Growth of Treasury. ETH on Timelock [On behalf of AlphaGrowth]

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Growth of Treasury. ETH on Timelock

Objectives

Hi Compounders. One of the goals of AlphaGrowth is to make Compound Treasury grow. Recently, we came up with the brilliant idea of how to make it happen and I am glad to share and discuss it with you.

Proposal

Timelock currently holds 5,038 ETH, and the exchange rate is 3,150$, equivalent to 15,869,700$. Why not make them work and generate yield?

Case 1.

Choose some staking provider. I do not have any opinion about which one we should use, but I am sure that one that has authority and perfect security.

Note: as an example, I would use Lido

Currently, Lido suggests a 2.93% APR, which will generate 147.6782 ETH of yield in one year.

Case 2.

Choose several staking providers to diversify risks.

Case 3.

Swap ETH into USDT/USDC and invest that liquidity into Compound markets. Personally, I do not like this case but it has a chance to live. USDT/USDC will show a higher APR, but I suppose ETH is a more interesting asset to have in the treasury.

Additional ETH

After ETH PoW Updates post Compound Community multisig received Compound’s funds. I do not know if we can use these funds, but if yes, then it will be an additional yield. Currently, multi-sig holds 167 ETH, which is 526,050$

Math

ETH Yield

Timelock Multisig Total
Amount ETH 5038 ETH 167 ETH 5205 ETH
ETH In 1 Year 2.93% APR yield +147.6782 ETH +4.8952 ETH +152.5734 ETH
ETH in 1 Year 5185.6782 ETH 171.8952 ETH 5357.5734 ETH

USD Yield depending on ETH price in 1 Year

ETH Price in USD Timelock Multisig Total
1575$ 232,593.17 USD 7,709.94 USD 240,303.11 USD
2362.5$ 348,889.75 USD 11,564.91 USD 360,454.66 USD
3150$ - current price 465,186.33 USD 15,419.88 USD 480,606.21 USD
3937.5$ 581,482.91 USD 19,274.85 USD 600,757.76 USD
4725$ 697,779.50 USD 23,129.82 USD 720,909.32 USD
6300$ 930,372.66 USD 30,839.76 USD 961,212.42 USD

Why we should do it?

  1. Current funds are not sufficient
  2. Yield will grow the treasury
  3. Yield can cover costs for Compound service providers
  4. Yield can cover costs for users’ incentivization
  5. Compound will support Ethereum as the network (validators that will be created with Compound’s ETH)

Next steps

  1. Figure out if the community supports this idea.
  2. Figure out which provider we want to use. Maybe a snapshot is needed.
  3. Also, maybe the community knows the places (contracts) where ETH is just lying down and we can make it work.
  4. On-chain proposal
1 Like
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Hi @dmitriywoofsoftware - Thanks for initiating the conversation. I definitely agree there are missing opportunities to be generating yield for the Compound treasury with these funds sitting in the Timelock and Pause Guardian multi-sig that currently sit idle.

I’d suggest setting up a new Aera Vault with Gauntlet as the curator to explore a yield-bearing strategy, potentially using through staked Ether or depositing it into the WETH Comet market. I’ll note that OpenZeppelin has already conducted a Staking Risk Analysis for Arbitrum as part of their Research & Development Collective that would also be relevant for consideration here.

I’d love to hear additional thoughts from @Gauntlet and other community members on the best yield strategies to pursue here.

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Agree that we certainly should be using our ETH in a productive yielding way. The idea @cylon suggested with a Gauntlet vault is logical to us and if fleshed out a bit more, we would be in support.

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I don’t have a strong opinion on the staking of ETH in the Timelock other than a slight preference for RocketPool over Lido. To me at least, RP seems more aligned philosophically with Compound. (Disclosure: I run an RP node and therefore also hold some RPL as bond).

I would recommend not staking the smaller ETH pool recovered from the ETHPoW fork market. The community has identified several potential near-term uses for this ETH:

  • 10% bounty to @arr00
  • possible in-kind reimbursement of certain ETH expenses of DAO contributors
  • possible return of a portion of this ETH to depositors whose ETHPoW was under threat on the ETHPoW chain before arr00’s intervention

It’s not clear that the effort and gas costs of staking/unstaking the multisig ETH would be worth it if the DAO decides to use some of this ETH for the purposes above in the short term. Specifically, if some of this ETH needed to be unstaked for use in a high-gas environment, it’s conceivable that the gas to unstake might exceed the yield.

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I also want to highlight an opportunity to supply staked ETH tokens to one of the Compound markets.