IIP-70: Create a Stablecoin Reserve Within the Operations Account

IIP-70
Title: Create a Stablecoin Reserve Within the Operations Account
Status: Proposed
Author: Accelerated Capital (@AcceleratedCapital), PrairieFi (@prairiefi)
Created: July 30, 2021

Simple Summary

We propose creating a $500k stablecoin reserve held within the Operations Account. This will come from the existing $7.8mm in USDC. $250k will be converted into DAI.

Abstract

As outlined in the Stablecoin Asset Management Guidelines, the Treasury Working Group recommends creating a stablecoin reserve equal to anticipated USD-denominated expenses over a 3 month period within the Operations Account. The reserve will be funded from the $7.8mm in USDC. After the transfer, $250k will be converted to DAI for diversification purposes.

A follow-up IIP will outline how the funds will be made productive once they are in the Operations Account.

Motivation

Funding a stablecoin reserve that is equivalent to 3-months of anticipated USD-denominated expenses will ensure that the treasury is sufficiently capitalized to address these expenses as they arise. Per the stated Goals and Philosophy of the Operations Account, the role of the Operations Account is to:

  • Identify the primary sources and uses of funding
  • Set and maintain target levels of stablecoin and high-quality liquid assets like ETH
  • Provide for alternative responses or remediation plans to various scenarios
  • Plan to deal with temporary, short-term, and long-term INDEX price disruptions
  • Operate within working capital risk tolerance levels with oversight from the TWG

This stablecoin reserve follows our initial analysis of funding usage and begins the process of establishing a working capital management program.

A detailed post highlighting our thought process and any relevant discussion can be found here: Stablecoin Asset Management Guidelines.

Voting

FOR:

Create a 3-month diversified stablecoin reserve by transferring $500k of USDC from the Treasury Account (0x9467cfADC9DE245010dF95Ec6a585A506A8ad5FC) into the Operations Account (0xFafd604d1CC8b6B3B6CC859cF80Fd902972371C1) then swapping $250k of the USDC into DAI once there.

AGAINST:

DO NOT create a 3-month diversified stablecoin reserve.

Copyright

Copyright and related rights waived via CC0.

14 Likes

Thanks AC - reiterating in case anyone is trying to reconcile the difference between this post and the published goals for the Operations Account, this is only the first iteration of the Operations Account. We recognize that TWG needs to earn the Community’s trust by starting with a smaller amount of money, demonstrating competency with a multi-sig for security, and deploying it productively (follow-up IIP). There are miles to go after this.

5 Likes

Awesome work @AcceleratedCapital and @prairiefi :clap:

When we first began conversations around treasury diversification in January / February this is the exact type of initiative that diversification was meant to fund.

By transitioning from funding our operations with INDEX denominated equity to funding through our stable coin reserves we significantly increase our ability to project expenses and build a pathway towards long-term protocol sustainability.

We are at the point in our protocol life cycle when we have a pretty good idea of what initiatives drive growth and how much funding is required on a quarterly basis. This understanding will allow us to start crafting a powerful long-term strategy for our protocol.

6 Likes

FOR in writing and will add a FOR vote when the poll is up.

It’s great to see the overall Treasury function evolve and mature; the Coop start to match USD denominated liabilities in stables (and take the Treasury’s finger off the sell side of the $INDEX market); and see moves to move liquidity closer to its required destination.

I appreciate the humility of this post from TWG and @AcceleratedCapital @prairiefi and your $500k scope - and would have been fine if the stable coin reserve was even twice this large given all of you and your teams great work in the DAO.

Thanks - look forward to seeing this live (:crossed_fingers:).

3 Likes

Hi All,

Great work @AcceleratedCapital and @prairiefi.

To support performing the transactions needed to implement this IIP and others to come. The TWG has developed the attached Work Instruction (WI). It is worth noting this IIP only requires a DEX transaction from the Operations Account and the WI contains a lot more than just this. As one can see, we are preparing for what is to come :slight_smile:

Please do add comments.

Hi @Pepperoni_Joe, @gregdocter

Can we please have and IIP number assigned and for a vote to be scheduled for Monday 9th August.

1 Like

@AcceleratedCapital and @Matthew_Graham confirming this IIP is now live on Snapshot.

https://snapshot.org/#/index-coop.eth/proposal/QmWwUL42vgm4qqbD61bUAX54qpmaWmPujtcMtndS54ffxt

2 Likes

Confirming this IIP has passed.

2 Likes

Hi @dylan,

Can we please have the IIP implemented and the transaction shared here.

Thank you in advance. :slight_smile:

The TWG Operations wallet has been funded with 500,000 USDC here:

3 Likes