CIP-205 Treasury Management

Treasury Management proposal for CityDAO

CIP-205 and CIP-204 have been combined to create one proposal here under CIP-205

Summary

CityDAO has $2.6 million in assets ($1.7 million in ETH and $982,000 in USDC) that are not being put to use or earning interest.

This proposal has two main objectives:

  1. Earn interest in the form of staking income from the current ETH we hold.
  2. Swapping $800,000 of USDC back into ETH.

This asset management plan has been approved by CityDAO’s outside council.

Current Assets

Wrapped Ether: 656.55 WETH | $1,633,605 USD
Ether: 12.58 ETH | $31,273 USD
USD Coin: $982,483 USD

Total Assets: $2,647,361
as of 2024-01-15

Staking Ethereum

This proposal approves swapping 656.55 WETH into two liquid staking tokens on a 50:50 ratio. Lido and Rocket Pool have been selected as the two liquid staking tokens to provide diversity.

Lido

The biggest operator in Ethereum liquid staking, with $23 billion of ETH under management. Lido dominates the liquid staking market and as such, we’ve decided to limit our stake to 50% to increase diversity and decentralisation by also using Rocket Pool.

Rocket Pool

Trustless and decentralised liquid staking, with $1.5 billion of ETH under management. Considered the gold standard for decentralisation.

Income

Assuming a 3% return on staked ETH, we should earn 20 ETH per year, or $50,000 USD.

Swapping USDC to Ether

This proposal approves swapping $800,000 of USDC into staked ETH over the next 4 months. We will retain $182,000 in USDC to cover the cash flow requirements of the DAO for the next 18 months.

$100,000 of USDC will be swapped every two weeks (fortnightly) with a Dollar Cost Average achieved over 4 months from the date this CIP is approved.

Each $100,000 swap will go from USDC to liquid staked ETH, split equally between Lido ($50,000) and Rocket Pool ($50,000) to ensure we’re holding interest bearing tokens.

Market Considerations

The council can override the above purchasing schedule by:

  1. Deferring a scheduled fortnightly purchase with a 75% vote in favour. The purchase will be deferred by two weeks.

  2. Fast forwarding a scheduled purchase with a 75% vote in favour. The purchase will occur immediately after the vote, with the next scheduled purchase two weeks after.

  3. Cancelling all future scheduled purchases with a 75% vote in favour.

Future Treasury Management

This CIP is limited in scope to staking existing ETH and purchasing additional ETH over the next four months.

In the future, we will need treasury management that will cover:

  1. Forecasting CityDAO cash flow requirements and ensuring we have 18 months of cash flow in USD. Quarterly rebalancing will need to occur to sell down a portion of our ETH that we received from staking to fund operations.

  2. Advising CIP proposers who are requesting capital on their impact to the treasury and CityDAO cash flow.

  3. Providing ETH swaps back to USD to fund future activity such as land purchases approved in CIPs

  4. Rebalancing ETH to USD should markets become over-hyped.

Whilst this is out of scope for this CIP, CityDAO citizen (Reeves) and council members (Blackacres and one other TBC) will be working on a future proposal for treasury management to be implemented after this CIP ends in four months.

Compensation

Reeves will be compensated $6,000 USD over 4 months ($1,500 per month). This comp covers the establishment and execution of this CIP and working with the council to propose the future treasury management.

Blackacres is a council member and is already compensated by the council ($1,500 per month).

Conclusion

This proposal outlines a balanced and risk minimised approach for long term financial sustainability. The yield produced from Etherum staking provides needed cash flow to our DAO, ensuring we are still here in 10 years time and able to seize future opportunities.

22 Likes

I think this is a good idea. We should certainly stake the ETH that we have.

3 Likes