Treasury Update: Unlocked GNO Allocation

Recently, 9,051 GNO were made available to claim from the LGNO Contract. karpatkey has been investigating possible yield strategies to make a recommendation for the treasury.

Context

Following a successful Snapshot vote in January 2022, the BalancerDAO and the GnosisDAO agreed to conduct a token swap, resulting in the addition of 9,051 GNO to the DAO’s treasury. Although initially locked, the DAO is now free to utilize these tokens as it sees fit, given that the locking period expired on February 15th, 2023. While the incentives that led to the successful passage of the joint proposal remain unchanged, the BalancerDAO should continue to hold the GNO resulting from the token swap. However, since there are no restrictions on the use of these tokens, we believe that the BalancerDAO might benefit from deploying yield-generating strategies rather than allowing them to remain idle in the BalancerDAO’s multisig.

With the focus on growing the Balancer DAO treasury in a risk-minimized manner, possible strategies for GNO were researched and analyzed.

Available Options

Mainnet

Mainnet options are limited and would require suboptimal decisions to obtain sufficient yield. If the BalancerDAO chose this path, it would have to either incur a leveraged strategy by depositing GNO as collateral on MakerDAO and allocating the minted DAI on a stablecoin strategy or provide liquidity to a DEX pool (e.g. GNO-WETH). It should be noted that allocating funds to Balancer or any protocol within the ecosystem e.g. Aura is not a possible path since we want to avoid farming Balancer’s own incentives. Both alternatives offer suboptimal results given that the expected yield does not justify the risk.

Having discarded mainnet, the next logical step was to explore alternatives to allocate the GNO on its native chain.

Gnosis Chain

Providing liquidity to DEX pools or creating a leveraged position are undesirable strategies due to the same reasons as in mainnet. Staking emerges as the simplest alternative and offers an attractive APR, especially when compared to the mainnet options.

Considering that we are fast approaching Ethereum’s Shanghai + Capella upgrade (confirmed now for 4/12), the Gnosis Chain is ready to implement this important upgrade due to its Beacon Chain architecture with little delay with respect to Ethereum. Therefore, in a couple of months’ time at most, withdrawals will be available for staked GNO from the staking smart contract, making this strategy even more appealing.

In this context, StakeWise is the protocol that stands out to offer non-custodial staking possibilities in the Gnosis Chain. It’s worth noting that StakeWise is currently on the way to deploy its V3 on mainnet and its consequent deployment on Gnosis Chain can be expected a few weeks later.

Recommendation & Next Steps

For all of the above, the best option is to stake GNO using StakeWise on Gnosis Chain.

However, considering the upcoming Shanghai/Capella upgrades and the fact that StakeWise V3 will be deployed shortly, we believe that the most suitable course of action is waiting for both events to occur prior to moving forward.

In due time, karpatkey will post a proposal on the forum requesting that the GNO is transferred to the treasury Safe managed by karpatkey in order to move forward with the recommended strategy.

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