-like RWA

It is our understanding that ENS wants to lean on the safest side of the investment spectrum. T-Bills don’t carry much risk. Moreover, the risk is already present in fiat-backed stablecoin that compose a good part of ENS treasury (but the yield is not present).

Let’s start the discussion

We, Karpatkey and Steakhouse, are here to support ENS DAO to the best of our ability in the reflection around RWA. Please feel free to move the direction anywhere you like but we prepared some questions to kickstart the discussion:

• Do you think ENS should allocate part of its treasury into RWA? Why?
• What is the risk appetite you see for ENS?
• Should ENS focus on permissionless product or are you open to permissioned one?

Floor is yours

[katherine.eth]

Hi @Steakhouse team! Thank you for initiating the discussion on RWAs. Adding my 2 cents here. For those of you who attend the weekly Meta-Gov calls, you’ve likely heard interest + educational talks on how the maturing RWA space can potentially affect DAO treasury management strategies.

One of the data points noted in the post above is this:

It’s crucial to note that the yield landscape has transitioned from DeFi outpacing RWA yields to RWA now offering higher returns.

For reference (and to further back up your point), here are two dashboards that I personally track: one that displays the APR yields for some of the top DeFi protocols (Defi Llama); compare that to an RWA dashboard that shows the yield on T-bills (to maturity) right now (RWA.xyz). IMO, MakerDAO is an example of a more mature DAO that has employed RWA strategies in their treasury management – I highly recommend reading through their strategies in their forum. (MakerDAO RWA Forum)

First and foremost, there is the question of why DAOs should employ diverse Treasury Management in the first place. Further to that, what is the balance of achieving sustainable yield while also employing low-risk strategies? My personal opinion is that while more ‘straightforward’ strategies, such as converting ETH to USDC (one that this DAO has done in the past), should be employed, diversification is the foundation of any kind of responsible treasury management.

ENS is one of the few revenue-generating protocols, which means that ENS incurs revenue in the form of ETH on a recurring and continuous basis. But even then, there are risks to keeping too much of that in ETH, especially considering that the majority of important initiatives the DAO funds are in stablecoins such as USDC. (See: [EP 3.3])

The DAO currently keeps almost 100% of its spendable treasury in ETH. While ENS generates protocol revenue in ETH, having so much exposure to a single volatile asset places the DAO in a vulnerable position. [Excerpt from EP 3.3]

The DAO currently manages treasury diversification via its fund manager (EP 2.2.4) in an approved manner (forum post) — and with strategies that are USD neutral and Eth neutral. My opinion is that RWA strategies such as tokenized T-bills fit within that risk profile, with the added benefit of being a great alternative to DeFi yields. In a macro environment with rising interest rates + lower DeFi APY yields, it is a strategy that will (and should) garner interest in the coming years among both institutions and large treasuries, whether they be corporations or DAOs.

While the RWA landscape is still fairly nascent today, and implementing an RWA strategy is likely a 10-step process today (questions as it relates to structure, custody, audits and more), I do think that it is a strategy any large treasury should consider in a volatile market. I also think that as the DAO (and its treasury) grows, RWAs as a treasury management strategy is something we should continue to keep a close eye on and share learnings about.

[maple_direct]

@Steakhouse thanks for opening up the discussion!

@katherine.eth we appreciate your helpful guidance on the DAO’s risk appetite for RWAs. To further the discussion, I wanted to point you to our recent post (Introducing Maple Cash Management).

We welcome all comments and look forward to hearing from you!