There have been a couple of comments here and there about “when the DAO runs out of funds” and I’m like, “huh?” If the DAO isn’t already the biggest holder of APE-ETH UniV3 tokens in the world, there’s a huge problem to consider. Why aren’t we actually using crypto to build crypto?
Yield farming and staking have the ability to fund all proposals the DAO passes. The DAO does not have to spend its core capital on those things.
Added benefits: The lockup protects the $APE price. Others see the investment and follow in, especially if the DAO makes an announcement that the money will stay there. It can be locked in contract as well for added gravitas.
I understand there may be an issue about holding $ETH on the balance sheet? If so, this issue should be worked out and not ignored, because solving it leads to a brand new level of stability for DAO funds.
In my eyes, and lawyers should comment, the DAO is not receiving profit from yield if it turns that yield directly back over into proposals.
Comments, thoughts? If this gets enough positive feedback, I’ll present it as a proposal.
This is a good idea. I’m not a professional on the compliance part, but on the asset management side, putting funds into uniV3 LP could be a good choice. I just checked the data of ape-eth on uniswap. TVL is not high (below 6M) may be due to the recent market drop. I roughly calculated the ROI and it’s over 100% annually (based on the current price). The return seems satisfactory but we still need more in-depth calculations and IL is not included yet. We will also need tools/platforms to actively manage it and make sure the LP is within the price range.
More importantly, I’d love to hear others’ thoughts on the legal side.
The return seems satisfactory but we still need more in-depth calculations and IL is not included yet.
Please don’t overthink the IL part. The DAO denominates itself in $APE, not the dollar, and if you’re keeping the pool no matter what, then IL is a myth. You can’t lose if you don’t ever plan to take it out.
I agree on the tools part; it would be easier to automate grabbing the yield, although if you’re just pooling and leaving it, this isn’t really a huge deal, either. This could be done manually.
The holding $ETH on the balance sheet part is the real holdup on this. Can it be done or is it a problem? @river@Pearson
The pair is ape-eth so the IL will be ape/eth as well even if not considering the dollar amount. We still need to think about IL because uniV3 IL could be high and drain the fee return. The easiest way will be putting it into uniV2 LP or setting a super wide range in uniV3 if we don’t want to actively manage it. But I think concentrating the liquidity on uniV3 benefits the community better.
Doesn’t matter what IL is if you’re locking until the next bull market.
Plus $APE is reflexive on $ETH, not the other way around. If you get a big dump, naked $APE loses more fiat value than an APE/ETH pool. There is no bear scenario in which holding $APE turns out better than taking real time yield off an APE/ETH pool.
People overthink IL and it’s not a concern if you have runway and scale. You just wait until the next bull market and collect the dang yield on the way and give that yield to projects and #BUIDL.!!
Agreed, UniV3 with a wide range is best because we’re not trying to be a defi DAO. We’re just trying to take advantage of the free money.
I agree with you, and this is something I’ve been thinking about since my first ApeCoin improvement proposal.
The only real issue here (besides “the DAO cannot accept profits” narrative) is we need to carefully consider the price impact on APE when diversifying the treasury. Mantis, I know you and I have no issues here and have the risk appetite to do this, it just needs to be done in a very transparent way.
Maybe an APE bonding mechanism where users with ETH can buy APE from the DAO at a discount, with the condition that the purchased APE is locked & staked for say, 4 weeks or so. This would allow the DAO to earn ETH which it can use for further initiatives like adding liquidity to the APE/ETH pair.
So this does all come back to “how do we set up the DAO to receive profits/funds?” It could be as simple as someone just… Doing it. Write the contracts, get a grant request from the DAO, when we have APE & ETH add to liquidity and periodically draw fee revenue in APE to throw back at the staking contracts.
As for managing the LP position and maintaining the range, we can utilize Arakis (formerly Gelato) to put it on autopilot, or we can set up a Treasury Management working group.
Maybe an APE bonding mechanism where users with ETH can buy APE from the DAO at a discount, with the condition that the purchased APE is locked & staked for say, 4 weeks or so.
I love this. The old original $OHM mechanism, just not with a 23059024% APY… This seems to be the missing piece about how to legally get ETH on the books.
to throw back at the staking contracts.
Or if that’s not allowed, it goes straight into a project.
or we can set up a Treasury Management working group.
You mean one guy hitting the “claim” button twice a week? I’ll volunteer. And due to the stress of the position, I’ll require a 2500 $APE/month salary.
This idea is worth a proposal, I believe. Any holes anyone sees in this setup?
Hey Mantis, AIP-133 talks about this and I make the argument that:
“If the DAO isn’t going to be providing DEX liquidity to Apecoin, then the folks who are building projects that the DAO will want to have around for years to come, should”.
This is why my funding proposal included this. This is probably the right method going forward which is why I included this in my proposal. Funding mechanisms like this should only be considered for projects that have already proven themselves in some way (and I’d argue that Boring Security has). We operate as a public good, and being in fundraising mode all the time takes us away from our mission. I didn’t want to get into that mindset of always trying to raise money, and instead just focus on the mission!
I consider you a leader in this space and I think many others would agree. I also agree with your statement here, and I’m wondering if there is a way/reason/time for Boring Security to provide some sort of SAAS to other AIP authors who receive sizable grants. LP management is, of course, an ongoing commitment. That may be outside the scope of Boring Security, but I think that helping authors to create secure LP positions may land right into your wheelhouse. I would appreciate your teams continued involvement and guidance with any discussions about this topic.
This could be a good solution to the DAO’s inability to hold eth or LP assets. The question here will be, should each project ask for some LP assets to sustain? This might be too dispersive and would add more risks. Or we could put all liquidity into one project but that may sound unfair to other projects. But I think this could be the right path to explore.
If the DAO gives APE-ETH, they might be screwed for having to hold ETH to create the pool. Perhaps projects can request a set aside of APE that is to be turned into APE-ETH and locked through Unicrypt. The project can receive yield to fund itself while the pool is safely locked.
I think it should be rare enough that we don’t need to build a framework around it, but I would be happy to provide consulting for any project we deem worthy enough to get there. I kind of view grantee lifecycle in this light:
First request funds to do a Proof of Concept (small amount)
Project comes back proven, asking for a larger amount or potentially a perpetual amount.
The holy grail of awards should be this perpetual funding amount, reserved for public goods and 100% apecoin aligned and invested projects. In those rare cases where perpetual funding models make sense, to some degree it is a little bit zero sum, so we should be wary about giving those awards out like candy.
However, we would 100% be on board to work with those projects in providing not only good liquidity positions, but to even have ours be synergistic with them in an overall risk-adjusted strategy.
If these funding models are created I think the guidelines should be the above, as well as multi-sig and some other factors as a prerequisite. Happy to draft up something quick. The only problem with having it be a thing that people vote on, is that it might attract a lot of people to try and do that model, which can be dilutive. Like I said though, happy to help provide the DAO with guidance on rules to set in place on perpetual funding requests with strategies on UNIv3.
This could be a good way to implement. We should set some criteria for projects asking for providing the LP. A proof of concept makes a lot of sense here.
I’ll volunteer. And due to the stress of the position, I’ll require a 2500 $APE/month salary.
