Treasury Diversification with Lido Finance

💬 General Discussion
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Proposal Name: Treasury Diversification with Lido Finance

Proposal Category: Ecosystem Fund Allocation

Abstract | Two or three sentences that summarize the proposal.

  • As DAOs become more mature there is a need to start operating as a business which can sustain economic growth and provide value back to the DAO and community.
  • Successful companies invest and effectively deploy capital from the corporate treasury. Likewise, community run Decentralized Autonomous Organizations (DAOs) share a similar imperative.
  • DAOs that put in place a treasury management strategy early will reap the benefits in the future and mitigate risks of low funding or bankruptcy.
  • Diversifying into stETH specifically will help to achieve long term capital appreciation and minimize risk in order to support growth and development of the ENS Ecosystem.

Motivation | A statement on why the ENS DAO Community should implement the proposal.

  • ENS DAO should diversify it’s treasury from holding ~$69 mil in ETH to converting approximately 60% of it’s current ETH holding equating to ~$41 mil in ETH of it’s available treasury to stEth.
  • By holding stEth as a treasury asset, ENS DAO will start earning yield on their treasury providing immediate income that can be used for operational expenses or invested back into the DAO and/or community.
  • Creates sustainable and predictable income for the DAO.
  • stETH has deep liquidity and network of integrations for additional treasury management strategies.
  • Encourages decentralization of the Ethereum network with minimal additional effort.
  • Educates NFT users about the fundamentals and power of decentralized finance.

Rationale | An explanation of how the proposal aligns with the ENS DAO Community’s mission and guiding values.

  • Holding stETH aligns directly with growing and developing the END ecosystem by earning yield on Eth in the treasury. ENS DAO can utilize yield to help pay for expenses and infrastructure to support and grow the DAO.

Key Terms (optional) | Definitions of any terms within the proposal that are unique to the proposal, new to the ENS DAO Community, and/or industry-specific.

  • stETH = Staked ETH on Lido Finance

Steps to Implement | The steps to implement the proposal, including associated costs, manpower, and other resources for each step where applicable.

  • Go to stake.lido.fi and stake ETH
  • Or work with Lido BD for more white glove treatment (no cost)

About Lido Finance | Information about the protocol Eth would be staked on.

  • Lido is liquid staking provider that allows users to stake Eth tokens through Lido Finance, helping secure the Ethereum network, and receive a yield bearing derivative token called stEth that can further be used in defi protocols.
  • Lido is the fourth largest defi protocol and largest liquid staking service provider in the web 3 space with ~8 bil total value locked across multiple chains (Ethereum, Solana, Polygon, etc)
  • Largest liquid pool in DeFi - $3BN for stETH/ETH

Timeline | Relevant timing details, including but not limited to start date, milestones, and completion dates.

  • There is no lock up period. ETH can be staked at any time and stETH can be swapped to USDC or ETH at any time.

Overall Cost | The total cost to implement the proposal.

  • There is no cost to the DAO for staking ETH with Lido

Case Study

A16Z stakes with Lido

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The meta-gov WG is working on an RFP for an endowment fund manager; something like this might be better construed as part of a response to that.

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Thanks Nick. Where is the best place to have that conversation?

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I agree with treasury diversification, but I think we should expand it some, based on recommendations of the Endowment Fund Manager. Perhaps using services like BlackRock Capital Investment Corporation for a portion.

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I was thinking ENS should do ETH a service and setup its own validator, 1) to give STETH less overall control, 2) maybe create a way for others to get in on this validator as an alternative.

I would think the top defi and service apps on ETH, including ENS, would see STETH market share as an overall threat and would setup ways for others to be validators as a way to maintain control.

The risk reward is clear due to size, to setup its own validator. Basically, can get a team to basically run its validator, the cost of this team would be less than the 10% fee paid to STETH in loss revenue for outsourcing validating.

At a minimum, I think ENS should setup its own validator? At a maximum, setup a validator that allows others to deposit eth and become a valdator at near zero fees, as a service to Eth industry overall and reduce market share risk?

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The Meta-Gov stewards should be posting a draft RFP soon; comments can be made on that.