Hi Uni Fam,
As crypto winter sets in it’s important to discuss how we plan to manage our DAO treasury. In short, we plan to passively deploy assets to earn low risk yield. This will grow our treasury value with an eye towards supporting and maintaining the CU Ecosystem indefinitely.
Upfront, we plan to establish a sister Gnosis Safe on ETH Mainnet. While we are huge supporters of Polygon, it is important to acknowledge that it is still a sidechain and there are security tradeoffs that come with that.
In an effort to not put all of our eggs in one basket we’ve focused on yield strategies available on ETH Mainnet. Based on our research we have outlined the following strategies and would like feedback from the community prior to implementation.
wETH Holdings -
- Bridge 2000 wETH to ETH Mainnet Gnosis Safe.
- Convert ~1000 wETH to stETH
- Deploy wETH and stETH to Curve.
- Stake Curve LP Tokens in Convex.
Yield ~ 7%
- Earned CRV and CVX Rewards will be re-staked in Convex.
Above we focus on compounding our CRV/CVX rewards via Convex and selling LDO for ETH. Rewards from staking earned CRV/CVX will be sold for ETH.
Given we don’t plan to touch our ETH holdings for 2–3 years we feel there’s a unique opportunity to deploy these reserves to earn more ETH. We can even take advantage of the delta between stETH and ETH on Curve right now to effectively purchase stETH at a ~4% discount. We expect a protracted bear market through 2023 and this strategy allows us to build up our ETH holdings with a multi-year outlook.
USDC Holdings -
- Bridge $15M USDC to ETH Mainnet Gnosis Safe.
- Enter Balancer Boosted Pool
Yield ~ 10%
a. Stablecoin Fees
- Purchase veBAL with Rewards
- Stake veBAL
- Vote with veBAL to direct gauge weight to RBW/wETH pool.
Harvest BAL rewards from staking veBAL and LP position in RBW/wETH pool.
a. 70% of BAL will be sold for USDC.
b. 30% of BAL will be sold for veBAL to maintain voting weight.
With this strategy we have two primary focuses. The first is to harvest BAL from veBAL selling it for USDC. The second order strategy here is to drive additional rewards to the RBW/wETH pool as an extra incentive for stakers. This begins our first step into the Balancer Wars!
Anyone familiar with the Curve wars will see a similar strategy above. Based on our modeling we think a modest purchase of BAL (ie. $500k) coupled with the rewards from the Boosted Balancer Pool will allow us to provide additional BAL rewards to LPs in our wETH / RBW pool. We anticipate these rewards to be at least 10% APR on top of the existing RBW rewards. This could go much higher if the value of BAL increases. In addition, the yield collected by the Treasury’s LP position in the pool will be sold for USDC. The opportunity to be an early participant in the Balancer Wars during a bear market could prove very fruitful.
Given our multi-year time horizon, it is our belief that a focus on earning yield via proven protocols (Curve, Convex, Balancer) gives us the optimal risk / reward profile. We look forward to engaging with our community and putting our treasury to work in the coming weeks!
— The Laguna Games Team
Further Reading -
- Balancer Docs on Boosted Pools
- Target Boosted Pool
- The Mechanics of stETH
- Providing stETH Liquidity via Curve