This is a proposal by the Treasury subDAO, specifically Solarcurve, Xeonus, Zekraken, and Luuk.
Motivation
With the recent approval by governance of veBAL, the Treasury subDAO has been tasked with sweeping collected protocol fees, converting them to bbaUSD, and sending them to veBAL lockers. The protocol fees will be split with 75% going to veBAL and 25% going to Balancer DAO. Treasury subDAO is best positioned to manage the investment of the DAO’s share of revenue.
All collected protocol fees up to the time of veBAL activation will go to Balancer DAO. Treasury subDAO will initiate a sweep of all collected protocol fees just before the launch of veBAL and invest them on behalf of the DAO. Going forward, protocol fees will be distributed to veBAL on a weekly basis. This process will be completely transparent - anyone interested in observing should reach out in #treasury in discord.
The needs of Balancer DAO will change over time so the methodology we will use to invest the DAO’s share of revenue will also change. The main pillars of the initial framework around how protocol fees are invested are:
- Reduce selling pressure on BAL as a result of DAO operations
- Use protocol fees to accumulate stables to use for compensation/budget requirements, rather than using BAL that guaranteed gets sold.
- Ensure operational runway for the DAO in any market conditions
- Building a base of stables helps to ensure the DAO can continue to operate in an extended downturn for BAL price
- Maximize the risk-adjusted yield for all DAO assets
- USDC is less risky than FEI but earns a lower yield for example. Generally, we plan to be more risk-averse than yield-seeking.
- Build Protocol Owned Liquidity (POL)
- bbaUSD is an example of a low risk stable product that earns a guaranteed yield and helps Balancer by increasing TVL, volume, and fees. POL creates a tailwind behind the growth of Balancer’s key metrics and we plan to stack diversified POL as much as we reasonably can.
Risks
- Treasury subDAO goes rogue and sends swept fees to their personal wallets
- Mitigation: The DAO Multisig will sweep collected protocol fees to a gnosis safe with the Treasury subDAO signers (Solarcurve, Xeonus, Luuk, Zekraken). Transactions will require three out of four signatures to execute. The process of converting fees to stables will take place during our weekly meeting and is open to the public to observe.
Specification
In order to account for gas costs and the time investment of Treasury subDAO signers, collected protocol fees will only be “swept” if the token balance exceeds $10k on Ethereum and $5k on Polygon & Arbitrum.
The process for sweeping fees and sending to veBAL will be as follows:
- Governance multisig on each chain will initiate a transaction to sweep collected fees meeting the above criteria to a gnosis safe controlled by Treasury subDAO
- Treasury subDAO will sell assets to stablecoins for veBAL and trade as necessary based on how the DAO plans to invest their portion
- Treasury subDAO will bridge stablecoins for veBAL back to mainnet. The DAO’s share may or may not be bridged to mainnet.
- Treasury subDAO will send bbaUSD to the veBAL distribution contract and send the DAO’s share to the DAO Multisig. Treasury subDAO will not custody DAO funds after this process is completed.
To be clear, a “Yes” vote would give the power to invest the DAO’s share of protocol fees to the Treasury subDAO at their discretion (trading assets, providing liquidity, etc). A “No” vote would mean the DAO’s share of protocol fees will simply be swept into the Treasury Multisig on each chain in whatever asset they happen to be in.
No matter the outcome, Treasury subDAO will still be sweeping protocol fees and converting 75% to bbaUSD to pay out to veBAL until an automated solution is put in place.