Treasury Investment into stETH

Simple Summary

Invest a portion of the treasury to increase PREMIA staking rewards and grow the treasury balance.

Abstract

Currently, the Premia treasury is not actively utilized. In addition, xPREMIA has only a single source of revenue from protocol fees. This proposal would create an additional source of revenue to grow the treasury and increase PREMIA staking rewards. The idea would be to invest 50% of treasury ETH funds into stETH, the Lido staking token, and allocating 80% of those returns to PREMIA stakers and retaining the remaining 20% in the treasury.

Specification and Implementation

Premia would invest 6,000 treasury ETH, roughly 50%, into stETH with a current staking rate of ~4.9% APY. This swap would occur on the open market to capture the ETH/stETH premium. Lido is a reputable leader in staking Ethereum and is responsible for staking $6.8 billion. They have been utilized by several other protocols for treasury diversification as well. In addition, stETH tokens are highly liquid and would create a long-term, sustainable way to incentivize PREMIA staking.

Much like protocol fees are collected now, 80% of staking rewards from the stETH investment would be collected and converted to PREMIA and distributed to xPREMIA holders. The remaining 20% would remain in stETH.

Premia is fortunate to not have a substantial amount of the treasury in PREMIA tokens. Starting with ETH allows for investment without the added complication of selling PREMIA tokens and negatively affecting the price.

(This proposal is not meant to be inclusive of diversifying the treasury into backstop, development, or advertising funds. However, this proposal could act as a first step to passing a more comprehensive plan for treasury diversification and revenue management.)

Motivation

Investing a portion of the treasury to stETH has the benefits of:

1. Increasing PREMIA staking rewards until option purchase volume matures
2. Adds support to grow the treasury outside of protocol fees
3. Establishes a revenue source to be governed and directed towards other initiatives in the future