[TEMP CHECK] Convert $2M of ARB in Stablecoins

[0xkeyrock.eth]

title: [TEMP CHECK] Convert $2M of ARB into Stablecoins

author: Keyrock @0xkeyrock.eth

created: 2023-08-11

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Summary:

After successfully completing the CRV OTC deal valued of 2M USDT for the Aave DAO, we propose a conversion of ARB (a volatitle asset) to stablecoins within the DAO treasury. Currently, the DAO holds 2.7M ARB tokens, which equate to approximate value of $3.1M.

Motivation:

Since the DAO has just approved an expenditure of 2M in USDT, we believe it is prudent for the community to consider replenishing this amount with part of the Arbitrum airdrop allocation. In March, a TEMP CHECK was conducted, resulting in the DAO favoring the “mixed option, discuss at ARFC”. However, no substantial progress or proposals have been made regarding the allocation. Thus, we propose to convert approximately 65% of the airdrop into stablecoins.

Specification:

Concerning execution of the swap, we believe that the Curator introduced by @Llamaxyz is capable of executing the swap. Depending on liquidity, this could be executed with minimal slippage. An analysis of potential slippage and impact may be conducted at a later stage if this TEMP CHECK reaches the ARFC stage.

The potential discussion concerning which stablecoin(s) the ARB should be converted into must be deliberated and voted upon at the ARFC stage.

This TEMP CHECK aims to gather community feedback regarding the conversion of 2M dollars’ equivalent of ARB tokens for the purpose of replenishing the CRV OTC Deal.

Disclaimer:

Keyrock has not been compensated by any entity for publishing this TEMP CHECK. We may or may not be active holders of the assets mentioned as part of our core Market-making services. Keyrock is a delegate within the Aave ecosystem.

Next Steps:

Temperature Check: Gather community feedback and assess sentiment towards the proposal.

ARFC: Based on the Temperature Check Snapshot results, proceed to the ARFC stage for further discussion and finalization of the chosen option(s).

AIP: If the ARFC stage Snapshot is successful, submit the proposal as an AIP for voting and on-chain governance approval.

Copyright: Copyright and related rights waived via CC0.

[ApuMallku]

Aho,
Can we offer alternative options? Swapping for ETH or BTC might be a better choice.

[0xlide]

Hi, @0xkeyrock.eth. i am in favor of the sale of $ARB.

Below are additional suggestions from me:

・I agree with ApuMallku and I recommend to exchange to ETH instead of Stablecoin.
・Aave DAO does not have good trader features. So I recommend a 90-day DCA(Dollar-cost averaging) for the sale method.

[0xkeyrock.eth]

@ApuMallku @0xlide thank you for the valuable feedback.

We believe the DAO is already well allocated into WETH, RETH & WSTETH as you can see below.

If more feedback is voiced within the community regarding a non-stablecoin asset, of course this can be evaluated with the TEMP check.

[jengajojo]

Thank you for the suggestion @0xkeyrock.eth I am not in favor of this proposal.

The DAO should find better uses for tokens that it receives via airdrops if the DAO wishes to hold its current reputation in the ecosystem and leverage it for future airdrops. The ARB tokens can be used to encourage building AAVE products on ARB, liquidity incentives or participating in ARB governance via a metagovernance group from the DAO.

[MrKris]

I fully understand that what I’m about to say may generate a chorus of disapproval however in the interest of open debate I’ll preserve.

Has any consideration been given to buying Aave on the open market with the Arb? Yes, I’m aware of the Aave in the treasury and the need for diversification however any Aave purchased could potentially;

• Be staked in the safety module to earn yield which is currently in excess of anything else available
• Which would further support the protocol
• Reduce some of the sell pressure (by staking) potentially increasing the value of the Aave in the treasury
• Could be swapped at a later date if/when Aave increases in value at set percentages generating more income—I’d also recommend same for price decreases.
• Send a positive signal of the protocols belief in its self
• generate interest in Aave.

Yes, I appreciate there would be increased risk in holding too much of the same token and recognise the need for treasury diversification and that Aave is naturally, and rightly so risk averse but thought I’d put it out there for discussion and for people far brighter than I am to tell me why this is such a poor idea.

[ApuMallku]

@0xkeyrock.eth I wouldn’t call it “well allocated”; the ETH allocation should be the highest allocation within the treasury of the DAO. We still support the idea of adding ETH as part of the proposal, it is important to have more options if this proposal goes to the snapshot phase.

[oneski22]

Strongly against the use of ARB (or any other token right now) for the purchase of AAVE.

• Staking in safety module would mean the treasury is farming itself… which isn’t ideal (we already have this issue with the stkAAVE the treasury farmed via its v2 holdings, however at 36k USD, its far smaller than the proposed 2MM)
• DAO’s expenses are presently denominated in stables and AAVE, we have plenty of AAVE.
• Massive slippage - there isn’t sufficient AAVE liquidity on ARB to facilitate a swap of this size. It would require first swapping to stables or ETH, bridging and then swapping to AAVE. Even then we would still see large slippage on the acquisition of 2MM Aave.
• There is no better way for the protocol to show it believes in itself than putting its treasury in its own protocol. Any swap to stables, would lead to those stables being deposited into Aave V3, affirming the DAOs faith in the protocol, and increasing liquidity attracting more users.

[0xlide]

Now is probably not the best time to sell ARB. ETH is highly correlated with ARB, which also deepens the diversity and safety of Treasury.

[EzR3aL]

Do we need stables right now? Do we have an overview of all costs somewhere and all stables we have left in comparison?
If it is not needed at the moment i would suggest swapping ARB to stables in the future.

These ARB could be put to work into Arbitrum v3 if not needed too.

[Alice]

You can see the runway as well as the state of the treasury here:

Aave | Llama

You can also read the reports for more details ^^

[EzR3aL]

Well then the DAO is more than safe at the moment. 10.4 years runway at current spending rate.
I don’t see the need for a swap right now.

[Alice]

You need to takes into account that BGDLabs contract just ended and the DAO might recontract them (it was at 7 years of runway before the end of the contract). ChaosLabs also asking for an extension, and that flipside may also become a service provider in the near future.

I can’t speak for the dao so I can’t tell you exactly how much it will spend in the near future but the computation is a bit moar complex than just looking at a number ^^

Lastly, it’s just my personal opinion but I find this opinion that 10 year is a long time quite short sighted at the scale of a protocol, even moar as it is a blockchain one that may outlive all of us and the generations to come.

[TokenLogic]

Hi @0xkeyrock.eth,

Has any consideration been given to other use cases for ARB ?
One potential consideration is allocating a portion to Aave Grants DAO. This way Aave DAO would retain stables or AAVE whilst using ARB to reward builders who drive value and revenue to the DAO via Aave Protocol.

Options:

• Transferring a portion to AGD and receiving back the AAVE - mainnet
• Next funding round sending ARB instead of AAVE or Stables to AGD

The second option could be considered an Arbitrum Network budget which aligns with the Optimism focused OP airdrop reward allocation, linked below.

Something to note, the Curator relies on Cowswap and Milkman in order to execute the swaps with MEV protection and defined price impact limits. An alternative method for Arbitrum would need to be created to perform swaps. Perhaps Paraswap is a viable alternative and for this a new swaps contract would need to be developed.

The below is the AGD funding on mainnet.

More details on Optimism here.

[ARFC] Return OP to Aave Grants DAO Safe

Title: [ARFC] Return OP to Aave Grants DAO Safe Authors: @corbpage Date: 2023-25-07 Summary: Aave Grants DAO (AGD) was airdropped 300k OP from Optimism to allocate towards grants (OP proposal from May ‘22). While claiming these tokens, they were erroneously sent to the Aave Guardians Safe, instead of the AGD Safe. This proposal is to send the OP back to AGD from the Aave Guadians Safe. Full context below. What happened: Optimism airdropped 300k to Aave Grants DAO to issue grant…

[0xkeyrock.eth]

Hello @TokenLogic and thanks for proposing AGD.

Indeed other use cases for ARB haven’t really been discovered within the Aave DAO. Based on our experience from Uniswap, we feel like there should be a plethora of proposals around the Allocation but nothing happened. Thus, why we felt with the recent OTC deal that it would make sense to convert part of it into stables.

We’re open into repurposing this proposal to a holistic view on what happens with the ARB allocation. In that case we do believe that AGD would be a good option along with a conversion into stables.

Voting options based on feedback from the community:

• Convert into stablecoins (exact amounts to be defined at ARFC level)
• Transferring a portion to AGD and receiving back the AAVE - mainnet
• Next funding round sending ARB instead of AAVE or Stables to AGD
• Convert into ETH (exact amounts to be defined at ARFC level)
• Meta-governance Group from the DAO

Looking forward to receive more feedback from the community.

[MarcZeller]

Hello,

With the ACI we’re pretty neutral on this. Current stable holdings are enough for expected service provider’s fees, protocol revenue is up these days, and selling assets such as $ARB in the middle of the bear market doesn’t seem the most efficient move.

As a remark, cowswap doesn’t exist in arbitrum so it will require ad-hoc swap contracts. It’s probably more time-efficient if the DAO wants to take this path to consider an OTC deal with MM such as @WintermuteGovernance.

We plan on voting ABSTAIN as we have no strong opinion on either direction.

[0xkeyrock.eth]

Thank for the input @MarcZeller.

If the DAO chooses to go the stablecoin or ETH OTC route then we would like to propose splitting half to Wintermute and half to Keyrock. As we’re the proposers and there are conflicts of interest, we can execute our part at cost. (no fees)
We will coordinate with @WintermuteGovernance to see if this is possible on their side as well.

We would also like to invite @0xbilll along with AGD reviewers(@daveytea, @fig to name a few) to voice their opinion regarding the potential allocation of ARB and how it can be deployed within the Arbitrum ecosystem. We will be consolidating the votes for this Temp Check into:

• Convert to stablecoins
• Transfer ARB to AGD (amount to be defined)
• Convert to ETH

[daveytea]

Thanks for the tag @0xkeyrock.eth . Speaking in a personal capacity, i’d support transferring the ARB to AGD. Some reasons:

• No added complexity of conversion of assets
• AGD can use it to incentivise building on Arbitrum, which would align with the ethos of the airdrop (and other airdrops like OP)

Not sure if the entire $3M needs to be transferred to AGD though. Could some of it be used to swap to AAVE, then AGD (or another component of the DAO) stake that AAVE to generate some yield? It would help create some independent streams of revenue for the holder of that AAVE, whether it is AGD or another component of the DAO.

[CryptoInvest]

Why selling $ARB in the middle of bear Market, when the DAO could sell it maybe half at 10$ per ARB

[0xkeyrock.eth]

After community feedback and considering market volatility, we believe that the best use case for some of the ARB tokens right now is to be used as part of the AGD budget.

We will not move forward with this vote and will leave the AGD part up to @0xbilll who is preparing something.

Thanks to everyone that voiced their opinion!