Discussion: DAO Finances & Stakes

Hello fellow Bancorians,
I want to write a proposal. However, I need some data and I’m having trouble finding it, and also I’m not 100% sure what I want to propose can even be done in the first place. So this thread is partially a discussion of what can/should be done with DAO finances, and partially just me asking for where I can find data on what the DAO itself has at its disposal.

I want to propose that we acquire a stake of some size in, for example, Keeper DAO. That is to say, I think that our DAO should buy and hold some amount of $ROOK (in line with my example), and collectively we should vote on how that stake votes in Keeper DAO should we take an interest; I make an example of Keeper specifically because we’ve integrated them into our systems.

If we integrate a project into our systems, we should make sure of at least the two following things:

  • That we do not put the project in the core of our system; that should remain purely in-house code, and it should be laser-focused on what we do and nothing else. External projects are peripherals, and we need to be able to perform our core-level function such that we can guarantee it will do what it says on the tin 100% of the time, regardless of what anyone else in the defi space is doing. Ultimately, this is a development subject and can be discussed at a later time. More importantly…

  • That we own a stake in projects we integrate, if possible, and furthermore we might avoid integrating projects that we can’t own a stake in. Regardless of exactly where a project fits into our system, any change will affect the surface-level functionality (which is the end-user experience), even if imperceptibly. That is a significant factor in shaping user opinions of us, and that means we absolutely should have a say in how those projects are governed to ensure that if another DAO has a proposal that will negatively affect us, we have a tool at our disposal to push back.

In order to even begin proposing this, however, I need to know what funds the DAO has where. In essence, I need a page that I can look at that tells me “We have w total, x free, y locked in A, z locked in B, …” and so on. Or something to that effect; Dune doesn’t seem to provide that sort of info. I’ve seen a couple people suggest using the Vortex Burner for things; aside from being a terrible use of the Burner almost every time, I think the ideas spring from not knowing what funds we actually have available to use for things like that.

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This is an interesting idea, YFI has done similar things diversifying their treasury.

I had an idea, if it’s possible that is. @mbr @MichalHerzyk

Could we allow people to forgo their trading fees in exchange for an equivalent of BNT ? That is to say give the staker the choice to receive native token rewards or BNT at the same rates as eachother.

Could work like this :

  • Stakers opt-in to receive BNT instead of Native Rewards.
  • Trading fee rewards in native are traded for BNT or newly minted BNT.
  • Trading fees are given to protocol and protocol adds them to the pool.
  • These Tokens are owned by the Protocol while at the same time create permanent Token Side Liquidity.

The difference between trading and minting BNT could be done in a way that is more capital efficient as well I’m sure. Doesn’t have to work exactly that way but there is a lot to be gained from Bancor having a source of permanent increasing token side liquidity. This would also create a deterministic minimum price floor for BNT.

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Tenzent’s suggestion is creative, but requires an opt-in and I dont think would have much of an uptake. If I understand it right it would lead to increased minting and emissions and thus is in the long term inflationary. I would rather take a miniscule tax from all swap fees and use them for DAO activities. The main problem is that this would lead to a wild assortment of tiny amounts of all tokens in various wallets, which would need swapping and cost a lot of gas. A simpler approach would be to only tax the BNT side of the transaction. This would be much simpler and would give earnings in only BNT. Anyone doing a two-legged swap would pay and only those swapping into BNT would avoid the tax. 1% of swap fees? Would this cost too much gas?

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You bring an interesting point and you are right that it could be done in a much simpler way.

Couldn’t we simply put a small % of the tokens earned by the vortex as permanent liquidity which could also serve as a treasury. I think the Vortex exists to lock BNT Liquidity, it could also be used to create token side liquidity.

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You are right that the mechanism to collect a tax from swap fees is already there. So the simplest thing would be to take a percentage of the vortex TKNs after they have been swapped to BNT and divert it into a wallet or pool instead of vBNT swap. Of course this muddies the water with the vortex mechanism, but it would be a very simply way to build a DAO fund.

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Just quoting myself from another thread (DEPRECATED) (BIP) Reallocate 50% of Vortex Burner vBNT for Bancor Brand Awareness Campaigns - #14 by glenn with a similar in nature idea.

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All good comments, but I dont think it means that its decided one way or another.

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The good thing with allowing people to receive their rewards in BNT is we are basically just facilitating a swap for them, the network doesn’t loose anything since it gains it back from the value of tokens underneath. but a minting feature of sorts would be required if we want to lock that liquidity forever, since just trading it for them does not lock up any token side liquidity.

I’m really interested in ways we could somehow lock up tokens the way we do with BNT in a capital efficient way if anyone has any ideas I’d love to hear them.

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It seems like we should figure out how to get a Capital Reserve (if we don’t already have one; haven’t seen any answers yet one way or the other) before we can decide how we use one, and it seems like the least disruptive/most prudent option is to tax a portion of all swap fees and to stay the hecc away from the Burner.

Firstly, I think that we should have one tax that feeds into the top-level Treasury, and from there all funds are divided. It would be unwise to tax swap fees more than once, as that’s more taxes to track and will lead to either all flows reducing to a trickle to maintain an overall tax rate or to all swap fees being eaten up by an ever-growing sea of taxes for new things that we need to fund. Either one is bad, so only one tax ever, and the rate can be decided on by governance now and automated later.

You might think, “that’s just kicking the can down the road.” This is not the case, as the Treasury acts like a buffer and allows budget flows to continue at a consistent rate undisturbed for a period, even if swap fees are lighter for the period while significantly extending “time to bingo fuel” when times are good.

We should also decide the exact nature of the Capital Reserve. Should we keep it in BNT, thus keeping it one leg away from any TKN, or should we keep it in TKN for diversification? Or some combination of the two?

Maker, for instance, keeps their “Surplus Buffer” in Dai collected from stability fees; this model seems to work for them, but then again, they’re a different class of DAO. They’re lending, we’re markets. But maybe we can use that!

What if we kept a Capital Reserve (whatever exact form that takes) but instead of paying out of it directly, we use it to mint Dai as needed (from a Keeper-underwritten Vault!) and use future swap fees to pay back the debt? This way, we’re not swapping anything, we can ensure via code that the Capital Reserve will only ever go one place (our Maker Vault, to be minted), we can give grants and such in a (permissionless) stablecoin that we don’t have to make ourselves, and when we pay back the debt we get our collateral back so we don’t lose our diversification.

Alternatively, the tax could just be automatically directed to a Maker Vault (or a contract that periodically dumps its balance into one, to save gas) and then when funds are needed, we just hit a (figurative) Big Red Button and mint Dai. This could probably save a lot of development time–speaking as an hobbyist developer, bear in mind–and there’s a lot of room for optimization, tweaking and improvement (OTI).

If we keep the Capital Reserve in BNT, then we could automatically swap to a Maker ilk that’s favorable when funds are needed, and this kinda sorta preserves the diversification but not nearly as well, and it’s much more costly–more computational steps, more gas required. The advantage is that we can swap to an ilk that has lower stability fees, a higher debt ceiling, or some other favorable attribute.

If we’re not talking about grants, and we’re just talking about budgets (paying for infrastructure we have in the future, etc), we can still utilize Maker loans! All we need to do is stream (via Sablier) an appropriate amount of Dai for the duration of the budget. This ensures that funds are not spent too quickly and that capital (effectively) flows away from us at a constant, known rate. Meanwhile, the debt is being consistently paid down by swap fees; perhaps we can also use streams to handle this, too.

Either way we go with the Capital Reserve, I think we should make use of Maker since it’s there and we’re big enough that we won’t have any issues using their system (dust limit, etc). There’s nothing wrong with doing things in Dai, it’s a decentralized stablecoin; this is exactly the sort of thing I think it’s meant for. Is this the sort of token-locking thing you meant, @tenzent?

Sorry for the wall of text; there’s a lot here in this thread already!