[ARFC] Treasury Management - Add to rETH Holding

Governance
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title: [ARFC] Treasury Management - Add to rETH Holding
author: @TokenLogic - @MatthewGraham & @DefiJesus + ACI - @MarcZeller
created: 2023-10-14

Summary

This publication proposes acquiring rETH with ETH held in the DAO’s Ethereum Treasury.

Abstract

This publication proposes converting a portion of the wETH, awETH and wEthWETH held in the Treasury to rETH.

A balance of 100 aEthWETH will remain in the Treasury to facilitate on going DAO expenses such as the Quarterly Gas Rebate and any other future expense that arise.

Motivation

At the time of writing the Aave DAO has the following assets in the Ethereum Treasury:

Asset Qty Value ($)
wETH 14.56 22,543.32
awETH 530.39 820,829.60
aEthWETH 510.45 789,962.05

The following assets are available to be claimed from the Paraswap Legacy Fees and Fee Claimer contract:

Asset Qty Value ($)
wETH 4.53 7,011.99
wETH 10.8 16,717.32

This publication proposes converting all wETH, awETH and all but 100 aEthWETH to rETH. The 100 aEthWETH is to remain to support on going DAO funding.

The table below shows the yield differential between the various assets:

Asset Yield (%)
wETH 0.00
awETH 1.26
aEthWETH 1.97
rETH 3.07

Based upon current market conditions, the additional yield generated by converting the assets as outlined to rETH is $23,266.50.

Upon implementation of this ARFC, the additional yield generated is ~$654.42, for the conservative and ~$2,782.86, for the aggressive approach due to the reduction in deposit rates of approximately 10.3 bps and 33.5bps respectively. This does not take into consideration how the market will then adjust after the ETH v3 interst rate parameters are changed.

Specification

The following is to be performed:

  • Deposit all wETH into aEthWETH (Aave V3 wETH)
  • Withdraw all awETH (Aave V2 wETH) into ETH
  • Withdraw all but 100 aEthWETH (Aave V3 wETH) into ETH
  • Deposit ETH into RocketPool’s rETH
  • Transfer rETH into collector

Disclaimer

TokenLogic receives no compensation beyond Aave protocol for the creation of this proposal. TokenLogic is a delegate within the Aave ecosystem.

Copyright

Copyright and related rights waived via CC0.

6 Likes
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Hey @TokenLogic,

We support moving the DAO’s ETH into an LST, however, we are curious why rETH was chosen over stETH/wstETH? Or why the proposal wasn’t framed to provide the option between rETH and stETH?

Considering the proposal is based on needing to cover DAO expenses it would make sense to maximise the yield from the DAO’s ETH holdings, which would mean acquiring stETH instead of rETH as shown below.

image

Thanks!

3 Likes
4

This proposal not only optimises risk adjusted yield for the DAO, but also helps the broader agenda of decentralisation of staked ETH, hence I am an favor of this move.

5

We’re aligned here with @WintermuteGovernance’s comment. It’s good to be diversified but the DAO already holds equal amounts of rETH and wstETH.

So if we’re aiming for yield optimisation for a treasury management approach - stETH makes more sense here.

2 Likes
6

Hello,

With the ACI, we represent the primary lobbying force for the acquisition of rETH.

We hold no reservations against Lido, and we’ve experienced significant synergies with stETH.

Decentralization stands as a foundational value of our ecosystem, and endorsing the diversity of LSTs further strengthens this decentralization.

Considering that the financial implications, specifically the “lost revenue,” are relatively minor when opting for rETH over stETH, we firmly believe that it would be a powerful and symbolic gesture for the Aave DAO.

2 Likes
7

We don’t have an issue with this. Just to be clear - when talking about treasury management in the institutional world it’s all about getting the best optimised return.

In this scenario, if we value decentralisation over optimisation then yes rETH is good holding.

3 Likes
8

We acknowledge that from a yield perspective, stETH is a better alternative, however, we echo the ethos of decentralization and support adding rETH to the DAOs holdings.

2 Likes
9

Maximizing the yield includes looking out for Ethereum’s best interests. As ever, it’s important to look at things through a risk-adjusted lens, both via direct impact and indirect impact. Lido is incredibly dominant in the [space](see https://dune.com/hildobby/eth2-staking), and their governance is very concentrated (compare $1.68 | Lido DAO Token (LDO) Token Tracker | Etherscan with participation on Aragon (Aragon) or Snapshot (Snapshot).

Lido is also dramatically less resilient than Rocket Pool to a mass slashing event (As see by Lido’s ~ 6.2k stETH in their insurance fund covering up to 276k validators; RP have 8 or 16 ETH per validator).

As a name-brand protocol, Aave have the ability to not only determine their own trajectory, but also set the tone for others in the space – let’s do our best for Aave and Ethereum.

Thanks Val for the help with the feedback.

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Hi @TokenLogic, could you explain how you got the ~$654.42 and $2782.86? I believe Gauntlet projected slight decrease in revenue for the aggressive case. As for the 10.3bps and 33.5 bps drop in deposit rates, how are those calculated?

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