by 0x8b257b97c0e07e527b073b6513ba8ea659279b61 (Morph)
Proposal:
Convert up to 50% (170 Ethereum) of the current eth held by the DAO (340) to Eocketpool rEth in order to secure a ~3-4% native yield.
Reasoning:
As we have covered in previous proposals, liquid pooled staking of Ethereum can be a decentralized, permissionless, and passive method of earning more Ethereum into the treasury of the DAO. A core critique of which, was that the execution and conversion of Mana would be a risky and speculative decision. Thanks to the recent Eth received into our treasury, we have a chance to revisit this without the downside of converting Mana.
On Smart Contract Risk:
Smart contract risk is not zero - However rocket pool has been thoroughly battle tested as a permissionless way to achieve pooled staking. As a decentralized metaverse, we should seek to enable ourselves through equally decentralized protocols. For this reason, I believe the lowest risk possible is to avoid other pooled staking solutions even as a hedge. While useful, we cannot risk that they are not locked as a permissionless smart contract or have custodian aspects (i.e. Lido/stEth)
The current multi-sig signers should feel comfortable with a one-time conversion to rEth, as this does not require any price action timing, since rEth merely represents the current Ethereum available to be un-staked. This can be done via the Rocketpool website (https://stake.rocketpool.net/). The multi-sig signers themselves should feel free to address this directly if necessary or if it is considered not a feasible request of their duties.
Closing Thoughts:
Permissionless pooled Ethereum staking is a stable and innovative way of earning low-risk yield on our treasury’s Ethereum, the compounding effect may be the difference between us having a significant Ethereum treasury or not, all without selling a single token of mana.
Will there be any safeguards that will be introduced in the subsequent proposal in case of an attack/hack/vulnerability discovered on reth, for e.g if the rETH/wETH ratio breaches a certain threshold.
It would be wise to have one just in case. Otherwise it’ll take 3 props in order to act and due to the nature of how fast such vulnerability can devolve, we might lose a lot our ETH should there be any of such events happening.
What is your risk assessment of the downsides to staking on rocketpool specifically.
morph was on the CBD twitter space earlier, and talked about this proposal, and how the ETH in question came from opensea. barring some clarification that explains otherwise, this sounds like a lump sum freebie, and this is a more responsible use of funds than any “onboarding” grant. voting 50% for now but open to other opinions which may make me change my mind.
From a safeguard perspective, it really makes the most sense to lean in - the compounding rewards are what makes this strategy so appealing, and while the contract risk is not zero, it is also very small given the permissionless nature of the protocol.
I would encourage all to check out Consensys’s audits of Rocketpool from 2021 for much more detailed information: Rocketpool | Consensys Diligence
On top of this, there have been multiple open source efforts to review and ensure rocketpool’s contract security, and a healthy active bug bounty system: Audits | Rocket Pool Community Site
Depending on inflation rate, and given that real inflation of eth is negative - we would likely see a return of 100% in around ~14 years in Eth.
This compounding effect here is nothing to scoff at, and given the audits, I believe the smart contract risk is minimal.
While we may need to use these funds or the income they generate eventually, leaving it alone for 50 years would generate the treasury over 2,000 eth.
Edit: I think we can do both, it will pay for us to at least have a diversification strategy here so that we can compare and assess how these changes impacts our treasury long term.
I like having some of the treasury put to work, and I think using Lido’s or Rocketpool’s liquid staking pools is safe enough, but I tend to lean towards HP’s point that increasing the liquidity of MANA is paramount vs the gains that can result from this position. Being that said, I like that more ideas to put the treasury to work are being considered (rather than throwing everything at random grants), and I think it’s wise to start slow with any initiative, so maybe starting with some ETH provided as liquidity and some other into staking pools is a nice way to start dipping our toes and testing the execution of this. Eventually if the LP’ing works out well we can vote to move the ETH over there to deepen the pools. Im voting yes on this.
I want to agree with this proposal for converting ETH from Treasury to rETH.
I voted invalid question because I believe the DAO has decided not to diversify its Treasury but it seems like this proposal wants to invest to Rocketpool’s ETH (rETH) using Treasury’s ETH.
According to this proposal’s Reasoning section, the Treasury received ETH. This ETH gave the Treasury some assurance that the DAO has some sort of value once MANA token declined significantly (we call it diversifier) (highlights FTX case on FTT as treasury reserves). In my perspective, ETH as a diversifier is better than rETH with heightened risks (but also rewards).
I will repeat my stance that the DAO should invest/participate on Ethereum PoS network but must still think of Treasury composition. The little ETH that the DAO had should not be risked to liquid staking and must remain in the Treasury wallet. There are non-custodial staking solutions for Ethereum network without converting ETH to rETH / etc… Those staked ETH will still be visible on the treasury wallet under the Beacon Chain tab.
If there is a solid method to perform non-custodial staking we can certainly look into it, however from what I have seen the overall method would still require us to centralize node infrastructure/hardware or utilize a relatively expensive third party host like AWS making oversight costs larger than the smart contract risk potential we would take on from rocket pool itself.
rEth seems to be the greatest risk/reward of the pooled staking options specifically for DAOs as highlighted by the Ethereum foundation - Can you expand on how we would achieve your suggestion as a DAO alongside costs and risks associated?
I’m open to modifying the proposal on how to achieve this, but simply pointing out multi-sig beacon deposits is not enough for us to take action and actually improve the ecosystem - the Eth sitting idle does not help us further the DAO.
Absolutely, liquidity pool health is incredible important and should be our #1 concern.
I believe these two suggestions work great in parallel, hence why I have voted to use up to 50% for each. This can be a long term approach, but ideally should Mana continue to trend downwards, we will be able to earn more Eth via this proposal that would ensure the liquidity source could be replenished should it need to.
No need to take action.
Just a defeatist fish passing by the Governance Forum.
The question is still invalid to me.
You have to ask first whether the DAO wants to spend ETH for rETH, rather than convert up to something even though there is 0% in the choices.
Surely, this will hasten the process as the previous proposal to diversify, was rejected. That’s how to win, similar to Hire Lordlike as a DAO worker proposal.
Just my thoughts. Kindly ignore this post.
Please see my comment in regards to both financial proposals and a vote change here:
Liquid pooled staking is a newer contract technology than liquidity pools - while my own confidence is strong, in order to be as objective as possible based on the feedback, I believe we should start and prove out this objective using 10% of the available Eth (34). We must get consensus in order to ensure these proposals are a success in their second stage.
As this strategy, and the security of liquid staking grows, we can reevaluate based on our objective returns and experience. If safer or upgraded self-custody liquid staking becomes a reality, we can migrate or upgrade our portfolio based on technical risk management, however I do believe that what has been brought in this proposal is absolutely the safest first step towards self sustainability.
Most importantly, I believe that both the LP and the Eth staking is crucial in conjunction, and that a 2.5:1 (25%/10%) ratio is a well balanced proof of concept we can grow long term.
Considering Community feedback, I’ve decided to change my vote to a lower percentage for the test. I also agree with Morph that a strong consensus is needed on this.
Hi! It is very intreseting to see this kind of proposals from the DAO. Why have you chosen Rocket Pool as the only LSD to hold? Wouldn’t be safer to have a bascket of different LSDs to mitigate risks? Also, maybe contribute to the network decentralization by holding “small” market cap LSDs (as opposed to Lido)
Hi there, as shown in the summary above Rocket pool is the only liquid staking option that aligns with our non-custodial and trustless values. Splitting this across multiple pools would increase our risk spread and make future reviews/movement/assessment difficult.
Is it wise to put that much into one location? I am all for the diversifying and investing but I am concerned that half of what the DAO has in one location is not wise. Regardless of current and past performance, I utilizing at minimum 2 defy options would be better. I am not that finiancially savy but the way things are i think more is better. Im voting yes but would like to see either half that being used or at least multiple platforms an spreaing it out. Thank you.
