HIP 003 - HumanDAO Treasury Management - DeFi Utilisation

Authors & Disclosure

Corey, Christopher Chase, Mona El Isa, Erin Koen

Corey and Christopher do not stand to make any personal financial gain from the below proposal. Mona and Erin work for Avantgarde Finance, a primary developer of Enzyme Finance, the decentralized asset management protocol on top of which the strategy this proposal lays out is largely built. Increased usage of the Enzyme protocol theoretically accrues value to the MLN token, in which Avantgarde, Mona, and Erin all hold positions.

Summary

This proposal aims to combine several strategies that will leverage the HDAO treasury to:

  1. Diversify the Humandao revenue streams through DeFi protocols, making us less reliant on P2E revenue streams
  2. Leverage our raised capital to grow funds for future development & investments
  3. Provide the HDAO treasury exposure to other ecosystem tokens through DeFi

A total of $1.5M USDC is being proposed for DeFi allocation, spread across 2 strategies to minimize risk factors such as smart contract hacks. Only strategies with low risk of liquidation will be selected and the main focus will be earning yield on our stablecoin balances.

Abstract

The main purpose of this proposal is to put the HumanDAO treasury funds to work and begin generating yield upon it. Currently the treasury has around $2.65 million in USDC, as this is not being utilized for yield generation, we are missing out on a considerably sized revenue stream. As this is treasury money, it is imperative that the DeFi protocols we utilize are as risk averse as possible. With this in mind, this proposal only scopes low risk strategies that pose low risk of liquidation.

The strategies suggested here are set up with a 1-2 year time frame in mind. However we want to remain flexible with our assets and will avoid any lengthy lock up periods where possible, especially ones which include speculation of assets appreciating in price. This will mean we will be able to pull our stablecoins from the protocols at any point in time, if we wish to reinvest them into other opportunities, such as new & emerging P2E games.

The $1.5 Million fund is planned to be split into 2 separate strategies. Those strategies will be managed using a gnosis safe in combination with enzyme protocol where it makes sense.You can see the value allocations below. A sub-treasury for this DeFi strategy will be created that will hold funds for strategy 2. In the future, it is proposed that everything will be run through an enzyme vault, as this provides security from the multi-sig as well as flexibility in terms of who can manage the assets. The multi pool strategy is proposed for now until Enzyme can handle investing in early-stage, less liquid assets (planned for next release).

DeFi Diversification (Treasury allocation broken into 2 strategies)

  • Strategy 1 - Enzyme secured DeFi strategy. Up to $1M (Curve, Convex & Yearn)
  • Strategy 2 - Non-enzyme hosted protocols / reserve fund for early-stage strategic projects and protocols. $500K

Strategy 1: Through Enzyme’s trader delegation and risk management features, this strategy allows a safe environment for the funds to be stored and managed with 24/7 oversight over reporting and performance. This pool will be used for DeFi farming, with rewards also being provided in the form of curve & convex tokens, which will open up the DAO’s treasury to the associated ecosystems.

Strategy 2: This strategy will be allocated towards DeFi projects which enzyme does not yet have access/integrations to until it’s next big release (Eve). This strategy will allow us to remain flexible in our approach and capture emerging opportunities within the DeFi space. Later in the year, we can aggregate all funds for maximum transparency towards our stakeholders.

Motivation & Rationale

The main causes of motivation for this proposal are two-fold.

  1. To carry out the DAO’s long term vision we need to diversify & build revenue streams. Utilizing DeFi is a big part of this process together with forging strategic partnerships.
  2. The main aim of this proposal is to enable long-term success of HDAO. HDAO has lofty goals and to achieve them we will need plenty of sustainable revenue streams, which DeFi utilization will help us achieve.

Below we have created an FAQ surrounding questions we have asked ourselves while building this proposal. We aim to address all the main concerns below.

Why were the 2 DeFi strategies chosen?

The main focus surrounding the DeFi strategy was to generate a low risk strategy that will create meaningful returns over a 1 - 2 year timeframe. Every protocol has associated risks, but we have attempted to negate these as much as possible by selecting established projects with high quality audits & proven track records. Everything we are planning to use has been extensively audited and stress tested.

How will you be managing the strategies within Enzyme?

Enzyme enables us to control a pool of funds as a mutli-sig with the added efficiency of being able to delegate trading/execution responsibility to a single person on the team with predefined constraints. This enables high efficiency but with protections in place that funds can’t be lost due to risk management policies which prevent excess slippage and/or trades in non-approved tokens/protocols.

We’ll mostly leverage the stablecoin yield bearing strategies through Enzyme’s curve & convex integrations to boost rewards. Other protocols are available should the investment strategy change. This will not only facilitate the management of assets, but it will provide full transparency and real-time reporting to our community of stakeholders who can verify the state of the treasury at all times in a user-friendly way.

Will your DeFi strategies see increased risk through a prolonged bear market?

The vast majority of the strategies will be built around stablecoin yield generating so volatile markets should have a very limited impact on our efforts. Limited to lower APY’s.

What risk levels will be taken on the 2 DeFi strategies?

Minimal risk has been the key focus on all areas. All protocols have smart contract risks associated which is why we are trying to subjugate this with audited and established projects that have been stress tested. Collateralized debt position strategies have not been scoped within this proposal and we are at little to no risk of being liquidated with any selected strategies.

What tokens and protocols are your farming priority?

Established stablecoins such as DAI, USDC & USDT together with protocols like AAVE, Curve & Convex. Coins like alUSD may be used in the 2nd strategy scope to unlock liquidity and generate further APY generating opportunities

What is enzyme?

Enzyme (formerly known as Melon) is the DeFi Operating System – enabling users to plug and play with dozens of protocols and hundreds of tokens. Enzyme vault smart contracts are highly configurable; among other things, vault owners can specify addresses that are allowed to deposit into the vault, addresses that are allowed to manage the assets inside a vault, and the DeFi protocols and assets with which those managers are allowed to interact. All transactions that occur within a vault (e.g. depositing USDC into a Curve pool and staking the resulting LP tokens) are visible on-chain and via the Enzyme app, meaning that stakeholders and DAO constituents have instant and perpetual visibility into the actions of a vault manager and their resulting profit and loss. Enzyme has been rigorously audited by top-tier firms (protocol/audits at v4 · enzymefinance/protocol · GitHub) and maintains a $400,000 bounty with Immunefi (Enzyme Finance Bug Bounties | Immunefi).

Budget

DeFi Diversification:
Strategy 1 (Enzyme Finance) = Up to $1,000,000 USD
Strategy 2 (DeFi 2.0 & reserve fund) = $500K USD

Poll

Do you approve the proposal?

  • Yes
  • No

0 voters

Copyright

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“Copyright and related rights waived via Creative Commons CC0 1

1 Like

Can we add a section about Enzyme Finance? It makes this proposal looks more solid.

1 Like

I think we should avoid putting any of our assets in USDT if possible.

2 Likes

Thanks for the feedback Joel, we’ve attached a section for enzyme at the bottom of the FAQ’s.

4 Likes

I second avoiding USDT.

Important Sources

Tether’s account of what’s backing USDT should be taken with a grain of salt. That’s because they simply posted a pie chart without oversight from any accounting or auditing firm

While Paxos and Circle do provide attestations of their reserves on a monthly basis, an attestation is not the same as an audit

An attestation is just when a third party verifies the information being shown to them. An audit is when a third party actually goes digging through all the paperwork to see what’s not being shown to them

This is the biggest difference between Paxos and its two contemporaries is that it is a regulated trust, and that’s why such a large percentage of Paxos’ reserves are made up of cash and cash equivalents

Even if all their cash equivalents are debts of some kind, they are a form of debt that can be quickly redeemed for dollars regardless of market conditions. This makes Paxos’ stablecoins the best.

Source: Coin Bureau

2 Likes