Earn Conservative Yields on Aavegotchi Stablecoin Treasury Reserves

Earn Conservative Yields on Aavegotchi Stablecoin Treasury Reserves


  • Simple Summary
  • Abstract
  • Purpose
  • Strategy
  • Funding Schedule
  • Proposal and Fees
  • Technical Specs
  • How to Get Started
  • Appendix
  • About Avantgarde

Simple Summary

Hi, @TheKidCG from Avantgarde and Enzyme here. This is a proposal to implement a conservative active treasury management program to earn yield on idle stablecoin funds sitting in the DAO treasury (currently $8M DAI) while maintaining security, transparency and trustlessness.


This proposal fleshes out how Aavegotchi can use an Enzyme vault in order to effectively manage its stablecoin treasury, with Avantgarde Treasury serving as the delegated third-party manager for the Enzyme vault. This proposed technical solution allows Aavegotchi DAO to retain full self-custody of its treasury funds at all times, while delegating the day-to-day management and execution of the strategy to Avantgarde.

This combination ensures the best aspects of security, transparency, control and operational efficiency – all enforced by battle-tested smart-contracts which have been on main-net since early 2019.


Aavegotchi holds a substantial portion of its treasury in idle $DAI, currently around $8M. The DAO wants to diversify out of a 100% DAI allocation into further reputable stablecoins such as USDC, USDT and LUSD. These reserves can earn steady yields through conservative strategies in order to a) keep pace with rising USD inflation environment and b) to pay for protocol maintenance and other operating expenses.

This proposal aims to preserve and grow the balance of the treasury and hence its usefulness as a tool to protect Aavegotchi’s community and grow the protocol. The architecture of Enzyme’s smart contracts allows for operational efficiency (removing the need for Safe multisig approval at every transaction) without sacrificing trustlessness and control over assets (the DAO retains 100% ownership of funds at all times).


We propose helping the Aavegotchi DAO create an Enzyme vault on the Ethereum deployment (Mainnet) and whitelisting their safe as the only allowed depositor. While Enzyme is live on Polygon, we would recommend using Mainnet for treasury management due to its robust security and greater range of DeFi integrations and assets.

After discussions with the DAO’s newly appointed Treasury Officer, Maxi Crouton, we are aware that the DAO would like to diversify out of a 100% DAI position into several other reputable stablecoins. This is spurred by the uncertain future direction of DAI as a USD stablecoin.

Therefore, we would suggest the following asset allocation:

  • USDC – 25%

  • USDT – 25%

  • LUSD – 25%

  • DAI – 25%

This allocation will be dynamic based on market conditions and the potential risk/reward of each stablecoin. This spreads risk appropriately and enables the DAO to run various stablecoin yield strategies that align with a conservative, low-risk approach. We assume a low risk-appetite here and will focus solely on high-quality stablecoins as determined by our risk assessment frameworks.

Additionally, we could look to enhance these yields by building a custom integration with Morpho, which enables suppliers to enjoy improved APYs. When liquidity is matched peer-to-peer (P2P), instead of via a pool, the capital utilisation rate is 100%, which means superior rates for lenders. Morpho combines the efficiency of P2P with the instant liquidity associated with lending pools. Aavegotchi DAO would benefit from improved rates while maintaining pools’ flexibility. This would be accessible via popular lending protocols such as Aave, Aura, Balancer, Curve and Convex.

Moreover, the DAO could opt to purchase Backed Finance’s new iShares Treasury Bond 0-1yr ETF - IB01, which is a tokenized US treasury bond (with a Chainlink price feed) providing 5.3% APY. If this was of interest, Avantgarde could speak to Wintermute to provide OTC liquidity on-chain via Enzyme’s integration with 0x, enabling the DAO to swap in and out of these tokens. This is an optional route but would provide the DAO with higher yields while retaining a conservative and safe approach.

Here is an example of what these strategies could look like. Please note this is indicative only and subject to approval by the Aavegotchi DAO.

Asset Current Yield* Protocol Strategy
USDC 1-4% APY* Curve Liquidity Provision
USDT 1-4% APY* Aave Lending
LUSD 1-4% APY* Liquity Stability Pool
DAI 1-4% APY* Spark Lending
Optional: Tokenized US Treasury Bonds 5.3% APY* Backed Finance + 0x + Wintermute Optional: Use Backed Finance and 0x/Wintermute for US treasury bonds exposure

*Note that yields are on the lower end of their 12-24mth range and we expect them to rise. Additionally, floating rates are subject to change depending on market conditions. We will actively manage positions as rewards are collected + compounded and as yields change.

Though these strategies are not subject to change by the day, it would be useful to react to changing market conditions within some pre-defined constraints without requiring a governance proposal. When the vault is configured, smart contract policies could be enabled to allow one wallet to manage the funds with very specific guardrails. In this way, the vault would be managed by a delegated third-party (Avantgarde) in a controlled but flexible way.

In short, Avantgarde acts as the delegated treasury manager to run the agreed strategy on behalf of Aavegotchi DAO. We can execute transactions and manage the DAO’s funds only within the agreed framework you set as the vault owner. Our team of asset managers will regularly monitor and assess the strategy to optimise for maximum ROI while ensuring risk is properly managed.

We believe that in the current environment, a 1-4% annual return target encourages prudent risk management and represents a fairly meaningful increase in the utility of idle stablecoin funds within the treasury.

Funding Schedule

While we don’t believe a sophisticated DAO should sit on idle funds, we also recognise that allocating your entire $8M DAI position to Enzyme in one tranche could seem excessive. We value our partners and view our work as a long-term relationship built on the principles of trust and proven success. As such, we propose that the DAO funds its Enzyme vault in several tranches, until the entire amount ($8M DAI) is actively allocated and benefitting the DAO.

We suggest an initial deposit of $2M, followed by recurring bi-monthly deposits ($2M every 2 months) until the entire idle DAI position is allocated. This would enable Aavegotchi to become comfortable with Avantgarde’s performance and the Enzyme ecosystem, while ensuring that funds are not left idle for too long (thereby presenting an opportunity cost to the DAO).

Proposal and Fees

We propose that Avantgarde’s Treasury Management arm is appointed as the delegated third-party manager for the Enzyme vault. Avantgarde Treasury would help to define Aavegotchi DAO’s treasury strategy, execute the management (according to agreed KPIs) and handle reporting.

Avantgarde will provide continual risk monitoring of market situations and keep the DAO informed of any relevant changes as and when they arise. Additionally, we will schedule monthly meetings with Aavegotchi’s Treasury Officer to ensure the strategy is being executed according to the DAO’s goals and objectives. On a quarterly basis we can present and share with the DAO core team.

As such, we propose charging the following fees:

Technical Specs

This proposal does not require development work or resources from the DAO, since it leverages existing purpose-built non-custodial asset management infrastructure.

Enzyme is an on-chain asset management platform that enables access to digital assets and DeFi from one simple, unified app. It provides a front-to-back execution and order management system, which provides fully automated reporting, risk management, administration, governance and operations. The protocol is trusted by protocols like Nexus Mutual, Unslashed Finance, Human DAO and others.

The Enzyme smart contracts have been live on mainnet for nearly 4.5 years without any vulnerabilities that have led to a loss of funds. The protocol is subject to continual development from various teams coordinated by the Enzyme DAO which is made up of smart-contract auditors itself. Enzyme is audited by top auditors in the space, and maintains one of the largest bug bounties in DeFi. The most recent audits, our GitHub repo and our bug bounty links are available as replies at the end of this post.

Enzyme vault smart contracts are highly configurable; among other things, vault owners can:

  • Specify permissions for a specific wallet address (eg. delegated Manager) to manage assets in a pre-defined way (ensures the DAO retains self-custody of these funds)
  • Keep the relationship between the DAO and a delegated manager trustless because Enzyme’s configurations allow for policies which aim to assure no misappropriation of funds
  • Access 16+ DeFi protocols and more than 250+ digital assets, while specifying which protocols and assets a permissioned manager can interact with or invest in
  • Define a maximum slippage tolerance, which if breached, automatically revokes trading permissions entirely from a delegated manager
  • Whitelist an address that is allowed to deposit into the vault (ie. the DAO’s multi-sig)
  • Access real-time financial reporting capabilities and give full transparency into the transactions a vault has conducted

The effective utilisation of these configurations would entail that Aavegotchi owns the vault via its Safe multisig and can decide on the trading delegation + specific risk policies, while also allowing for efficient strategy implementation, easy exit from positions and full transparency on trade activity. The Enzyme vault dashboard also offers real time Net Asset Value (NAV) reporting, while providing historical performance against the chosen benchmark asset.

All transactions that occur within a vault (e.g. depositing USDC into a Curve pool and staking the resulting LP tokens) are visible on-chain and via the Enzyme App, meaning that stakeholders and DAO constituents have instant visibility into the actions of a vault manager and their P&L.

How to Get Started

Below is a list of the relevant parameters that will need to be decided to properly configure the Vault along with our suggestions for those parameters. Following that is a high-level overview of the steps to deploy and seed it with funds.


  • Denomination Asset: DAI
  • Management Fee: 0%
  • Performance Fee: 20%
  • Permissioned protocols: Initially Aave, Aura, Balancer, Curve, Convex (consider using Morpho to boost yields). Optional: Tokenized US treasury bonds using Backed Finance and 0x/Wintermute.
  • Delegated Trader Permissions: avantgardefi.eth
  • Cadence for sweeping funds from treasury to Enzyme Vault: Quarterly
  • Target vault exposures: Non-directional, 100% stablecoin yield opportunities, optional US treasury bonds

Deploy and Seed Vault

  • Configure vault owned by Aavegotchi multisig with appropriate policies as discussed and voted by Aavegotchi DAO
  • Deposit denomination asset balance into vault (DAI)

Appendix A: Security

Audits & Bug Bounty

  • Enzyme’s contracts have been audited formally by PWC, Open Zeppelin and Chain Security and audits are available publicly here.
  • We run one of the largest bounty programs in DeFi together with Immunefi [see additional links].

Security-oriented Governance

  • Any upgrade or change to the Enzyme protocol is signaled by the Enzyme DAO, which is composed of technical experts. Only vault owners can opt-in to the upgrade and will never be forced into one.

Appendix B: Vault whitelabeling

At Avantgarde, we have created a whitelabel feature that would allow DAOs to create their own white-labelled Enzyme vault. This means Aavegotchi can link its Enzyme vault to the DAO website under a unique URL, so that Enzyme becomes an invisible layer of DeFi technology which is seamlessly integrated into the DAO’s community experience. Here is a mockup we’ve prepared and that we propose for a fully customised implementation.

About Avantgarde

By way of background, Avantgarde is the core developer and maintainer of the Enzyme protocol. Our team is made up of top-tier talent across development, financial engineering and mathematics departments. Our team has been building in the DeFi space since 2016, and our leadership team are the original founders of the Enzyme protocol.

Our experience spans across DeFi smart-contract and web3 development, asset management, understanding and structuring financial products, portfolio construction, technical and financial risk assessment and financial reporting.

Avantgarde’s Treasury team possesses a strong financial acumen (more than 50+ years of TradFi experience) alongside deep-rooted DeFi engineering expertise. We currently manage $30M in treasury assets on-chain, and work with several DAOs to outsource the management of treasury assets whilst keeping the management of those assets in their custody. We provide 100% transparent and verifiable reporting at all times, while ensuring that strategies are tailored to your specific risk tolerance and profile.

We are proud to service some of the leading industry players today and assist them with our Treasury Management services, and we would be delighted to work with Aavegotchi to support the DAO’s financial objectives and long-term vision.

Additional Links Part 1

Most recent audits: protocol/audits at v4 · enzymefinance/protocol · GitHub

GitHub repo: Enzyme Finance · GitHub

Additional Links Part 2

Bug bounty with Immunefi: Immunefi