- joyce-gro (Gro core team member)
- me (member of G-Force which is Gro’s decentalised marketing team)
Merit Circle governance approved MIP-2 Broad investment mandate proposal on Nov 16, 2021. This proposal allows the committee to allocate some fiat in yield farms with no more than 5% can be put in a single position and no more than 20% in total can be put into yielding stablecoin positions. We propose to help you manage 5% of the aforementioned fiat through our risk tranched stablecoin PWRD, which offers deposit protection while generating yield.
After approval of the MIP-2 Broad investment mandate it was decided to put a maximum 20% of the treasury value (TV) in crypto assets and a maximum of 20% of TV in stablecoin yield farms. It was also decided that a maximum of 5% of the TV can be put in a single position. While selecting a yield farm for stablecoin, the security of funds is one of the biggest criteria. The fact that a significant portion of USDC reserve is based on commercial papers by unknown entities should raise some counterparty risk. Also, irrespective of the type of stablecoin selected, there remains a systemic risk to it.
We would like to propose helping you manage part of the Merit Circle treasury through our risk-tranched stablecoin PWRD, which offers deposit protection while generating yield. Our goal is to make it work like a FDIC protected account but in DeFi with healthy yields.
• Protect your stablecoin treasury from high-impact tail risks like the failure of a major stablecoin or protocol through:
our Risk Balancer mechanism that ensures exposure to multiple stablecoins & protocols and
risk-tranching where Vault, our leveraged yield farming product, would absorb the loss for Treasury users if such failure occurs.
• Generate healthy yields on your treasury balance instead of having the funds staying idle until they’re deployed. With a base yield and having options to earn token incentives on top, we believe MC treasury stablecoin balance would be better placed to support growth of the ecosystem. Details on token incentive options are available at Gro.
We suggest Merit Circle DAO to allocate a pilot deposit to PWRD that amounts to 5% of your treasury. You could decide to increase the allocation later on after having confirmed that our treasury product meets your expectations.
With the aforementioned mandate Merit Circle DAO’s treasury will become much more secured. A large part of treasury management is to reduce liquidity, market and credit risk. By using risk tranched stablecoin PWRD the treasury can reduce the risk of a single stablecoin failure. We believe this mandate will safeguard MC DAO treasury from any unforeseen regulatory attack on stablecoins. PWRD is protected by a novel risk distribution model that shields holders from loss, while still accessing DeFi yields. Any loss of capital from stablecoins or protocols is first absorbed by Vault, letting PWRD generate yield more safely.
Only 5% of treasury value will be used to be deposited in PWRD.
Made up of a basket of stablecoins, PWRD risk is diversified and lower than other products in the market. To reduce risk further, PWRD is always at least 100% protected by the capital deployed in Vault. There is no cap on the amount protected, and the protocol makes sure there is enough Vault TVL to cover PWRD (and won’t let you buy more PWRD if not).
Even in the unlikely case scenario of a major stablecoin failure, your funds will be safe. It would take multiple simultaneous and major failures of protocols and stablecoins to touch the PWRD funds. Technically, PWRD is designed as a stablecoin. But it is more stable than other stablecoins because Vault absorbs any price volatility of the underlying basket of stablecoins to make PWRD more stable than its components. Yield is delivered into a users wallet as a stream of new PWRD stablecoins.
PWRD may not give the highest yield available in the market on stablecoins but it gives necessary deposit security which can help in mitigating risks. With a base yield and having options to earn token incentives on top, it provides a better solution for stablecoin treasury management.
The proposal will be open for discussion.
After the discussion is concluded and any possible adjustments have been made, the proposal will be up for voting on Snapshot. This link will be provided in due course.
The snapshot voting will last for 24 hours after it goes live.
After the voting concludes and if the proposal is accepted by the token holders, the proposal will be ratified by the multi-signature signers.
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