by 0x8b257b97c0e07e527b073b6513ba8ea659279b61 (Morph)
Asset diversification is a well founded strategy to not only build, but protect wealth long term.
As a DAO that is entirely MANA driven, we are in a unique position that we should always bet on ourselves and assume MANA is our safest and most valuable asset.
However, there is no yield associated, we rely entirely on the dependence of selling MANA, causing downward pressure in our economy. This is proving to not be enough, and as vesting runs out, we may find ourselves quickly depleting while also hurting the economy we’ve built.
The DAO would benefit greatly from yield that is:
1.) An integral part of our platform ecosystem (I.e. Eth/Matic).
2.) Provides some kind of other net benefit to DCL ecosystem
This proposal intends to mark out 5-10% of the DAO’s current funds, and place them into sensible, proven, on-chain, decentralized yield - no trading, it is a one time investment not intended to ever be sold. If successful, this can be scaled, and with overall growth of the industry, significantly reduce or even cover our monthly costs in $USD without selling MANA.
1.) Ethereum Validator Nodes - Portfolio Majority (50-75%)
Currently, Ethereum offers us a yield of ~3.5-6%, but more importantly, it offers that yield in Eth which is inherently deflationary alongside network usage. On top of this, the Matic/DCL ecosystem is built as a layer 2 system on top of Ethereum, one of the oldest and longest running smart contract chains that has successfully upgraded many times.
Recommended decentralized staking options:
2.) Mana/Matic & Mana/Eth LPs
Mana based LPs have an inherently good functionality that benefits the ecosystem by adding liquidity depth (as opposed to just selling MANA on the open market). They also earn a yield in both assets, giving us a way to earn back MANA and another native asset we can sell for income without affecting our economy negatively.
All of these assets are relatively correlated to the general market, while we may experience ups and downs in our USD price, the overall correlation to MANA should be relatively stable, preventing impermanent loss. This gives us stable, secure, on-chain yield that does not need to be touched, and the profits can be redistributed back into the DAOs treasury when needed.
Open to any other suggestion! I believe 1.) & 2.) are the most optimal in terms of R:R and should be the majority (due to their liquidity deepness & proven on chain yield), however, there is room for a micro-allocation (5-10%) towards other yield strategies that may be less proven but yield higher in terms of market exuberance.
This brings the next complication, how/when to diversify:
Selling MANA on the open market should not be done lightly, especially when it’s a larger portion of the portfolio.
For this reason, it is suggested we use an algorithmic decision to methodically diversify, removing user decision from the process. Here is the suggested conditions.
We will separate the investment (5-10%) into 1% ‘chunks’ (i.e. 5-10 total chunks), these bullets will be fired at the discretion of the multisig signers, across liquid DEX’s, when the following conditions are met:
- RSI above 70 on daily timeframe
- Above 200MA on daily timeframe
This combination is a great measurement of ‘market exuberance’, it is NOT a guarantee to sell at the highest point, but is a guarantee that we sell into times of unusual buy pressure. This ensures we do not Rug/dump our own token price or sell during a time of market despair, and also makes it likely we are selling into larger whale buyers and speculators, not retail buyers / DCL citizens.
For an example, within the last year this would have presented three ‘diversification events’ that would not only have yielded us income, but assisted with stability in recent turbulence.
I hope this draft proposal stirs some conversation around the unbalanced monthly income/expenses, and how we can reduce the constant sell pressure of MANA long term. If this strategy is proven to be successful, it is my hope that our treasury could not only grow but be as much as 50% diversified with proven, on chain yield that supports our ecosystem.
If one day, the DAO treasury runs dry, this may very well be the final bastion that keeps the lights on for the open source community. We must outlast beyond the vesting contract.
- Invest 5% of current treasury
- Invest 10% of current treasury
- Do not diversify treasury
- Invalid question/options