EGP-16: DAO Asset Unwind + Consolidation

EGP-16 Title: DAO Asset Unwind + Consolidation Author(s): @BEW , @Butler and the Third Stringers Type: Protocol Proposal Status: Proposed Date Proposed: 2022-09-27 Date Ratified:

References

• Audit RFC
• GSC Wallet Contents
• Element DAO Wallet Contents

Sentence Summary

Unwind derivative assets in the GSC and DAO wallets, and combine them to DAO wallet

Paragraph Summary

Currently the Element DAO wallet has roughly 175k worth of derivative Yearn assets. In addition to the DAO wallet the GSC wallet currently has around 45k worth of derivative assets, split across Element LP positions and Balancer LP positions. In order to clean up DAO operations these assets need to be unwound, and then consolidated into the DAO treasury.

Motivation

Given the ongoing bootstrapping of the Element DAO, now is a good time to sort out the DAO treasury at a base level. While the DAO may have some amount of non-ELFI assets to work with, none of them are in base assets such as DAI, ETH, or USDC. In order for the DAO to use any of these assets to further the goals of the DAO, the derivative positions in the GSC and DAO Treasury will need to be unwound. Considering that network fees are relatively low, unwinding now seems prudent and likely more cost effective than waiting. Finally, assets split across both the DAO treasury and the GSC wallet eschews what should be the standard practice of funding the GSC wallet via the Element DAO governance process. We believe that any petty cash given to the GSC should be subject to this governance process, not granted by default. By unwinding all assets and then consolidating them in the DAO treasury, the DAO will be better positioned to follow transparent standards around distributions or future treasury strategies.

Specification

• For each wallet, unwind all the derivative assets into their base assets e.g. USDC Principle Token / USDC LP → USDC, yvCurve-stETH → ETH
• Consolidate all stablecoins to USDC. This includes DAI, LUSD, MIM, alUSD, EURS, USDT, etc.
• Convert any wBTC to USDC
• Convert any stETH to ETH
• Transfer all converted ETH and USDC post unwind in the GSC wallet to the DAO treasury. This would leave the DAO treasury with all of the unwound assets, in either USDC or ETH.

Proposed Code

Not Applicable. There should be no code changes needed for this proposal.

Test Cases

Not Applicable. There should be no code changes needed for this proposal.

Security Considerations

Security considerations for this proposal center mostly around smart contract interactions with third party contracts such as Yearn, Balancer, and UniSwap. While the risk is not zero, these applications and contracts are battle tested and fully audited. As such we believe there is minimal risk or security considerations to the DAO. Furthermore, this risk is unavoidable due to the fact that any utilization of these assets would require the aforementioned contract interactions at some point.

Technical Review Plan or Audit Information (If already available)

Not Applicable. There should be no code changes needed for this proposal.

Next Steps (Voting Outcome Summary)

This is a relatively low impact change that merely converts derivative assets to their underlying, for the purposes of creating a more fungible treasury with reduced risk exposure. Being that this is a preliminary proposal for future treasury management efforts, that does not express preference, we expect it to be non contentious. For these reasons we believe we can follow a relatively quick proposal to execution timeline as follows:

1. Discuss this proposal on the forum and discord (Week of October 3rd)
2. Implement a poll on this proposal on Snapshot: Tentatively shooting for this Thursday assuming there are no contrarian opinions or comments that need to be addressed or discussed further
3. Coordinate with current DAO and GSC wallet operators to execute the change: As soon as the proposal passes snapshot (assuming it does)