Author
Treasury League: @Biaf, reviewed by @Teo and @Davide
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Since the launch of Idle DAO, our approach to treasury management has tended to be a mix of reactive and proactive actions. This post is the first of many to communicate how we intend to flip the approach to being more proactive, starting with communicating the already taken and next steps in that direction.
The final goal will be to grow, sustain and preserve Idle DAO treasury assets, whilst attracting and compensating Leagues members, fund community grants, and sustain protocol expenses across a variety of market conditions.
Summary
This post lists the additions, the changes and the improvements the Finance department of the Treasury League endorses for M1-2022:
- Analytics dashboards
- Leagues rewards CF
- Polygon fees
- DEXs liquidity deployment
Analytics dashboard
To enhance monitoring and reporting of Idle DAO Treasury performance, it will be open a new grant for the set up of a dashboard to monitor assets, liquidity pools, yield sources and token staking performances for all the Idle DAO Treasury funds (both unified and per wallet)
Other than this new dashboard, current ones on Dune Analytics will be checked, updated and improved when needed based on Leagues’ requirements.
Leagues rewards CF
As previously presented in the M1-2022 budget post, Leagues have a ~$40k monthly burn to reward contributors. Assuming a similar burn rate for the remaining months of the mandate, Finance suggests converting the majority of the Leagues’ multisig funds into stablecoins to ensure the budget of M1-2022.
Currently* the Leagues multisig main tokens are:
| Token | Amount | $ value |
|---|---|---|
| $IDLE | 16,800 | $20k |
| $WETH | 18,9 | $51k |
| $USDC | 19,000 | $19k |
| $LDO | 10,000 | $16k |
| $stkAAVE | 101 | $14k |
| $SUSHI | 3,800 | $13k |
We should not consider LDO tokens (under management for the incentivization program for Lido stETH tranches) and $IDLE (used partially to pay Leagues rewards). Thus, the focus on possible diversification to stablecoin should be on SUSHI and AAVE. ETH and WETH will be the latest to be swapped, if necessary. Given the current markets conditions, we would suggest starting to swap just the amount needed to sustain February rewards and postpone the March swaps.
We will need ~$32k in stablecoins and around $18k in $IDLE to cover the next 2 months for Leagues rewards. For the February rewards, we will need to swap only the stablecoins part, being the $IDLE holdings sufficient to cover the need for the month.
It’s important to highlight that AAVE tokens are staked and would need 10 days of cooling period before being available for swapping. This step could cost additional gas fees and make the AAVE swapping option less preferable.
We have already $14k in USDC and we need to reach $16/17k, hence we would suggest starting to convert ~$5k of SUSHI in USDC to pay for February rewards.
The remaining funds will be kept as they are or further swapped into ETH.
Polygon fees
Polygon fees from BY strategies have been routed to the newly created Fee receiver wallet.
The main fees received from the BY strategy on Polygon up-today are*:
| Token | Amount | $ value |
|---|---|---|
| USDC | 460 | $460 |
| WMATIC | 266 | $417 |
| DAI | 238 | $238 |
| WETH | 0.02 | $60 |
Overall, the current value of these tokens sums up to more than ~$1k. Polygon offers lower gas fees than Ethereum, hence we will start deploying the liquidity coming from Polygon strategies (only BY currently, with a possible future addition of PYT) even with smaller threshold amounts than the ones followed on Ethereum. Given the size, we will start from the Idle BY strategy. In the future, we can think about using liquidity in other protocols.
DEXs liquidity deployment
Currently Idle is funding liquidity on Bancor and Uniswap pools on Ethereum.
The main purpose of liquidity provisioning is to make the IDLE DEXs more efficient and minimize the slippage on trades.
Bancor pool
Idle funded the Idle/Bancor pool on Bancor on January 27th, 2022:
| Token | Amount | $ value |
|---|---|---|
| $IDLE | 187,000 | $303,638 |
| $BNT** | 96,702 | $263,996 |
| Total | $567,634 |
Impermanent loss
Computing the impermanent loss for the IDLE/BNT Bancor poll, we get an IL value of 0.02%***.
| Token | Price T0 | Price T1 | Imp. Loss |
|---|---|---|---|
| $IDLE | $1.21 | $1.26 | |
| $BNT | $2.30 | $2.31 | |
| Total | 0.02% |
The negligible amount of impermanent loss faced in the pool is linked mainly to the Bancor IL protection mechanism. It reimburses BNT tokens for any impermanent loss faced. Additionally, the liquidity deployment window is short (i.e. less than 1 month) and the tokens faced minimal price change.
Uniswap pool
Idle added new funds to the Idle/Ethereum pool on Uniswap on January 25th, 2022. Previously, there was a first liquidity deployment on October 22nd, 2021. Overall, Idle deployed the following amounts:
| Token | Amount | $ value |
|---|---|---|
| $IDLE | 37,425 | $77,252 |
| $WETH | 30.29 | $74,903 |
| Total | $152,156 |
Impermanent loss
Computing the impermanent loss for the IDLE/WETH Uniswap V3 poll, we get an IL value of 21.10%***.
| Token | Price T0 | Price T1 | Imp. loss |
|---|---|---|---|
| $IDLE | $5.26 | $1.26 | |
| $WETH | $2,714 | $2,722 | |
| Total | 21.10% |
The amount of impermanent loss faced in the pool is linked to the longer investment window (i.e. around 5 months for the first batch of funds and 1 month for the 2022 deployment leg), together with a significant price change of the $IDLE token composing the pool.
Splippage
Based on the current size of $IDLE pools the slippage has been computed again, following the same approach used by @Davide in this governance forum post.
| Swapped amount | Bancor slippage | vs Sushi | vs Uniswap | vs Paraswap |
|---|---|---|---|---|
| $10,000 | 3% | 7.6% | 8.7% | 2.5% |
| $50,000 | 13.6% | 28% | 30.5% | 9.3% |
| $100,000 | 23.9% | 44% | 46.5% | 16.2% |
Paraswap is the most slippage efficient DEX in the analysis, followed by Bancor and Sushi. Uniswap is the worst exchange on the list per this metric.
On Bancor, we have a strategic partnership in place and a more liquid market, hence we propose to further increase the liquidity there. Uniswap, nonetheless, is a key exchange and we propose to increase market liquidity to strengthen the oracle resiliency (Uniswap V3 is used by lending protocols like Fuse or Euler). We will share a proposal about the new Uniswap V3 funds deployment in the coming weeks.
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*Price quotes took on February 23rd, 2022.
**Idle DAO funded only the $IDLE side of the pool, the BNT side was matched by Bancor.
***Fees are not included within the results.
Next Steps
The purpose of this governance post is to share an overview of the current and future treasury management activities. We will release new DEX liquidity information and other posts on the subject of treasury management in the coming weeks.