TMP-1: Yield Farming

Title: TMP-1: Yield Farming Author: Avicenna (@book_of_healing) Created: 12/23/2022

Summary

This Treasury Management Proposal provides a framework for how the DAO can evaluate yield farming opportunities and highlights some current opportunities to farm with the DAO’s treasury assets.

Abstract

The DAO’s treasury has $7M in stables and 3.3K ETH that is liquid and not currently earning any yield. This proposal suggests allocations for various yield farming opportunities that have been curated for community review and approval. This proposal also suggests initial parameters for evaluating yield farming opportunities and mitigating their associated risks. These parameters may be updated in the future with subsequent proposals. This is the first step towards decentralizing Jade Protocol’s treasury management efforts and enabling the community to play a role in how treasury funds are utilized.

Disclaimer: There are risks associated with yield farming, including but not limited to: counterparty risk, de-peg risk, economic exploits, smart contract exploits and/or the risk of impermanent loss. This proposal put forth by the author was synthesized as a result of due diligence and community discussion on Jade Protocol’s governance platform. There are no guarantees of financial gain and the DAO collectively assumes responsibility for both the positive and negative outcomes that may result from yield farming. This proposal does not constitute investment advice, but rather presents opportunities available to the DAO. Should the community vote to pass this proposal, then the DAO is authorized to deploy capital as described in the google sheet. At worst, the DAO may lose the entirety of its deployed funds, and at best, the DAO may generate ~$65K of monthly income based on current yields.

Motivation

The DAO recently withdrew all assets from yield farms out of an abundance of caution given fallout from the FTX contagion. Although there remain some unknown risks in the market (for example, questions around the solvency of Genesis), there are some opportunities that do not appear to have DAO is currently sitting on ~$11M of assets that could be earning a competitive monthly yield of $65K.

The motivation for this proposal is to further decentralize the treasury management efforts of Jade Protocol DAO by including the community in the decision making process.

Below are a list of criteria that have been proposed to guide the DAO in deciding which yield farms to consider when deploying capital. These criteria have been designed to mitigate the aforementioned risks associated with yield farming.

• Never farm with more than 50% of the backing treasury funds.
• All proposed investment treasury yield farms must be audited by at least one professional software auditing firm and must have the audit published for public review.
• Backing treasury funds should only be deposited in conservative farming opportunities that are well established and have multiple (2+) security audits published.
• The max allocation per farm must never exceed 6% of the farm's global TVL. For example, if Stargate's global TVL is $350M, the DAO’s total allocation to Stargate would never exceed $8.75M (across all chains).
• Max farm allocation per asset on a given chain in the protocol should never exceed 15% of the TVL for that given asset & chain. For example, if there is 10M of Ethereum based USDC TVL on Stargate, the cap for that asset and chain would be 1.5M USDC.
• The DAO should seek to only deposit funds in farms that have sufficient deep liquidity for their reward token(s). Liquidity should exceed $1M and the token must have liquidity on the chain where it is being farmed (or a straightforward method to bridge it to a chain with sufficient liquidity).
• The risks associated with each proposed farm must be properly disclosed in the proposal.
• All farms (and necessary bridges to sell rewards) must be compatible with Gnosis Safe multisig wallets.

The Google sheet linked below displays a list of all proposed yield farms, allocations, TVL metrics, projected yields, projected income, and LP size for each reward token. Audit links and risks are provided for each protocol, along with a DEX link where the reward token can be sold.

https://docs.google.com/spreadsheets/u/0/d/128yyaT5V-465wGe4gIRJaZvnIGL_DYPBg8cmC1wUnt0

Next Steps

A high level summary of how the proposal will be implemented:

• The DAO will adopt the guidelines set forth by this proposal to evaluate future yield farming opportunities.
• The DAO will deploy capital into the yield farms outlined in the google sheet.
• The DAO will adhere to the asset allocations outlined in the google sheet.
• The DAO will sell rewards from yield farming activities on a weekly basis.

Voting

This is a DAO Proposal that was drafted by community member Avicenna on December 7th, 2022. After 16 days of community discussion, the proposed edits were incorporated and consensus was reached. This vote will be subject to a 24 hour warmup period, followed by a 72 hour voting window.

If you agree with this proposal, a [YES] vote would confirm the following:

• A set of guidelines for how to evaluate future yield farming opportunities.
• Agreement to deploy capital into the yield farms described in the google sheet.
• Agreement to the allocations as described in the google sheet.

If you disagree with this proposal, a [NO] vote would result in:

• No set guidance for evaluating future yield farming opportunities and no funds being allocated to any yield farms at this time.

Copyright

Copyright and related rights waived via CC0.