Proposal

Use all of the 5 idle ETH in treasury with Frax staking as we wait for market conditions to improve for PlutoPawn development.

Introduction:

Frax has launched a staking platform for ETH. This new liquid staking platform leverages the frax ecosystem to increase yields and further increase decentralized staking. Frax has created two tokens for this frxETH and sfrxETH. Defined in their docs as:

“frxETH acts as a stablecoin loosely pegged to ETH, leveraging Frax's winning playbook on stablecoins and onboarding ETH into the Frax ecosystem.”

“sfrxETH is a ERC-4626 vault designed to accrue the staking yield of the Frax ETH validators. At any time, frxETH can be exchanged for sfrxETH by depositing it into the sfrxETH vault, which allows users to earn staking yield on their frxETH. Over time, as validators accrue staking yield, an equivalent amount of frxETH is minted and added to the vault, allowing users to redeem their sfrxETH for a greater amount of frxETH than they deposited.”

Proposal in depth:

While the 5 eth was initially set aside for the development of PlutoPawn, current market conditions have delayed its launch (PP team note: preference is to work towards funds for a full audit as long as there is no bull market rush to launch, vs in a bull market it may make more sense to launch in prod to generate more hype). As such we have 5 eth sitting idle. This, at the time of writing, equals thirty percent of the Degen Dwarf portfolio. Since our intention is to eventually fund PlutoPawn, a more conservative approach is needed for this eth as we ideally want our ETH to be more liquid compared to investing it in projects we already have or even taking an ALCX loan on it.

By using a liquid staker such as Frax we can grow our ETH position safely. Current yield is ~7.59% apy if we were to stake directly on frax’s site to get sfrxETH. When we unwind our sfrxETH position we will gain the eth rewards the node has gathered. This farmed ETH can be used to pay back our ALCX loan, use in our wETH farms, further fund PlutoPawn, or to hold in treasury. Rival liquid stakers tend to yield around 6%. A second option would be to make an LP of frxETH and ETH and stake it in convex. The slippage should be minimal, but we do run the risk of a discount towards the liquid eth forming as we have seen in rocket Eth and Lido Eth pools. This pool however would pay us around 10-12% apy in the form of FXS, CVX, and CRV. We’re already farming these tokens. By using this LP we can grow our positions even faster with our “idle” funds. There is an additional option for us to create our own vault within Convex of this LP from 1-52 weeks for further boost. However, for Degen Dwarves' needs, this is not recommended as the Dwarfs may need the tokens before the lock expires.

Further resources on the topic: https://www.youtube.com/watch?v=Al9TY-Hgi0E

https://docs.frax.finance/frax-ether/frxeth-and-sfrxeth

VOTING

1. For - Stake all Idle Treasury ETH in frxETH (no lockup)
2. Against - do nothing with ETH (or do something else)
3. Abastain (I just want to be included)

Proposal by Robo Odin with Edits by Ov3rkoalafied