[Social] [EP2.2.5] Selection of an ENS endowment fund manager

Referring to the myriad of ways of manipulating liquidity on-chain: flash swaps, flash loans, etc. No whales necessary. Remember that in the case of AMM trades, it’s only necessary to manipulate the price for an instant of time. This is virtually risk free. This happens literally every day on-chain.

The problem you’re missing here is that (absent additional smart contract controls) these two are equivalent, you are asking for unilateral powers and do not even realize it.

This approach is exactly the problem. Again, integrating a protocol only begins at whitelisting its entry points. Without intimate knowledge of how each protocol actually works at the smart contract level, you are asking to get burned.


Thanks Lefteris, just to clarify, Enzyme’s reporting infrastructure is entirely open source and relies on subgraphs which means the data we display on interface is easily queriable, verifiable and auditable. The interface also makes it easily readable in real-time. The cryptio part of our proposal is to handle non-treasury reporting which we were asked to include but does not actually cover the scope of the original RFP.

One of the things that put me off a bit from the proposal is that despite all we saw last year with insitutional crypto offerings collapsing, Avantgarde seems to insist on using them via Maple.

That’s correct. Copy/pasting my response to you in our private discussion for full transparency.

I think our key point is that risk management/capital preservation is more than “off chain” or “on chain” (for example, Luna was on chain)

The important judgement is: who does their research / risk underwriting better? Yes, on chain is more transparent and so easier to underwrite, which is why our big bias is toward onchain. But “On chain: good, off chain: bad” is too simplistic, and therefore actually riskier than the case by case approach we believe in.


great summary

Voting update, with 6 hours to go. lefteris.eth, she256.eth and imtoken.eth have all weighed in.

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Hi Lefteris -

Thanks for your thoughtful response, I really appreciate the time you put in to this decision.

I just wanted to make sure that you’d seen @nicmm’s posts in this thread on the difference in trust models between Enzyme and Zodiac. Our CTO put it aptly, Enzyme ensures outcomes, Zodiac only inputs.

Nic wrote a couple of posts but this one went up after you posted your rationale, so thought I’d link.

Delegate’s View - Coinbase.eth

After reviewing the finalists’ proposals, we believe that none of the above would be the best immediate route forward. As such, we’re voting:

  1. None of the above
  2. Llama
  3. Avantgarde
  4. Karpatkey


As Nick reminds us in the replies above, the DAO’s goal with this RFP is to establish long-term funding for protocol development and to insulate the DAO from economic fluctuations (with ETH exposure being the main source of any fluctuations).

We don’t think any of the proposals adequately solve for this specific mission. In fact, as discussed by other delegates on this forum, active management of funds might not be the most immediate step that the DAO can take to insulate its long-term runway against ETH price movements.

To avoid going too far out on the risk curve, long-term funding of $4M per year likely requires a more sizable endowment than what the DAO is currently starting with. In the meantime, a 5% yield on the current treasury likely only nets the DAO an additional $1-2M annually (at best). This risk / reward doesn’t seem reasonable, and we’d prefer to wait for the treasury management space to mature further.

It’s nice to start working on an endowment process now, but any rushed decision that risks funds with limited upside seems unnecessary.


After Coinbase’s and Rainbow’s vote, NOTA is now in the lead.

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The point of the management of funds was to also start on the derisking process. The ENDaoment process has been something that the DAO has been working on for many months, all the while seeing its very heavy exposure to ETH hurting its treasury net value as we get deeper and deeper into the bear.

This is why we are finally ready to now act and do something about it.

Voting for “None of the above” takes us back to step one and we have no idea when or how we can even start derisking while at the same time the market conditions put the very existence of the DAO at risk.

This risk / reward doesn’t seem reasonable, and we’d prefer to wait for the treasury management space to mature further.

I have to admit I am pretty amazed to see that coming from Coinbase, an org that also deals with many institutional customers. So is it your professional opinion that doing nothing and just holding the overwhelming majority of the DAO’s treasury in ETH poses less risks than actually taking action to do something about it?

Coinbase aside, I would also like to hear the reasoning of the vote from @rainbow since they also helped swing the vote towards None of the above.

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Is this true? Is the existence of the DAO at risk if we wait?

Not with the current ETH price I gess? @nick.eth should chime in. I think it was mentioned in the space yesterday. But who knows where ETH will be in a week? In a month? The DAO should not gamble trying to guess bottoms. Choosing “None of the above” takes us back to the drawing board.

And if anything this entire process should underline how hard and time consuming a process reaching a decision as a DAO is.

If we do end up voting for “None of the above” we should act fast on a derisking strategy. Essentially a vote for a strategy on how and for how much ETH we should derisk (sell for stables).

And separate the treasury management from it as a completely different proposal.

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It depends on just how low the ETH price goes and what happens to ENS income. As long as income exceeds expenses (it does handily right now), we can sustain ourselves without drawing down on the treasury. But if that changes - and it’s reasonable to think that ENS registration fees are correlated with crypto market performance - then we’d be faced with insufficient income and a treasury that has shrunk dramatically.

Here’s my mental model on the DAO with/without an endowment:

     W/O Endowment
│      │ E > I │ I > E │
│ ETH↓ │  BAD  │  OK   │
│ ETH↑ │  OK   │  GOOD │

     With Endowment
│      │ E > I │ I > E │
│ ETH↓ │  OK   │  OK   │
│ ETH↑ │  OK   │  OK   │

The DAO is not in the business of trading or trying to time things. We should absolutely be willing to trade off some upside - that would exceed our needs in any case - for a guarantee that we won’t face an existential crisis if the market goes as badly as it potentially could.

I am working on a draft EP to propose changing ENS’s accounting of unearned income to be USD-denominated instead of ETH-denominated, while Coltron is working on an EP draft for day-to-day treasury operations that would entail keeping a substantial runway available directly to the DAO (outside any endowment) in stablecoins.

Both are relevant regardless of the outcome of this vote, and will help to ensure the DAO has less immediate risk and exposure to currency fluctuations if passed.

Edit: More last minute voting changes have put Karpatkey back into the lead (for now).


Delegate’s View - cory.eth

After much consideration, I have finalized my vote as

  1. None of the above
  2. Llama
  3. Avantgarde
  4. Karpatkey

After a historic year, the ENS DAO is well funded for the forseeable future. I also think $4.2M in annual expenses is a lot for a software project.

Despite USD expenses, I do not like the idea of over-diversifying into blacklist-enabled tokens. I am terrified of the tail risk. ENS DAO is front and center and likely to be used as an example in legal matters.

If we do not have enough stables for the bear market, then I would suggest we just execute a UniSwap trade not give 80% of our treasury allocation away (edit: admittedly with limitations as set in the proposal and smart contracts).

That said, I am sympathetic to the desire for a treasury management role. But I think these proposals miss the mark on risk-minimization. If someone wants 80% of my own money, I wouldn’t just give it to them. I’d make them earn it and prove they’re doing well first. I would be open to a proposal with much less money on the line. Holding ETH is fine, ideal even.

Llama was the highest friction option, so I selected it first among the candidates. Avantgarde impressed me a bit more. They seemed higher effort as they reached out to me as well.

I found this decision very difficult and was impressed by all the options and dialogue.


To be clear, none of these proposals involve giving 80% of the treasury to anyone. The funds would still be held by the DAO, with the fund managers able to execute certain limited operations on them such as allowlisted trades.

I understand, was trying to use the term “treasury allocation” to be brief.

Main point follows, I would be more happy with a smaller start.


Final results: Karpatkey is the winner.

Edit: Updated with correct numbers for NOTA


Point taken and this has been echoed by others. I also mentioned I would like that in Twitter. To start slow.

As @nick.eth already pointed out in Twitter we have full control of execution, size and distribution: https://twitter.com/nicksdjohnson/status/1595200052418314241

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Thank you to everyone who participated, and the care you all took in your voting choices.

The next step will involve the Meta-Gov Working Group working with Karpatkey to produce a refined version of their proposal that’s ready to be presented to the DAO and executed.

Given the feedback we’ve received during the process, and the concerns of many who ultimately voted for None of the Above, I expect that the size of the endowment will be the subject of much discussion. We all want to build something that everyone can get behind.

The Meta-Gov working group is also working on a pair of proposals that will help lay out day-to-day treasury operations for the DAO, ensure it has a substantial runway in stablecoins independently of the endowment, and reduce the DAO’s exposure to volatility.


An interesting day for ENS!

Firstly great to see high voter turnout and community discussion, a very important proposal.

A few considerations:

  • Firstly, still in the camp the Ranked choice voting was not the correct option here, considering a majority voted ‘none of the above’ and had no option other than to rank (and therefore vote, for winners) - *For example here: If Brantly had changed his 2nd place vote from Karpatkey to Avantgarde, None of the above would have won, in addition, the lack of visibility and understanding around the voting process impeded the governance process.

  • Secondly, the refinement of the Karpatkey proposal should happen in public (perhaps with community calls / input) - since there has been no onchain proposal or open input about the refinement of these proposals.

  • Thirdly, as Nick alluded to; the size of the endowment is still very open. I’d propose starting Karpatkey with a fraction of the 80% (say, 5-25%) allowing us to spend the first 6/12 months in a testing/data collection phase, to then later on looking to deploy more of the treasury all going well.

Lastly, there should be discussion and processes established around potential failure states or changes to the endowment, for example if the manager does not fulfil their obligations to the DAO, or the DAO wishes to change strategy, how is this achieved.

Excited to see the ENS DAO continue to achieve new things! :fire:_ :fire:


A plurality (more than any other candidate but less than a majority) of first-votes were for None of the Above. Under IRV, if a majority had been cast for None of the Above in the first round, voting would have ended immediately with it as the winner.

This is untrue. Brantly’s first vote was for None of the Above, and since it was not eliminated, his vote counted throughout the process. His second and third choices would only have been considered if NOTA was eliminated.

To address the broader issue of people being forced to pick candidates after NOTA: note that in this election no choices after NOTA were considered, because NOTA was not eliminated; the results are exactly identical.

If we instead take the state from about 6 hours before the conclusion of the vote, when NOTA was in third place:

we can simulate the effect of disregarding all choices placed after NOTA:

The results are what you would expect: all the outflows from NOTA are gone, meaning those voters had no input in the selection of the eventual winner; instead, the round 2 results decide the outcome. Voting this way doesn’t give NOTA voters an increased chance of winning, it just means they do not have a say in their subsequent preferences.

We’re definitely committed to working in public, but it’s not viable to offer the DAO - or random commenters on the forum - input on every individual choice. We would never actually reach a conclusion. A more viable approach is for the MG WG stewards to work with Karpatkey on an initial proposal, which is put to the DAO for feedback and refinement; that process can continue iteratively until all serious concerns have been addressed.

Karpatkey will need to speak for themselves, but I doubt they would be willing to offer the same terms to manage a $2.6M fund as they offered to manage a $52M fund. I also don’t think that managing $2.6M for 6-12 months tells us anything much useful about either Karpatkey or the investments; the time horizon is too short and “past performance does not guarantee future returns” as investment professionals are fond of saying.

In my mind, the minimum sensible size for the endowment is all of the unearned revenue (presently ~$19.8k ETH). This is money we cannot spend, which needs to retain exposure to ETH (unless we change the accounting basis), and could be used to earn a modest return on very low risk investments such as a diversified basket of staked ETH (if in ETH), or lending via AAVE etc (if in USDC). It makes little sense for us to sit on it and do nothing with it, and diversification into several low-risk options such as different staking providers insures us against tail risks from those providers.


Well said @nick.eth :clap::clap: