Deposit treasury DAI into AAVE

Ideas
1

EDIT: Since posting this, @Jesse_gldnXross has triggered conversation around a token swap here. Whatever the DAO’s decision on this is should factor in to how we utilize the DAI in treasury

Deposit ALL of the current treasury’s 2,555,183.60 DAI into the app.aave.com DAI lending market on Ethereum.
Even with lending markets depressed due to the recent bear market in stablecoins, some basic yield can be earned on our DAI in the treasury. Our DAI currently sits in treasury doing nothing. We are incurring opportunity cost by NOT utilizing it in the markets.

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The yield on DAI on AAVE on Ethereum is a nominal 2.26% + 0.36% of AAVE governance tokens.
Aavetgotchi also has an established relationship with the Aave protocol as Aave hosts our GHST listing.

BENEFITS:

  1. 2,555,183.60 DAI * 2.26% DAI yield is an earning of ~$66,500 DAI annually assuming APR stays the same. In reality the APR will fluctuate. However, stablecoins tend to have the shortest range of fluctuating APR.
  2. 2,555,183.60 DAI * 0.36% AAVE yield is an earning of ~ $9,200 AAVE tokens which we can either sell on the open market or use to participate in AAVE governance.
  3. The funds could be used to fund future initiatives for the DAO without digging into the principal capital the DAO controls. i.e Its free money we are leaving on the table and can be used for anything our heart desires.

RISKS:

  1. The treasury would be entrusting our DAI into the contract security of the Aave protocol. However, Aave lending markets have been around for a long time and have established themselves as very secure, with no significant contract bugs or hacks that have put assets at risk. The Aave DAI contract currently controls 635M of DAI in its lending contract. This is quite a large asset value and could be used as a proxy for the ‘trust’ that the wider ecosystem places in the Aave protocol.
  2. Depositing the DAI into the AAVE treasury creates an extra administrative step to remove it should the DAO need to withdraw funds to fund other initiatives.

I would like to see a bit of discussion of more pros and cons im not thinking about before eventually crafting a Snapshot.

2 Likes
2

I think this is a good conversation to have. More movement and putting the treasury to work is definitely the next step for DAO maturity. A couple things come to mind:

  1. Depositing some of treasury into AAVE seems like a fair option to consider but depositing ALL of the current treasury seem’s over leveraged imo.

  2. I’m in the final stretches of preparing a proposal around a token swap as well. Maybe these two considerations will intertwine under the wider umbrella of treasury management opportunities.

  3. an active treasury is important so I hope AAVE staking gets ample consideration, thank you!

4 Likes
3

I think if you are going to deposit into the Aave lending contract at all you might as well just go whole hog unless you have some short to medium term use-cases for the DAI that is in the treasury. Thats just my opinion though and what i’d do if it was my funds.

It might be prudent to save some portion of the treasury funds directly in treasury so it can be used easily without the hassle of first removing it from AAVE.

Something like an 80/20 approach might be more sensible. 80% locked in AAVE earning interest and 20% remaining liquid in treasury.

This would still be 2 Mil in AAVE and ~500k remaining to the treasury to do as the DAO likes

4

Getting yield would be great. I like some of the suggestions @Lululute made in the Token Swap discussion.

Not a fan of all-in on anything. Staking a significant amount on AAVE for yield would be smart, but any staking should be diversified, and some of the treasury should remain liquid.