Treasury Management: Convert Aavegotchi Treasury’s DAI to sDAI and sFRAX

Author: 0xlide(#9345) Quorum requirement: 20% (9M) Vote duration: 7 days XP Reward: 10 XP for each Aavegotchi in voter’s wallet Summary

Summary

This proposal suggests converting the held DAI on Ethereum into sDAI and sFRAX to increase the income of the Aavegotchi DAO.

Motivation

AavegotchiDAO holds 6.5 million DAI in its treasury, and by converting this into 3.25 million sDAI and 3.25 million sFRAX, the treasury can generate an annual yield of over $300k. Also, splitting it into sDAI and sFRAX will help diversify the treasury’s portfolio more than before and reduce its reliance on Maker DAO.

・sDAI Docs: https://docs.spark.fi/defi-infrastructure/sdai-overview Contract Adress: 0x83F20F44975D03b1b09e64809B757c47f942BEeA Acquisition Amount: 3,250,000 sDAI APY: 4.20 ~ 5.00%(*DSR ~ EDSR 2023-10-23) Main Liquidty: crvUSD-sDAI (Curve DEX) *Defillama Data

About: Savings Dai (sDAI) is an ERC-4626 representation/wrapper of DAI in the Dai Savings Rate (DSR) module.The sDAI vault APY is calculated based on the DSR set by Maker DAO and the EDSR, which is determined by the utilization of the DSR. The EDSR has a maximum limit of 5% and decreases as more DAI is staked in the vault. Additionally, the EDSR is a one-time, one-way temporary mechanism, which means that the EDSR can only decrease over time, it cannot increase again even if DSR utilization goes down.

The collateral assets for DAI and sDAI can be found in the Monthly Real-World Asset Report and Dashboard provided by Steakhouse Financial. The DSR is subject to change with Maker DAO Governance.

・sFARX Docs: https://docs.frax.finance/frax-v3/sfrax Contract Adress: 0xA663B02CF0a4b149d2aD41910CB81e23e1c41c32 1 Acquisition Amount: 3,250,000 sFRAX APY: 5.40%(*IORB Rate 2023-10-20) Main Liquidty: crvUSD-sFRAX (Curve DEX) *Defillama Data

About: Staked FRAX (sFRAX) is an ERC4626 staking vault that distributes part of the Frax Protocol yield weekly to stakers denominated in FRAX stablecoins. The sFRAX vault APY is based on a utilization function that can be set by the frxGov governance module. The utilization curve starts at a top end of 10% APY and theoretically has no bottom; however, as more FRAX is staked in the vault, the protocol will attempt to deploy the staked FRAX to sources that yield as close to the IORB rate as possible to keep the bottom APY close to the IORB oracle.Also,Financial Reserves and Asset Exploration Inc (dba FinresPBC 167) was incorporated in the US state of Delaware as a public benefit C corporation to accomplish this mission.

Specification

The recommended procedures for acquiring sDAI and sFRAX are as follows:

・sDAI Acquisition: Deposit the acquired $3,250,000 DAI into DSR to obtain sDAI.

・sFRAX Acquisition:

1. To prevent MEV attacks, use CoWswap’s TWAP Order to convert $3,250,000 DAI to FRAX.

2. Deposit the acquired $3,250,000 FRAX into Frax V3 to obtain sFRAX.

Next Step

If passed, the Aavegotchi Foundation will execute this proposal with the cooperation of 0xlide.

Disclaimer

0xlide is not affiliated with or paid by Maker DAO or Frax Finance to publish this Proposal.