[RFC-8] Treasury Management Proposal

Summary

This RFC aims to propose a treasury management solution for the PopcornDAO treasury, specifically for the 2,030,443.89 USDC in Aragon.

Motivation

After researching stablecoins and yield generating opportunities, I would like to propose using Origin Dollar OUSD for the following reasons:

  • OUSD is a stable currency that is backed 1:1 by USDT, USDC and DAI.
  • Funds are managed by smart contracts and community governance. There are no corporate gatekeepers controlling your money.
  • OUSD generates yields by deploying the underlying stablecoins that were deposited to the OUSD smart contract to other DeFi protocols such as Compound, Aave, and Curve. There may be new diversified strategies added to the vault in the future. Collected interest, trading fees, and rewards tokens are pooled and converted to stablecoins to produce OUSD-denominated yields.
  • Received OUSD begins accruing compounding yield immediately.
  • Nexus Mutual offers insurance on deposits:

Action steps:

  • Withdraw USDC from Aragon into a multisig controlled by Popcorn Core team members
  • Convert USDC into OUSD with OUSD dApp
7 Likes

Nexus mutual providing insurance on deposit is a no-brainer as we didn’t have that with usdc on Aragon. notable questions: are we going to be paying insurance premiums? Or are we just locking our capital in Nexus Capital to underwrite insurance?

3 Likes

Origin is a legitimate stablecoin that provides crucial diversification for the Popcorn ecosystem. I look forward to the new yield generating opportunities that can come with this proposal.

1 Like

OUSD is battle tested and a lower-risk way to put our treasury to work.

A couple points on Nexus Mutual to consider: First, they only cover losses due to an OUSD de-peg of over 10% — any other issue leading to a loss would not be covered. Second, the premium on the insurance would eat significantly into the profits generated by holding OUSD.

If we go down this path we should carefully consider whether the limited coverage Nexus Mutual offers is really worth the cost.

3 Likes

I’d like to propose to deposit into velodrome’s incentivized LUSD/sUSD pool. The assets are very well decentralized and have an excellent track record.

Hey @krychek, Peter from the Origin team here! This is a great start, there are a few things I’d like to add:

  • more information on the Origin Dollar can be found via the OUSD docs site
  • there would be 0 slippage to convert the Popcorn USDC into OUSD via the OUSD dApp, type in the numbers and you will see!
  • there are no lock-ups, contracts, conditions, or terms, to earn with OUSD, it is completely non-custodial
  • yield generated from OUSD is distributed back to the holders of OUSD in the form of a positive rebase at least once per day, though sometimes multiple times in a day if the rebase function is called
  • OUSD sitting in smart contracts (ie Curve, Uniswap, Sushiswap) does not rebase, instead the yield is sent to those holding OUSD in a rebase-capable wallet, such as Metamask, Ledger, Gnosis safe
  • this creates a multiplier for OUSD holders, sometimes as high as 3x, which is one of the reasons OUSD can achieve a higher yield than manually deploying on Compound, Aave, etc
  • the current OUSD deployment can be viewed via the OUSD analytics page (daily APYs seen if you click the “365 day” button)
  • OUSD deployment is voted on using the OGV token, 1 OGV = 1 vote
  • OGV holders can also stake their OGV to earn a portion of the yield generated by OUSD (this is already baked into the numbers on the analytics page)
  • OUSD has been heavily audited with 7+ audits since 2020. Security is prioritized over new feature development and we now have OpenZeppelin on retainer
  • OSUD insurance is also available via InsurAce and is one of only six projects to receive the highest security rating of AAA
  • OUSD has been battle-tested with a TVL of $300 (Dec '21), yields do not diminish with scale

I’d be happy to answer any other questions!

I would also like to note: many members of the Origin team, including both founders, are holding a significant portion of their personal wealth in OUSD. Origin Protocol’s corporate treasury is also holding millions of dollars in OUSD. We have skin in the game and are willing to put our own money at risk with the code we have written

This is correct, utilizing Nexus Mutual or InsurAce would lower the amount of yield Popcorn can earn with OUSD (cc @Mukhtar_yah)

However, it may not be necessary to purchase this coverage, as there have been 0 incidents since the first OUSD audit was complete. Some of the steps Origin has taken to mitigate the chance of losing funds include:

  • We regularly have our work audited by top auditors
  • We have retained Certora to formally verify the various security properties of our contracts. They helped us establish automated verifications that will run anytime we update our contract code
  • We have automated checking for common errors with Slither and Echidna tests. Together, these alert our team to common security issues in addition to our own test suite
  • Code reviews involving our smart contracts are incredibly rigorous. We require at least two engineers to review each change with a detailed checklist
  • A timelock was added that enforces a 48 hour wait period before any changes to the OUSD contracts can be executed. Time-delaying admin actions gives users a chance to exit OUSD if its admins become malicious, are compromised, or make a change that the users do not like
  • We have formalized an engineering rotation for reviewing attacks on other projects as well as ensuring we deep dive into each of these reviews, including reviewing the affected contracts’ source code ourselves. We’ve observed that attackers often exploit the same fundamental vulnerability on multiple different projects. By reviewing other project’s vulnerabilities, we force ourselves to stay up to date on the latest security threats in our industry and are constantly learning from their mistakes

As usual I have a contrary opinion here :smiley:

I don’t think any yield that can be earned on stables is worth deploying the treasury in this market environment! This runway is Popcorns lifeline and should be protected at all cost.

Additionally, if deployed anywhere the DAO should wait for the DAI Savings Rate proposal to pass on Maker DAO and deploy there if anywhere at all, as Maker as a protocol has by far the biggest Lindy effect!

5 Likes

i agree with the guy above, not worth risking the project’s treasury for a few %

1 Like

I tend to agree as well. At least it would be great to understand what are the next best alternatives for this move, and what the risk associated with it is.

Putting Popcorn’s lifeline on OUSD doesn’t seem like a no-brainer move to me. Would rather look at diversifying further with different low-risk options and taking a structured approach to achieve transparency for the community in comparing these.

@krychek, who would take on a task like this in the current set-up?

Appreciate your contrary opinion. Principle protection is one of the key requirements Origin considers when selecting the yield strategies each week. Like I mentioned earlier, we’ve got skin in the game too with personal funds and stand behind the code we’ve written.

With Maker’s MIP65, 81, and the GUSD proposal all passing, Maker is slowing becoming more and more centralized. A majority of the top Maker delegates received their MKR from Rune and are swayed to vote in his favor. Given everything that has happened recently with FTX, SBF, Alameda, Gemini, and Genesis, is it really worth putting more trust in a centralized party?

If the Maker proposal were to pass, OUSD rates would be 2-3x the APY of DSR, but in a fully decentralized fashion.

Origin launched the same year as DAI my guy!

OUSD has been and will always be extremely low risk. Completely non-custodial at all times.
I’d be happy to set up 1v1 calls to dive further into OUSD with @kyaruchanfx, @Hellboy, or anyone else with questions. Here’s my calendar, book any available time!