Finance Nest Community Updates - A Thread

Finance Accountability
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Finance Nest March Update

F.Nest Members: @ElliottWatts @prairiefi @Ahuja @Hammad1412 @Matthew_Graham

General Update

During March, Finance Nest had a productive month. We released a new process for streamlining third party payments whilst supporting the ongoing launch of products and publishing the financial reporting content leading into the end of Q1 2022.

The new third party payment process consolidates weekly payments into a single distribution and enables those members of the community to know when partners will be paid. Further to this, Finance Nest is also exploring getting an Index Coop credit card via an intermediary. This will enable Index Coop to support direct debit like payments which will reduce the overall number of expense claims going forward as we seek to eliminate personal payments being made by contributors on behalf of Index Coop.

Stablecoin Runway Update

At the end of March, the Index Coop’s actual total spend for the month was $576,523.86 which is significantly less than the forecast total spend of $728,070.45. With a 0.69% increase in spend during March to February, Finance Nest views this variation as minor and highlights the variation between budgeted and actual spend has been consistent over the last two months.

Finance Nest will be preparing recommendations for the Council as part of the mid season review, that reflects the budget v actual learnings to date in effort to realign forward looking budget spend for the remainder of Season 1.

The USDC spend was down from $315K in February to $268K in March. This is largely due to contributors now being able to participate in receiving their monthly wage in the form of icETH. Of the $268K USDC spent in March, $235K was attributed to contributor rewards and this represents a reduction from $265K during February. During April contributors will be able to participate in a pre-sale of JPG.

During March $3,040,314 of USDC was transferred from the main treasury with $1,320,417 and $1,719,897 going to the Operations and Investment Account respectively. With the Operations Account holding around $1.6M unproductively, this alone is equivalent to 6 months runway based on March’s USDC burn rate which is more than enough for Season 1.

Across all Accounts, Finance Nest believes Index Coop to have around 33 months of runway using March’s spend rate. ($2M Operations Account, $6.7M Investment Account). Please note this excludes all revenue generated by Index Coop and overlooks the annualised >$700K of revenue generated from the Investment Account.

Investment Strategy Update

In preparation for launching LAYER1 on Balancer information now public, the use case for the BAL tokens being earned across both the Operations and Investment Account can be discussed more openly. The Operations and Investment Account holds a combined $4.4M Balancer Boosted Pool position (USDC, DAI, USDT) position. The strategy provides diversification away from the centrally controlled USDC and the yield was around 10.5% at month’s end without any boost. The pool has over $370M in TVL and is a strategic pool for Balancer. When Balancer V2 launched, Balancer offered the largest known bounty in the industry’s history and around 80% of the LTV in the Boosted Pool is actually deposited in Aave via Linear pools.

The BAL tokens are intended to be used to support growing Index Coop’s TVL. This is achieved by depositing the BAL into Balancer or Aura’s ve of vl contracts and then used to vote BAL and/or AURA token yield to Index Coop’s INDEX/product pools. Examples include LAYER1, an icETH Boosted yield pool or INDEX/ETH pool. This strategy is as much a growth strategy as it is an income generating strategy. Deploying Index Coop’s stables to earn yield is viewed very positively by the Balancer team and has been great for building goodwill. When other DAOs are doing token swaps for BAL or considering market acquisitions, Index Coop is farming and looking to build on top of Balancer.

In the coming weeks, Index Coop Business Development team may request Strategic Partner status and Finance Nest may request permission to interact with the veBAL contract from the Balancer Community or opt to deposit into the Aura contract when the protocol launches. The goodwill built through deploying assets and building the LAYER1 product on Balancer V2 puts Index Coop in good stead to attain BAL rewards from the Liquidity Mining committee gauge. This gauge is administered by an internal team at Balancer. A fantastic outcome would be for Index Coop to receive a long period of AURA and/or BAL rewards which would represent a huge cost savings for Index Coop.

We expect the Liquidity Mining (LM) rewards to lead to significant TVL to Index Coop. This is especially the case if the LM rewards are directed to an icETH pool. The yield on an icETH Boosted pool is expected to exceed the wstETH / ETH pool. The wstETH / ETH pool has over $400M in TVL and we expect the icETH Boosted Pool to outperform the returns of this pool. This strategy amongst and others are being developed by Finance Nest with help from liquidity pod and business development team. We intend to use the BAL / AURA holding to maximise AUM in Index Coop products.

Please do note, maintaining the investment account strategy requires very few man hours, perhaps as little as 5 hours per month. The strategy outlined above was developed with input from multiple contributors across the DAO on how best can we grow TVL whilst maintaining the runway. A yield strategy that extends the runway and supports Index Coop in growing TVL, is a very good strategy. The strategy has a great asymmetric return profile.

Liquidity

March was again, a busy month for Protocol Owned Liquidity (POL), icETH was launched and POL was deployed from both the Operations and Investment Account to support the launch.

Four FLI-P products were supported in March (iMATIC,iETH,iBTC + BTC2x) ~$600k reduced to ~$100k by month end. The partnership with Argent in collaboration with ZigZak exchange was supported with $1M of inventory. Sales there have shown promising results and the capital there is expected to be withdrawn beginning in April. A $130k of GMI:ETH position remains as well as ~$225k of DPI/USDT still remaining on loan to KuCoin.

Outside of supporting product liquidity IC is also supporting ~$700k of INDEX:ETH liquidity

We are experiencing some challenges in coordinating signers across multiple time zones whilst noting that some signers are less active than others. We have been working with Den who is an early stage community partnering with Index Coop to trial some new innovations built on top of Gnosis Safe. Den will be installing bots in the contributor discord which pings the respective channel whenever a transaction needs signing and providing a mobile messages service that messages each signer when a transaction requires signing. We hope to implement these initiatives during April.

We are still incurring a fairly onerous man hour tax when launching products as pools are seeded well in advance of exchange issuance functionality becoming available. In order to reduce the man hours in multisig transactions, we are exploring the option of transferring funds to a trusted individual who can then do all the transactions in under an hour relative to 3-4 people over a 8 hour period. There are trade-offs with security, but +20hours of signer time to launch a product is not ideal either. This idea, if advanced, will go to the council for feedback before being discussed more broadly within the community.

We are also looking to create a fresh mainnet Operations Account like Safe for managing active liquidity positions. This POL Operations “Sub” Account is intended to manage active POL positions.

Reporting

Finance Nest delivered all the financial reports relating to February’s end of month data. A couple were a little later than expected, which caused some OKRs to suffer. Finance Nest is looking to ensure more emphasis is placed on reaching the OKR objectives.

Payroll is functioning well, we had a couple hiccups with distributing funds that were promptly corrected. We continue to use Parcel for free token transfer transactions and have now found a rhythm for publishing data on the INDEX accruing to contributors via the DSM program. Finance Nest has commenced scoping out the cost of extending DSM for the remainder of the community and will be handing this data across to Community Nest early/mid April.

The next main area of focus post quarterly reporting is revisiting the revenue forecast for Index Coop and continuing to iterate on the financial model that was developed early Q1 2022.

We look forward to showcasing what we can deliver as we work through Season 1. :rocket:

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