Proposer: Lucio
Summary
This proposal aims to give mandate to the Stake DAO Association to expand its Treasury Management expertise towards Curation for Stake DAO. Such Curator can identify the best opportunities in the market based on available Stake DAO core strategies and propose/package financial solutions offerings, making use of well-established lending platforms (such Morpho or Euler) and creating additional revenue streams to the DAO.
Context
Stake DAO currently has a unique set up that can allow it to tackle the challenges ahead in terms of scaling revenues and attracting new sources of capital.
Here are some facts to set the scene:
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Strengths :
· Stake DAO has elected and mandated multisig signers, including a wide range of community members, to manage the DAO’s treasury in the best interest of the DAO, and all relevant transactions;
· Stake DAO’s treasury management has been outstanding over the past year and achieved c.29% cash yield according to the last activity report published. This is unrivalled execution proving the team’s ability to execute smart yield strategies;
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Weaknesses :
· Stake DAO’s current revenues are tied to its underlying projects’ inflation, and despite the effort made through Onlyboost and Staking architecture v2, its scalability remains limited, which makes it difficult to tap into larger pockets such as institutional ones, or retail distributors;
· The Resupply and Aave/Pendle/Ethena examples have proven the demand for looped yield strategies, and there is currently no possibility to do such loops on Stake DAO strategies, while it is possible for some of Stake DAO’s competitors.
Rationale
With all the points mentioned above, there is a solution that, if successful, could address the weaknesses, while leveraging/expanding the existing strengths.
Stake DAO could launch a Curation Vertical, powered by professionals hired by the Stake DAO Association, that would curate lending vaults on lending platforms such as Morpho or Euler. Funds would be allocated to markets involving Stake DAO strategies’ LP tokens (following the grant received by Morpho to develop an adapter to allow Morpho markets for Stake DAO LP tokens, it sounds reasonable to also look for ways to provide funds to those markets). This would allow users to loop in Stake DAO strategies with a multiplying effect on Stake DAO’s TVL and fee generation.
To take an example, Stake DAO’s reUSD/scrvUSD strategy currently has an 18% APR, while the highest lending APR on Morpho is around 12% APR. Assuming the sd-reusdscrvusd/USDC market on Morpho allows a maximum LTV of 0.9, this means that users could do loops of borrowing stable coins at 12% and depositing the borrowed funds as collateral yielding 18%, and therefore changing an 18% APR into an APR of up to 72%. If the user only does 4 loops, it doubles its APR (reaching 36%), and multiply Stake DAO’s TVL and revenues by 4. If the user does 9 loops, they reach 51% APR (nearly 3x higher than the original APR), and Stake DAO’s TVL and revenue increase by 6.5x.
We can easily see the multiplying effect of such a new strategy on Stake DAO’s TVL and revenue. Those funds in curation on Morpho are directly ending up on Stake DAO.
Furthermore, thanks to these looping strategies, Stake DAO lending markets should have a higher lending rate than other lending markets, and therefore should therefore attract more capital. Some other curators might even follow the lead and allocate capital to those markets. This would then allow Stake DAO to tap into the extraordinary vending machine of Morpho, Euler, or others to attract more capital to Stake DAO strategies. This also means that Stake DAO can have a limited amount of easily sellable products (for example a USDC Morpho curated vault), that can be pushed much more easily to institutionals, and which in below would allocate those funds to Stake DAO strategies.
Finally, it would allow Stake DAO to have a very scalable product, as if it receives too much funds for the Stake DAO LP token markets, it can also allocate them to other markets, and still generate revenue for the DAO. This would be an ideal product structured for compatibility with qualified institutional participants and other eligible counterparties, subject to applicable laws and regulations, as there would not be any scalability concern anymore.
Implementation details
This would require the creation of a curation division that might need some recruitments. It would also need developing adapters to build Stake DAO markets on lending platforms. A legal assessment would also probably be required. Finally, there could also be a rationale for developing a lending UI on stakedao.org to allow users to easily loop their strategies.
Proposal Specifications:
· Admin(s): veSDT holders
· Community Feedback Period: Minimum of 3 days
· Voting Duration: 7 days
All actions and implementations described in this proposal will adhere to applicable laws and regulations to ensure legal compliance and uphold the integrity of Stake DAO’s operations.