Proposal for Treasury Stables Rebalance (sDAI → USDC/USDT)
(1) Introduction and Objective
K9 Finance DAO proposes rebalancing our stablecoins under the existing approved treasury management proposal. Shima and Turtle have identified major changes around MakerDAO and the DAI product that increase the risk of holding DAI as a stablecoin. sDAI has outperformed both USDT and USDC but not at a high enough rate to warrant any additional risk.
In order to de-risk holding DAI during significant changes from Maker, the management council suggests swapping all of our sDAI holdings to Aave Ethereum USDC.
There is an additional $100k of USDT in the treasury that is not yet allocated from the previous treasury management proposal that was passed via Snapshot. This $100k will also be allocated to Aave Ethereum USDC.
This additional $100k still may be moved to higher beta opportunities but currently do not think the opportunity cost in waiting makes sense vs. placing into this pool.
(2) Benefits to K9 Finance Community
This proposal offers several advantages to the K9 Finance community:
Risk Mitigation: By moving away from sDAI and into USDC on Aave Ethereum, the DAO significantly reduces exposure to the uncertainties surrounding the DAI ecosystem and MakerDAO. This ensures a more stable foundation for the treasury, aligned with the community’s risk tolerance.
Capital Preservation: Allocating treasury assets to USDC, a widely recognized and audited stablecoin, safeguards the DAO’s capital while still offering opportunities for yield generation within the Aave ecosystem.
Operational Flexibility: Maintaining an additional $100k in USDC allows the DAO to remain agile, ready to seize higher beta opportunities when they arise without sacrificing stability in the interim.
(3) Proposal Details
(a) WHAT
The DAO proposes the following actions:
sDAI Rebalance: Swap all existing sDAI holdings to USDC within the Aave Ethereum pool. This move will de-risk the treasury by shifting from a stablecoin with increasing risk factors to one with a more secure and established profile.
USDT Allocation: Allocate the uncommitted $100k of USDT in the treasury to the same Aave Ethereum USDC pool. This allocation will ensure that the treasury earns a yield on these funds while avoiding the risks associated with holding them in USDT during this period of uncertainty.
(b) WHO
The stakeholders impacted by this proposal include:
K9 Finance DAO Members: All DAO members will benefit from the reduced risk and improved stability of the treasury. This proposal aims to protect the collective assets of the community.
Management Council: The council will oversee the rebalancing process and ensure that the transition of assets from sDAI to USDC is carried out efficiently and securely.
Treasury Managers: The individuals responsible for executing the swaps and reallocating the treasury funds will play a crucial role in implementing this proposal.
(c) WHERE
The rebalancing will occur within the following platforms:
Aave Ethereum: The USDC and USDT funds will be allocated within the Aave Ethereum pool, where they can earn yield with minimized risk.
MakerDAO: The DAO will exit its position in sDAI, thus removing exposure to the MakerDAO ecosystem and the risks identified.
(d) WHEN
The proposed timeline for this rebalancing is as follows:
Immediate Action: Upon approval of this proposal, the management council will initiate the swap of sDAI to USDC and allocate the $100k of USDT to USDC within Aave Ethereum.
Monitoring Period: Post-rebalancing, the treasury managers will monitor the performance of the allocated funds and report back to the community on a regular basis, ensuring transparency and allowing for adjustments if needed.
Future Reallocation: The $100k in USDC will remain flexible for reallocation to higher beta opportunities as they arise. The management council will review potential opportunities and bring any proposals for reallocation to the community for approval.
(e) HOW
The resources required for this proposal include:
Treasury Management Tools: Utilizing the existing infrastructure within Aave and other DeFi platforms to execute the swaps and manage the funds.
Technical Support: Skilled treasury managers and smart contract users to ensure the swaps are carried out efficiently, minimizing slippage and optimizing returns.
Community Feedback: Ongoing input from the K9 Finance community to ensure that the rebalancing strategy remains aligned with the collective goals and risk tolerance of the DAO.
(4) Impact Assessment
The potential impact of this proposal on the K9 Finance DAO ecosystem is significant:
Short-Term: The immediate shift from sDAI to USDC will reduce the risk profile of the treasury, ensuring that the DAO’s assets are better protected against market volatility and uncertainties surrounding MakerDAO.
Long-Term: By reallocating funds into a more stable and predictable asset (USDC), the DAO positions itself for sustained growth, with the ability to pivot into higher return opportunities as they arise.
Risks and Uncertainties: The primary risk lies in the potential opportunity cost of not holding sDAI if MakerDAO stabilizes and sDAI outperforms. However, this risk is mitigated by the need to prioritize capital preservation and the current uncertain outlook for DAI.
Metrics for Success:
Stability of Treasury: The primary metric will be the stability and security of the treasury post-rebalance, with a focus on maintaining or improving yield without taking on additional risk.
Community Satisfaction: Positive feedback from the community regarding the reduced risk and increased transparency of the treasury management process.
Flexibility for Future Opportunities: The successful allocation of $100k into a liquid and stable asset, allowing for quick reallocation into higher return opportunities as they arise.
I’m all for stabilizing our Treasury and decreasing risk, while still receiving a return. Adding another $100K into the mix could increase our returns as well.
I appreciate the transparency and being proactive rather than reactive. Great initiative!
Response to the Treasury Stables Rebalance Proposal (sDAI → USDC/USDT)
Introduction
Thank you for presenting the proposal to rebalance K9 Finance DAO’s treasury from sDAI to USDC and USDT within the Aave Ethereum ecosystem. This proposal is timely and addresses key concerns regarding the stability and security of our treasury assets. I appreciate the thorough analysis provided by the management council, particularly regarding the risks associated with holding DAI in light of recent developments within MakerDAO. Below is a detailed response that acknowledges the proposal’s merits while also considering potential implications and additional insights.
Acknowledgment of Benefits
Risk Mitigation: The decision to move away from sDAI, especially in the current climate of uncertainty surrounding MakerDAO, is prudent. USDC is a more stable and widely accepted stablecoin, which aligns well with our community’s risk tolerance. This proactive approach will help protect our treasury against potential downturns that could arise from holding sDAI.
Capital Preservation: Transitioning to USDC allows the DAO to preserve capital while still engaging in yield-generating opportunities within the Aave ecosystem. This is a strategic move that not only secures our assets but also positions us for growth through interest accumulation.
Operational Flexibility: The allocation of an additional $100k in USDC provides the DAO with liquidity and flexibility for future investments. This readiness to engage in higher beta opportunities is crucial for long-term growth and adaptability.
Proposal Details
Clarity on Actions
sDAI to USDC Swap: The proposed action to swap all existing sDAI holdings for USDC is clear and aligns with the objective of reducing risk. I fully support this action.
USDT Allocation: Allocating the uncommitted $100k of USDT to the Aave Ethereum USDC pool also makes sense. This ensures that the treasury continues to be productive and earns yield while maintaining a stable asset profile.
Stakeholder Considerations
K9 Finance DAO Members: It is essential to ensure that all members are well-informed about the benefits and risks associated with this move. Engagement and communication with the community will help in building trust and transparency throughout the rebalancing process.
Management Council: I commend the council for taking the initiative to oversee this transition. It is crucial that they maintain open lines of communication with both treasury managers and the broader community to ensure everyone is aligned and aware of the developments.
Implementation Timeline
The proposed timeline appears reasonable; however, I would suggest incorporating a clear communication plan for the community to keep members updated on the progress post-approval. Regular updates will enhance transparency and encourage community engagement.
Resources Required
Treasury Management Tools: It would be beneficial to outline any specific tools or protocols that will be used for the swaps and fund management. Ensuring that we are using best practices in DeFi will help minimize risks associated with slippage and execution.
Technical Support: Identifying the key technical personnel responsible for executing these swaps will be vital. Having a well-defined team can help streamline the process and ensure accountability.
Impact Assessment
Short-Term Impact
I agree that the immediate shift from sDAI to USDC will significantly reduce the risk profile of our treasury. This is a crucial step in safeguarding our assets and ensuring operational stability in the face of volatility.
Long-Term Vision
The long-term benefits of reallocating funds into a more stable asset are clear. This strategy not only positions us for sustained growth but also allows for potential strategic pivots as new opportunities present themselves.
Risks and Uncertainties
While the primary risk of opportunity cost is acknowledged, it is essential to weigh this against the current landscape of uncertainty surrounding DAI. The decision to prioritize capital preservation is justified, especially given the unpredictable nature of the crypto market.
Metrics for Success
The proposed metrics for success are well-defined. However, I would recommend including specific quantitative goals regarding yield performance and community engagement metrics. This could involve tracking the yield generated by the USDC allocation and assessing community sentiment through surveys or feedback mechanisms.
Conclusion
In conclusion, I fully support the proposal to rebalance our treasury from sDAI to USDC and allocate the additional $100k of USDT to the Aave Ethereum USDC pool. The benefits of risk mitigation, capital preservation, and operational flexibility align well with our community’s objectives. I encourage the management council to move forward with this proposal while ensuring ongoing communication and transparency with the K9 Finance community. Together, we can navigate this evolving landscape and position ourselves for future success.
Thank you for your efforts in managing our treasury effectively, and I look forward to seeing the positive impacts of this proposal.
I fear that anything USD related on the blockchain ultimately will end up back in the control of the Federal Reserve. I believe we should seek a different approach to our holdings. I dont know what but it cannot be anything USD blockchain related. No matter how much “Easier” it is to convert “USD*” to ETH. Maybe we ought to look at the other exchanges available to us. Might be harder to manage, and could become a financial and logistical nightmare, but it may prove to be a much better move migrating from one “USD*” to another, amid political discourse.
*** UDS* means anything USD on the blockchain such as USDT USDC USDEU USDUK and so on and so forth.
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