title: Authorize the Operations Account for Aave, Balancer, Compound, and PoolTogether Strategies
created: August 17, 2021
This IIP will make the stablecoin reserve within the Operations Account productive by authorizing the Treasury Working Group to deposit stablecoin held within the Operations Account into Aave, Balancer, Compound, and/or PoolTogether. More protocols will be added to this list in the future.
IIP-70 was recently passed authorizing the deposit of a stablecoin reserve into the Operations Account. Per the Stablecoin Asset Management Guidelines, the TWG recommends these funds be made productive. In order to actively manage these reserves, this IIP will authorize the TWG to deposit and withdraw into Aave, Balancer, Compound, and PoolTogether freely in line with the stated guidelines. Having this blanket authority will allow the TWG to act nimbly when managing the liquidity of the Operations Account as market conditions or the state of the Index Coop’s operations evolve.
The Operations Account presently has no authority to deploy the stablecoin provided by IIP-70 into productive use. The TWG seeks to deploy these assets productively with a limited number of protocols in order to earn income for the Index Coop, to demonstrate competency, and earn trust to deploy a greater percentage of treasury assets in the future.
The TWG recommends the following protocols to earn yield on stablecoin within the Operations Account and the rationale is detailed within each section.
Aave is the largest non-custodial liquidity market protocol measured by TVL. Depositors provide liquidity for passive income while borrowers take out over-collateralized perpetual loans and flash loans. Participation in certain Aave markets as either a depositor or borrower is incentivized with AAVE tokens that provide a beneficial improvement to the net APY. The TWG may seek to accrue AAVE for additional meta-governance power for the INDEX token or sell for current income.
Balancer is an automated portfolio manager and trading platform, similar in many ways to providing liquidity on decentralized exchanges like Uniswap, but self-rebalancing to maintain constant weights. Balancer launched stable pools, including a DAI/USDC/USDT pool, in July 2021 on Balancer V2. Participation in this pool is currently incentivized with BAL tokens, providing a substantial increase in yield. The TWG may seek to accrue BAL for additional meta-governance power for the INDEX token or sell for current income.
Compound is a conceptually similar protocol to Aave, operating as a decentralized liquidity market protocol. Participation in lending and borrowing earns a “distribution APY” paid in COMP tokens. The TWG may seek to accrue COMP for additional meta-governance power for the INDEX token or sell for current income.
PoolTogether is a decentralized protocol for no-loss prize games on Ethereum. Users deposit funds into a prize pool for the chance to win a portion of the interest generated on the total deposits while simultaneously earning a yield payable in POOL tokens, the native governance token of the protocol.
PoolTogether has been used by Yearn Finance within their DAI and USDC vaults due to its high yield and relatively lower risk profile. PoolTogether is dependent on Compound currently for its yield source, and so it is only impacted by one additional layer of protocol risk beyond Compound.
The TWG likes PoolTogether as a strategic investment. POOL tokens are not currently in any existing products, so accumulating them will accrue additional meta-governance power for the INDEX token in a well-established protocol in the DeFi ecosystem. The stream of POOL tokens provides a relatively high yield source for the Operations Account, and the chance to win the weekly drawing is an additional sweetener. To illustrate: a $250k deposit of DAI today would generate a 10.2% APR payable in POOL tokens with a 1 in 21 chance to win an additional $3.4k in DAI and COMP this week.
Each of these protocols have apps built-in to Gnosis Safe and no technical work is required.
DO authorize the TWG to use Aave, Balancer, Compound, and/or PoolTogether in the Operations Account within the constraints outlined in the Stablecoin Asset Management Guidelines.
DO NOT authorize the TWG to use Aave, Balancer, Compound, and/or PoolTogether in the Operations Account within the constraints outlined in the Stablecoin Asset Management Guidelines.
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