10-15% seems good to me with the lowest effort management strategy you giga-brains come up with.
OIP-13: What % of excess DAI should Olympus deposit into Aave?
tex I can understand wanting to limited exposure to any one given protocol but IMO what's the difference between owning aDAI and DAI? Two protocol risks instead of one but if maker has problems I'd imagine all of crypto has problems. I agree with the comment about needing to monitor the $ and % amount as the treasury grows but I dont see any immediate downside if a larger % is put into the pool since the protocol can access it as needed. I don't see diversification benefit in putting a smaller % in DAI unless we were to deploy to a more risky protocol like FRAX. That I could understand but DAI is a cornerstone of crypto and treating it like an algo stable or some other coin is leaving yield on the table IMO.
Very rough draft on a sensitivity analysis but gives a bit more clarity on the potential yield on various allocation and potential rebases (plz let me know if the rebase range is off - currently moving +/- 0.25%). I think somewhere in the 15%-20% range is resonable to start with more diverisification in the future being ideal.
Excess Reserves $7,000,000
AAVE APY 2.33%
AAVE APR 0.63%
Total 2.96%
Allocation
Yeild 1% 5% 10% 15% 20% 25% 30% 35%
1.96% 0.02% 0.10% 0.20% 0.29% 0.39% 0.49% 0.59% 0.69%
2.21% 0.02% 0.11% 0.22% 0.33% 0.44% 0.55% 0.66% 0.77%
2.46% 0.02% 0.12% 0.25% 0.37% 0.49% 0.62% 0.74% 0.86%
2.71% 0.03% 0.14% 0.27% 0.41% 0.54% 0.68% 0.81% 0.95%
2.96% 0.03% 0.15% 0.30% 0.44% 0.59% 0.74% 0.89% 1.04%
3.21% 0.03% 0.16% 0.32% 0.48% 0.64% 0.80% 0.96% 1.12%
3.46% 0.03% 0.17% 0.35% 0.52% 0.69% 0.87% 1.04% 1.21%
3.71% 0.04% 0.19% 0.37% 0.56% 0.74% 0.93% 1.11% 1.30%
3.96% 0.04% 0.20% 0.40% 0.59% 0.79% 0.99% 1.19% 1.39%thedamnswan Love this! A flexible approach in place is really what my post was getting at in under utilizing AAVE and DAI from a % of assets standpoint when the risk is essentially the same. Thank you for this
andrewlias Average that out and you're sitting at 9.9%
Me likey
I think we should put around 10%-20% of our DAI reserves into Aave. I believe Aave is as close to risk free as it gets in crypto and having all our DAI passively sitting in our treasury doesn't really bring much value to the ecosystem.
Wrt risks I'd say that at this point our biggest (and systemic) one is over reliance on USDC (which is backing both DAI and FRAX), not a possibility of partial loss from battle tested lending platforms such as Aave.
I would also recommend no more than a 10% move.
This would be small enough that we could deal with a total loss, however unlikely. Also, if over time we scale into 5-10 relatively uncorrelated partnerships/investments and develop olympus dao into a holding company style collective.
Future projects could include the leaders in the metaverse (e.g. AXS) and other ecosystems.
TL;DR. Great proposal. I vote for 10% allocation to start.
I would quibble with the word 'excess'. We don't have an 'excess' of RFV and I don't think we should ever think of the Treasury as containing an excess. The Treasury is what it is, and we should manage it holistically as we would any portfolio- with specific risk and return objectives. I think this framing is important for effective long-term management.
With that in mind, I suggest we start very small, say 10% allocation of the Treasury to AAVE. It would be an easy position to scale up if things are going well, so there's no need to move into AAVE in a big way, particularly if better long-term, low-vol investment options begin to emerge.
I think once this proposal is implemented it will continue to spark more proposals for discussion around enhanced Treasury management.
For example, since they recently passed their code audit and have emerged from Alpha, I would advocate for a very small allocation of Treasury DAI (<1% or <$100K, whatever is smaller) to Orion Money (https://orion.money), which is currently yielding 12% via AnchorProtocol paid in UST and swapped 'under-the-hood' back to DAI on demand. As Orion solidifies and deposit caps are raised, we can scale up this position slowly, if the Community Agrees.
My vote is 10%. Also, as small mitigation against USDC we could begin Treasury allocations via Orion Money into Anchor Protocol (very small to start, <1%). The underlying in that case would be held in UST and redeemable for DAI.
p.s. I wish we could get this overall approach to treasury management for the Terra Community Pool. It would be a $600m UST monster.
100% agree
10-ish % sounds good and I agree with many posts that we should keep an eye on it and reduce it in case we have a wild increase in the treasury or if OHM price drops and pushes up the % of the treasury in Aave.
I like the math relating to 3, 3 but it's pretty convoluted. I wouldn't have spotted it.
It's nice that the $1m works out to 2sqrt(33), though my vote is to go with a fixed $1m for now rather than a decision to allocated a set % of the excess. We can revist how this is working later.
