IIP-142: Transfer USDC from Treasury to the Investment Account


IIP: 142
Title: Transfer USDC from Treasury to Investment Account and Deploy Productively
Status: Proposed
Author: @Finance.Nest - @Ahuja @Matthew_Graham
Gov Review: @sixtykeys
Created: 13th March 2022


Simple Summary

We propose transferring the remaining USDC balance from the Treasury to the Investment Account. This capital is to be deployed productivity in line with the Stable Coin Asset Management Guidelines and the Investment Account Strategy. There is currently 3,040,314.00 USDC in the Treasury, with 1,320,416.67 USDC being sent to the Operations Account as part of the season 1 budget. The remaining 1,719,897.33 is to be transferred to the Investment Account.

Treasury Account: ‘0x9467cfADC9DE245010dF95Ec6a585A506A8ad5FC

Investment Account: ‘0x462A63D4405A6462b157341A78Fd1baBfD3F8065’

Ethereum Operations Account: ‘0xFafd604d1CC8b6B3B6CC859cF80Fd902972371C1

Abstract

As outlined in the Investment Account Strategy forum post, the Finance Nest recommends holding a productive stablecoin allocation within the Investment Account, that can be deployed to earn interest this is important to build a safety net for the community. Stablecoins offer the most immediate diversification benefits due to their uncorrelated nature relative to other assets in the treasury, so we intend to keep the transferred stablecoins in stablecoins.

This IIP is to facilitate the transfer of 1,719,897.33 USDC from the Treasury to the Investment Account where it will be deployed to earn yield.

Motivation

Currently, after taking into consideration the Season 1 stablecoin spend, Index Coop will hold around 1,719,897.33 of USDC in the Treasury, with the remainder being held within the operations account or is already deployed within the Investment account. This USDC is unproductive and there is an opportunity cost for this. Finance nest constantly tried to improve the stablecoin runway for the community, yield generation is essential. At 10% ROI, one years interest on this USDC is equivalent to more than 1 months of Index Coop stablecoin spend. To maintain a runaway of around 24 months and facilitate the current stablecoin burn rate, all funds need to be made productively.

Specification

Low vol stable coin assets held within the Investment account will be managed in line with the Stable Coin Asset Management Guidelines as part of a broader portfolio construct outlined by the Investment Account Strategy.

Finance Nest will manage the funds in accordance with the two publications linked above and any transfer of funds will be within the permission granted to Finance Nest by IIP-123. The performance of the portfolio shall be made readily available via monthly updates on the status / performance of the capital.

Capital will be deployed across multiple strategies with a long time horizon in mind. There may exist a more actively managed portion of the fund which is able to react to high yield short term opportunities. This style of investment will be sized appropriately with a consideration of the holistic risk profile and with the overall goal of preserving community capital front of mind.

Voting

FOR:

DO transfer 1,719,897.33 of USDC to the Investment Account.

AGAINST:

DO NOT transfer 1,719,897.33 of USDC to the Investment Account.

Copyright

Copyright and related rights waived via CC0.

4 Likes

Hey @Matthew_Graham, as always, well thought out and articulated.

Taking a step back here, could you explain a little why generating yield with USDC is strategically critical for Index Coop’s success right now?

I’m looking for the compelling ‘Why’ here in direct relation to Index Coop’s stated Vision/Strategy.

1 Like

Hi @nic,

As we all know Finance Nest has a responsibility to maintain roughly a 24 month run way in low vol assets. We are currently, cash flow negative and each month we draw down on our stables. If we were to attain 10% APY on the $1.7M mentioned above, this is sufficient cash flow to sustain >1 Non Developer Core Hire.

The opportunity cost of not deploying this capital is $170K per year at 10% ROI. One of three pillars of Finance Nest is to sustain the DAO. Deploying unproductive assets to earn yield is aligned with this strategic objective.

In a perfect world, the USDC should have been deployed immediately after being received from the two OTC rounds. Having deployed the funds already in the Investment Account Index Coop has demonstrated the ability to manage this capital.

Thank you for asking the question. :slight_smile:

3 Likes

Hi @sixtykeys, @mel.eth,

Can we please have an IIP number and schedule this vote for Monday 21st February.

It would be fantastic if @Finance.Nest could process their own IIP requests, especially now it is a Season 1 objective being tracked.

1 Like

gm @Matthew_Graham,

@sixtykeys will get this IIP reviewed and a number assigned.

We’re training up some new GovReps currently and will be looking to expand this out as quickly as practical. In the meantime please direct interested Finance Nest contributors to the #governance-general DAO discord channel to let us know they’d like to be trained in the next round; expected April ‘22.

Hi @mel.eth

I was under the impression we were moving away from gate keeping and towards a github defined process which moves the whitelist gate keeper system towards something in line with the leading DAOs of DeFi.

Do you now when @Finance.Nest can follow an online process ? We submit proposals on many DAOs without training and had no issues. It not like one needs a degree to perform these administrative like tasks.

@Matthew_Graham Thanks for sharing ser. This is a reasonable response and it’s a good thing. But we must resist this temptation to sacrifice the ‘right’ for the ‘good’.
We believe that the Coop’s survival depends on the number of successful products that it creates, grows, and maintains autonomously and sustainably.

  • We are against proposals that are not additive to, but rather distract from, Index Coop’s core strategy

  • I’d offer that instead of covering up our failures in other parts of the business, I think we’d all agree it’s better to allocate our resources to address those failures, to permanently solve the runway problem

  • I know you’re aware, but for those reading, a basic/standard Startup principle is that money on balance is directed only to the business - Index Coop is many things, but at it’s core, it’s a startup

    • Investors typically desire HUGE (10x-100x returns), not $170K a year
  • Coaching moment - I’d encourage Finance Nest to examine its philosophy when it comes to IC success. I don’t know the details/inner workings of how y’all process and prioritize.
    But if Finance believes the best way to get a core hire is to generate small yield, then we’re not thinking holistically/big picture, about best way to partner with / support Product Nest on big bets, we’re thinking as an accountant would.
    This is the entire Coop’s responsibility. Finance is a support nest, your primary mandate given your organizational strategy - find innovative ways and use your imagination/influence/resources to support Product Nest to create, grow, maintain. All Nest Leads and all Coop Leaders need to be thinking at this level.

    • $170K is just not that much money, seems like a distraction from core business (create / grow / maintain successful products)

    • I’m convinced launching even a single successful product in the next year will produce far more income for IC’s runway and core hires, than USDC yield gen (not to mention all the other growth benefits - success breeds success, and we need some serious momentum).

  • Winning is just going to take far bigger swings than generating USDC yield, plain and simple

  • I’d recommend reading the following, it really hits the nail on the head: Reverie

  • Given all this, Set would be against this proposal

3 Likes

gm @Matthew_Graham,

I’d like to address your statement and question here in hopes that you’re able to give more focused insight in a more appropriate setting once there is some more context:

We’re considering different approaches, but as it stands we are off-chain. While the proposal process is facilitated it is not permissioned or gated: anyone can propose within the guidelines established here and that proposal will be addressed according to those guidelines. We seek to make this process as smooth as possible, are reducing centralization/increasing resilience in the short-term, and are working toward better automation in the way I think you’re describing (maybe INDEX token-holder-gated, fully-automated). While we see the value in abstracting away the turking element of facilitating Index Improvement, the proposal editorial process is considered valuable and we’re looking toward automating that as well. I understand and share your desire to automate; we’re looking at the most responsible ways to go from what we have to a more automated process and your feedback is welcome.

Finance Nest contributors can follow the process here as this is the most up-to-date asset on the status of IIPs at all times. Note that until a proposer requests review and IIP number assignment proposals are not tracked as prior to that they are considered discussions around proposed ideas and tracking of such can be done by reviewing the Leadership and Governance → Proposals category of this forum as that is the tag that proposals are categorized under, given that this forum has been expanded to a DAO resource.

Thanks for the feedback and call-out here. While it’s hard to admit that we’re not where we’d like to be, we’re moving efficiently in the direction you describe while maintaining the robust and trusted processes we have in place. All that said, if there is anything that in your view presents a blocker to Finance in a governance-sense please ping the Governance Nest Rep (currently myself; yourself listed as Finance Nest Rep) in the #nest-relations channel and I will pick it up asap. If you find that you personally are having challenges running IIPs please reach out to schedule some time with @sixtykeys or myself for assistance or to provide focused feedback on upgrades that you would find useful. Thanks.

Hi @nic,

I kind of get what your saying but I think there is a difference in context here. The narrative that this USDC is not readily available to accelerate or support growth whenever needed is inaccurate. It is my understanding that each Nest has requested funding for Season 1 which covers all the foreseeable growth initiatives. Beyond that, any capital held within the Investment Account can be made readily available whenever needed to support any opportunity that arrises.

For capital that is awaiting on a suitable means of being deployed to grow the business, it should be deployed so that when the business needs it, there is more of it to spend on growing the business.

Finance Nest supports growth and product where ever possible. If you recall I completed the larges product sales in this DAOs history and attain the only Tier 1 lending market listing. So Finance Nest is pulling its weight. We have also designed yield / product strategies that are now with Product Nest for review. Then of course there is all the financial reporting that supported the two OTC rounds and continues to provide the data we share with our major investors.

This capital can be deployed with out creating any distraction to normal business operations. As for the below statement, I think this is more a reflection on the Coop as a whole. These comments are better reflected on the Nest Proposals where one can review the intended work scope for the Season and provide feedback. I did notice, there are little to no comments, so we can only assume Set Labs is happy with each Nest’s proposal.

This capital may be used to farm the SPICE token belonging to the Arrakis DAO which manages the G-UNI product currently with Gelato. Index Coop uses G-UNI pools on multiple networks and is positioned to migrate a long more liquidity into the G-UNI pools. The veTokenomics system means those that farm SPICE earn the ability to then vote on directing SPICE rewards to various G-UNI pools. Index Coop can vote SPICE rewards across pools like USDC:FIXED, USDC:PAY, ETH:icETH and USDC:PINT. These are all yield products, neutral LP positions and any additional long term incentives in the form of SPICE is going to help grow deeper liquidity and support larger market buys of the respective product. The TL;DR, is farm an asset via a no price vol risk strategy and use the proceeds to direct a continuous flow of incentive APY across Index Coop’s liquidity pools. That is very much a value add to Index Coop’s business model as liquidity is key to the success of the business.

If I interpret your post more holistically, it is more challenging Index Coop to grow and improve. Finance Nest has limited remit and is doing all it can but ultimately, it can only influence what is within its remit. Making sure the communities assets that lay idle are being used to benefit the Coop is something Finance Nest is doing. We are actively building metagovernance votes in other communities which supports Index Coop’s effort to be an influential metagovernance participant in the ecosystem.

5 Likes

Thanks @Matthew_Graham, I appreciate you

Got it, so this is really about using idle assets to generate more resources for liquidity provision on IC products. Not so much “sustain >1 Non Developer Core Hire.” I didn’t understand that was a motivation in this IIP.

Liquidity is def a huge hurdle for create / grow / maintain :thumbsup:

3 Likes

Hey @Matthew_Graham an IIP number has been assigned (142) and this vote has been queued to go live on Monday, 21st March 2022, 6PM UTC.
Snapshot here

2 Likes