Revised: Less USDC, More ETH [Part 1/X]

Based on feedback, I am revising my original proposal

First, I want to thank those who took the time to read and provide feedback on my original proposal, linked here. For good reason, suggestions were made to revise the initial proposal so that it was more specific, preventing the investment team from operating with a higher degree of freedom.

I believe that this is a reasonable ask, and have written the following proposal (to replace the original one) with this in mind.

The Meta-Strategy for Less USDC, More ETH

For reference, this is a snapshot of the current TSYM treasury. We have over 25,000 USDC, representing more than 60% of the total in dollar terms.

Originally, I suggested that the investment team would not need to pass individual proposals for each new treasury allocation it made, as long as actions aligned with the following meta-strategy:

1. Lower stablecoin reserves from 63% to 20% of the treasury while reallocating to staked ether utility tokens (stETH, rETH, etc.)

2. Increase the yield earned on staked ether tokens through a leveraged “hyperstaking” strategy that captures the delta between the Ethereum staking yield (4%) and the borrow rates (1%) on staked ether tokens. You can read about the mechanics in my previous proposal here.

3. Earn a passive yield on remaining stablecoin reserves by either providing liquidity to pools of stablecoin pairs on AMMs like Uniswap or by providing collateral to lending protocols like Compound

The result would look something like this:

While operating freely within these general confines would have given the investment team the chance to move in and out of various positions at a quicker pace, I can understand how this type of freedom is something that needs to be earned over time. That said, I am now proposing the following specific actions for the investment team to execute on the community’s behalf.

Here is Part 1/X of the Meta-Strategy

In the spirit of being more precise, I am proposing that we divide the broader strategy into several individual proposals. The first one being the following, to be executed on mainnet and via CoW Swap where applicable.

1. Swap 8,000 USDC (30% of current balance) to equal weightings of stETH and rETH over 4 weekly installments starting on December 4th. This would mean that each week, 2,000 USDC would be swapped for a staked ETH utility token. We will rotate between Lido (stETH) and Rocket Pool (rETH) each week, starting with rETH.

2. Swap the current ETH balance for stETH on December 4th and deposit half of this balance into a hyperstaking contract on Definitive.fi that will be built on top of a Compound V3 vault. Then, deposit the other half of the balance into a similar strategy on EthSaver. By doing so, we can diversify our smart contract exposure and lower our total risk as a result.

3. Swap 8,000 USDC (30% of current balance) to DAI (a decentralized USD-denominated stablecoin managed by the Maker protocol) on December 4th. Then, immediately deposit the DAI into MakerDAO’s DAI Savings Rate (DSR) contract pot, currently yielding almost 5% APY.

If all actions are taken, the treasury would then look like this:

Taking another view, the treasury composition would look also like this:

After items 1,2, and 3 are executed, we could then revisit additional allocations to fulfill the remainder of the meta-strategy. This could involve additional swaps to lower the total stablecoin reserves to 20%.

Why not execute this strategy on a Layer 2?

Executing Items 1-3 mentioned above would result in a total of 7 unique transactions. At $10-12 in gas per transaction, the entire strategy would cost less than $100 to implement on mainnet. For this reason, I do not think it is currently worth setting up a new multisig wallet on a L2 such (ex; Base) in order to benefit from cheaper transaction costs. Additionally, we may see higher slippage amounts on our DCA swaps if we take the L2 path.

If we decide to manage our treasury more actively in the future, then it may be worth creating a separate L2-based multisig.