ETH/Stables Treasury Management Proposal

General
1

INTRODUCTION AND OBJECTIVE

The K9 Finance DAO Treasury is holding funds in ETH and stablecoins that is currently unused. This proposal details how a portion of the treasury could be staked on leading DeFi protocols to earn passive yield, helping grow our reserves and strengthen the DAO, long into the futures.

This proposal outlines a conservative approach to generating yield on the treasury’s assets, focusing on battle-tested DeFi protocols, and low-risk investment strategies that do not involve locking up treasury funds for any duration of time, keeping them accessible for DAO operations as needed.

BENEFITS TO K9 FINANCE COMMUNITY

This proposal benefits the entire K9 Finance DAO and all KNINE holders by providing yield on the assets held by the K9 Finance DAO treasury (DeBank: k9safe.eth). Earning yield on treasury assets helps grow our operational reserves, extendss our runway, and ensures the long-term budget for DAO operations over time.

PROPOSAL DETAILS

WHAT

Proposed Treasury Strategy

  1. Use 130 ETH held by treasury to earn passive yield from Ethereum validators through Liquid Staking Derivatives (LSDs), like Lido staked ETH (wstETH).

  2. Use $300k of stablecoins held by treasury earn passive yield through lending on Aave and through MakerDAO’s DAI savings rate.

  3. Additional $100k available for future strategies similar to the above. Monthly reviews of the DeFi market will occur to identify strategies that fit within this treasury management thesis of using liquid staking and stablecoin management options.

To diversify our investment, the proposed strategy will split the treasury asset investments. The starting allocation will be as follows:

Ethereum LSDs

Stablecoins

Asset allocation may be periodically adjusted based on performance and rebalancing needs, within the approved DeFi protocols. Performance monitoring and initiation of such minor adjustments will be managed by Shima.

Expected Returns

  • ETH: 2.5-3.5% APR
  • Stablecoins: 4-12% APR

You can view current and historic returns for the respective assets on the following links:

Current Markets

Historical Data

Dune Analytics:

WHO

All KNINE holders are impacted by this proposal, as any increase in treasury earnings strengthens the K9 Finance DAO as a whole.

WHERE

This proposal would require the k9safe.eth multisig to perform transactions on Uniswap, Aave, MakerDAO, and any other relevant tier 1 swaps/lending markets that support the above assets.

ETH from the treasury will be swapped into Liquid Staked Derivatives (LSDs). The respective LSD tokens will stay in the treasury wallet.

Stablecoins from the treasury will be rebalanced to contain 33% USDC, 33% USDT, and 33% DAI. USDC and USDT will get deposited into Aave as a lender and DAI will be deposited in Spark to earn DSR yield. aUSDT, aUSDC, and DAI lending receipts (withdrawal permission) will be held by the treasury wallet.

Investment will initially be balanced in equal portions across the 3 LSDs and 3 stablecoins.

≈ 43.3 ETH per LSD (Lido, Rocket Pool, Frax)

≈ $100k each USDC and USDT in Aave and $100K DAI in Spark

There are always risks in performing transactions but the management council has deep technical experience and will only be interacting with approved/vetted tier 1 providers as mentioned above.

WHEN

This proposal should pass as soon as possible, which would be the next Roundtable meeting around May 10th-13. Implementation can happen within a week of approval.

HOW

The K9 Finance DAO treasury wallet will swap ETH and stables via decentralized exchanges like Uniswap and Curve. ETH will be swapped directly into LSD equivalents. Stablecoins will be deposited into the aforementioned lending protocols. All assets and control will remain under the DAO multi-sig at all times.

Asset allocations may be periodically adjusted based on performance and rebalancing needs. This allows for optimizing returns and maintaining a healthy treasury strategy without requiring a DAO vote for all changes.

Shima from the management council will oversee this investment initiative. He will be responsible for performance monitoring and any required strategy adjustments that remain in-line with this proposal’s DeFi strategies. For risk management purposes, funds can be withdrawn from DeFi protocols, back into the treasury multi-sig at any time. Outside of rebalancing and withdrawal, no other fund movement or investment strategies will be performed without DAO approval through later proposals.

The community will be able to monitor this spending via the blockchain and looking at the DAO’s treasury wallet: Debank: k9dao.eth.

IMPACT ASSESSMENT

The expected return is

  • ETH: 2.5-3.5% APR
  • Stablecoins: 4-12% APR

This will be monitored by Shima, who is being suggested as the DAO member who will provide ongoing management and reporting on the performance of all treasury investment strategies. Reporting will occur monthly and be reviewed by the Roundtable of Dogs.

10 Likes
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[reserved for later]

4 Likes
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Excellent topic to raise, thank you.

4 Likes
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I remain skeptical on the return appraisal of 3-3.5% on ETH all layers, and 6-8% on stable coins;

Based on my own findings, gains, and experience in providing liquidity on several other platforms, the most return I have seen is roughly 1.2% or .012 for Liquid Staking Derivative Tokens on Layer 1, 2, and in one case 3 on the etherium blockchain. I do not see us ever obtaining 3.5% as I originally aimed for 6%, or 0.06 in return for my stake on various backends of dApps or decentralized apps. If you can obtain 3.5% or 0.035 return per 100K in USDT or USDC and prove me wrong then my skepticism will turn into support of this avenue. I will not challenge you to achieve 6-8% on stable coins, I just do not see that being possible at this moment in time.

4 Likes
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Thanks Shima for this proposal! I want to comment here for us to take into consideration the ApeBond proposal.
(link to my comment here: Bond Protocol-owned Liquidity with ApeBond - #20 by Archangel)
Let’s make sure we’re not focusing too much on an average 6% APY here while accruing a 25% immediate cost with ApeBond.
I’d love to here your thoughts on this!

4 Likes
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I support this proposal

9 Likes
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I support this aswell , very prudent strategy

4 Likes
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I support this proposal for the following reasons:

  1. Using Lido aligns with the brand of K9 Finance DAO
  2. The proposed protocols here have minimized the risk profile of smart contract risk
  3. It is only using the Ethereum L1, which is in line with the chain profile of the K9 DAO products being live on Ethereum and Shibarium
  4. There is a stablecoin diversification effect built in here to spread stablecoins across multiple smart contracts
  5. The treasury remains long the assets that K9 DAO supports for the long term: ETH, SHIB, BONE & KNINE
  6. This strategy can be actively managed if approved and rebalanced within the parameters of the proposal
  7. This strategy leaves appropriate assets within the treasury (namely BONE, SHIB & KNINE) for yield generation use on the Shibarium network at the right time

Context is that there are many yield-generating strategies out there that can be on L1s or L2s with a variety of risk profiles. This strategy aligns with the K9 DAO brand using LSD-based products, retains liquidity of assets with no lockups, and uses some of the strongest and battle-tested smart contracts in the industry. While a more aggressive approach could have been proposed, I feel this is a safe balance with minimal smart contract risk that is appropriate for a DAO treasury

13 Likes
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I will be adding the tokens to my watchlist now, I pray others do the same:

stETH (Lido)
RPL (Rocket Pool)
sfrxETH (Frax)

I have my doubts about frax.

4 Likes
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I support this proposal

3 Likes
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I support this purposal

4 Likes
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While I may not be qualified to offer an in-depth opinion, from my perspective, the proposal seems ok. Turtle appears highly qualified to present this, especially if you’ve seen today’s issue of The Shib, which provides good insights. Additionally, Buzz’s perspective seems reasonable.

I agree with this proposal as well. :slight_smile:

5 Likes
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Thanks to the great AMA last week we got allot of good info about this proposal…I’m 100 percent behind it?!!

3 Likes
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I support this proposal.

4 Likes
15

Will this allow community members to add liquidity with their K9 and collect rewards? Or will this just build a stronger liquidity for K9? Or both?

2 Likes
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People get KININE on a discount and the project will get ETH to lock away LP with the KNINE allocated to it all done over a long period of time.

6 Likes
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I know k9 needs a financial plan to run the team . So taking some liquidy and staking it as eth would make great sence for supportijg the great team at k9. We all have to eat. K9 will be bigger than bone. K9 to1 cent.

4 Likes
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I can get behind this proposal.

4 Likes
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I support this proposal!

6 Likes
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I support this proposal!

3 Likes