Proposal 313 (Q5212)
From Nouns Dev
A Nouns proposal.
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | Proposal 313 |
A Nouns proposal. |
Statements
4
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313
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stETH peg protection
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NounsDAO holds over $26M in stETH, representing more than 50% of its treasury. To hedge against risks associated with stETH, the DAO can purchase stETH depeg protect ion on the Cozy v2 protocol. This will protect the income-generating portion of the treasury and allow the DAO to execute transactions on L2, starting with Optimism.
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4,000
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219
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Nounsdao
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13
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4,000
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187
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1
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16 June 2023
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112
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1. testing 2. lists ----- 1) testing 2) lists
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30
join a governance pool, learn more at https://federation.wtf
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wow love the energy from nounsprotector.eth. thanks for digging into the details and sharing the results of your research. I do feel differently on the conclusion though. I dont feel like this is a low effort product lobbying prop. stETH peg protection is something we actually could use (of all the defi stuff out there this doesnt feel random to me) and also theyve done their homework to make their L2 product work for our L1 dao. the optimism proxy contract we get out of this makes it feel like a good faith engagement to me. however I do see the liquidity concern that nounsprotector is raising. given this prop is just to get the funding for the audit for the optimism proxy contract, Im happy to vote FOR this prop and will just say that the second props execution ask should be appropriate to the liquidity available (or else it would be hard to vote in favor!)
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While I appreciate Nounsprotectors investigation, I dont view this prop as a governance attack at all. Exposure to stETH is a real risk to the DAO and imo worth us funding investigations into mitigations – Cozy being one such possibilities. I do have some general questions around the exact approach we should take to this risk though: 1) Are we taking on any *additional* risk with stETH given how much Lido already underpins ethereum? 2) If we think there is marginal risk, how does insurance compare to diversification or reducing our exposure to any staked ETH? Regardless, I think this prop is a reasonable exploration and worth funding given its relatively low risk. Even just getting an Optimism proxy itself is worth the price of admission on this one!
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46
No se vieja estoy re laco
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20
(noun40 voting via agora proxy)
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We object to this proposal, as we see it as a covert governance attack, wasting the time and energy of governance participants. Cozy is a credible-neutrality insurance protocol that we value highly. Similar models have been adopted by Liquity and Aave (...) and have stood the test of the market. For this reason, we are optimistic about Cozys future. But it offers a crap insurance proposal for nounsdao with grossly unequal risks and benefits to recklessly usurp the time and energy of all governance participants and covertly complete its product seeding user capture plan. This behavior is disgusting to our researcher of the proposal. Our opposition stems from two main reasons: 1. Cozy currently lacks the capacity to address the issues it claims to solve. Its insurance pool is only $500,000, and its contract has only been deployed for a month, yet it claims to protect $1,000,000 in assets. For policyholders, this presents a garbage product with a severe imbalance of risk and reward. 2. The second reason comes from the opinion of the proposal researcher: I view this proposal as a covert governance attack. The time and energy invested by the Nouns collective in governance is a pure public good, and Cozys blatant consumption of all governance participants time and energy is a Standard hitchhiking behavior. It forced me to spend an hour researching its mechanisms, gathering data, and creating documents to explain to our squad why its proposal is terrible.. If there are too many proposals like Cozys, I wont invest time in researching and debating Nouns proposals anymore, which infuriates me.
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I would vote for the Nouns/Optimism contract audit separate from the it’s association with treasury risk management because I think there are great things we can do with it like OP Mainnet/Zora Network Droposals.
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My thesis as a delegate is: “Nouns has a unique role in the ecosystem as a gathering place around public goods.” I agree with the points here that treasury risk management should be handled via the ETH to stETH ratio, not via buying peg protection. I also think that, while this proposal itself is relatively small and low risk, it opens the door to more complicated treasury management techniques. DAO treasury management is a slippery slope. As soon as opportunities for more yield (or alternatively, further hedges) come up, it begins to consume the DAO. Similar to Wilson’s reasoning, if we buy peg protection, what comes next? This is an example of this slippery slope, where techniques gradually grow more and more complicated. Eventually, the complexity grows to the point where it can threaten the security of the DAO’s treasury. (Not with this proposal, which is quite reasonable and helps the security of the treasury, but only in proposals that go further down the slippery slope.) We should draw a line at staking ETH in Lido. If we wanted peg protection, holding stablecoins would likely be a better hedge, given how much a catastrophic stETH depeg would impact the price of ETH. I have a lot of respect for the work that Cozy Finance is doing, and I also believe that an audit of the L1Proxy is likely useful for the industry. But I would prefer that those funding requests are separate from treasury management techniques. I am voting No because the slippery slope of treasury management — as much as I like the specific project, I view it as risky to set a precedent of active treasury management and yield/hedge chasing. *sent from voter.wtf*
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14
a depeg of 50%+ likely results in nearly full loss, in which case the coverage does not suffice. this was more of a concern pre-withdrawals but we see the risk as very low now especially since our treasury is not high time preference, so we could wait out any short term volatility.
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On behalf of UglyDAO
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we have 26 mil in steth, if we are concerned with a 50 cent depeg we should consider diversifying the treasury as opposed to insuring only 1 mil (which decays to 500k after a year) -- it might make sense to consider insuring a larger % / the entire position if there was proof of liquidity. i would likely support a separate prop for optimism/L2 governance as this opens up some exciting possibilities *sent from voter.wtf*
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Grateful to the Cozy team for this proposal, but I am against. I have previously voted against staking ETH, at all. I do not think the DAO is optimized to make these kinds of risk and yield decisions. If we are concerned about depegs at all, I think we should just hold ETH. I am sympathetic to the point that voting on things like this is not a great use of the DAOs time. I *do* want to see the DAO support important DeFi work where it can make sense, though. To be honest, I think I would be more open to just doing benevolence grants for co-marketing or something like that, rather than actually using our treasury in DeFi. My vote on [Proposal 217: Stake additional 5000 ETH in Lido](https://nouns.wtf/vote/217) > I think that using the treasury to earn yield is a slippery slope and is a path we should avoid. The treasury should be used to fund Nounish ideas. We should not be seeking 5% yield opportunities but rather opportunities to 10x or 100x the number of people who know of Nouns, 10x or 100x peoples passion for Nouns, 10x or 100x Nounish organizations or creators resources, etc. I see seeking treasury yield through DeFi as a distraction from these other things and think it is outside the DAOs mandate. I also worry that putting the treasury to work earning yield will make people less inclined to spend the treasury when I would prefer something of the upset approach: burn stale treasury ETH past a certain date as an incentive to us it or lose it. *sent from voter.wtf*
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Averse to this proposal, both in premise and in execution. In premise, I generally dont view insurance as a great asset to purchase - if the underwriter is pricing the insurance premium correctly and generating a great return, it necessarily means the buyer is not getting a good return on their premium payments. Conversely, if the underwriter is pricing the insurance premium incorrectly, the buyer may get a good return on their payments, but ultimately runs the risk of counterparty insolvency. In this case, paying over 1% fees sounds cheap until you compound that number for a few years and realize the opportunity cost. In execution, I find it odd that we first have to pay to get the contract audited. Are cozy contracts not already audited? If not, why is that something we should cover? Its a little rich for us to pay to verify the veracity of the product were aiming to purchase itself. Second, the pool seems to only have $300k left, which is nowhere close to covering our actual stETH exposure of $26M. If we are serious about risk management and insurance, there are better ways to accomplish the same goals (ie other LSTs, initiating short perp positions, etc). If stETH depegs more than 50%, the entire ecosystem will have bigger problems than waiting on a $300k insurance payout. *sent from voter.wtf*
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*sent from voter.wtf*
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This Week:-1. A proposal involving a 12 ETH pool for protection is discussed, with comparisons to OTC trades.-2. Concerns about counterparty risk and market size are raised.-3. Questions about the protocol, APR adjustments, and protection amount are asked.-4. Cozy is mentioned as not having enough funds to cover 1M worth of stETH.-5. Uncertainty about who will write contracts for the initiative is expressed.
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This Month:-1. A proposal involving a 12 ETH pool for protection is discussed, with concerns about counterparty risk and market size raised.-2. Uncertainty about who will write contracts for the initiative is expressed.-3. Fluffiest expressed that the math for a certain proposition does not make logical sense.-4. Sqx. commented that paying 1.5% to protect 4% seems off in a 5% Risk Free world.-5. Recent MakerDAO governance discussions have raised concerns about GUSD's heavy reliance on the PSM and Gemini holding GUSD reserves at Silvergate.-6. Votes favoring the removal of GUSD from the PSM led the tally until the end of the voting.-7. Venture capital firm ParaFi Capital, investors in GUSD's parent company, delegated enough voting power in the last minutes to change the end result.-8. The incident occurred due to GUSD having too many stakeholders and flaws in the governance mechanism of MakerDAO.
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