Summary
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 $2.5MM of the aforementioned fiat through our risk tranched stablecoin PWRD, which offers deposit protection while generating yield.
Abstract
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.
Proposal
We would like to propose helping you manage $2.5MM 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.
Benefits:
• 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 4.
Suggested implementation:
We suggest Merit Circle DAO to allocate following amount from the treasury:
1.25MM in PWRD
1.25MM in PWRD-3CRV (staked on Gro)
You could decide to increase the allocation later on after having confirmed that our treasury product meets your expectations.
Motivation
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.
By allocating part of treasury balance in PWRD-3CRV pool, the treasury will be able to boost total APY upto 45%. This will help in overall growth of the ecosystem.
Budget
Only $2.5MM will be used to be deposited in PWRD pools mentioned above.
AND
“** This proposal will be open for discussion until the 8th of December 2PM UTC.”
To be added into new proposal ^
