Non-Constitutional: Stable Treasury Endowment Program 2.0

[thedevanshmehta]

Thanks to @cp0x for kickstarting the discussion and to the others for pitching in with questions. Can already see a major change to the proposal on the timing for putting this up for vote.

@Tekr0x.eth

Maybe setting a timeline of slowly DCAing ARB into stables over some time (6 months for example) would be a better option?

@JoJo

• how does putting a limit price to arb be consistent with the goal of growth + diversification knowing that that price might just not happen and so the whole initiative could not be live for a long time?

The reason to not do simple DCA is I don’t think we should be liquidating anything when ARB is at all time lows. We already have an endowment of $30 million thanks to STEP 1 and so we should play additional diversification from a position of strength and without urgency to increase its size.

The only instructions given in the proposal are to not liquidate at a price that is much below the rate obtained in STEP 1, primarily to address the valid issue raised by @krst

@krst

We should be mindful of the fact that ARB token is a governance token that controls the whole Arbitrum ecosystem. Securing the value of the token is critical from the ecosystem security perspective. Increasing the liquidity of the token without a plan for securing its’ value increases the risk of governance attack on the protocol.

@cp0x

• What are the results of the previous pilot stage of diversification?
  (It seems to me that this stage is only at the beginning of the path and there are no results yet, which means it is too early to draw conclusions)
• Since there are no results, how can this program be expanded?

@JoJo

• how can we extend the program if we didn’t even see the results of the first one? Is the capital of the first one even allocated?
• how can we extend it if we are even voting for more fund/no more fund/election for the pm of the previous election?

@BlockworksResearch

we believe it would be best for the DAO to have some evaluation to see how performance of STEP was carried out previously. Steakhouse offered to complete monthly reports at the close of each calendar month

We have obtained some greatly positive results on the ecosystem growth front. @OpenEdenLabs has massively increased their TVL from $30 million at time of application to $115 million; Ondo USDY launched on Arbitrum following their selection; and Securitize (BlackRock distributor) is on Arbitrum, to name some Ws.

Franklin Templeton was rejected in part because we would have had to take funds to Stellar (their primary blockchain at the time), but they too have since launched on Arbitrum in August, showing some indirect ways STEP has made us a chain you need to have a presence on if you are in RWA.

The above comments are valid that we need to see how the program itself performs in giving us an endowment where we can spend from yield earned.

I propose that we take STEP 2 to a snapshot vote only after @steakhouse has completed at least one of their monthly reports, and to tally only once some yield from STEP 1 trickles in to our treasury. Until then, we keep the proposal open for iteration, discussion and improvement.

@cp0x

We have found financial discrepancies in the payment of the manager of this program. Given the increase in the amount of funding for which the manager is planned to be responsible from 35 to 70 million, should the manager’s funding increase? If so, then it is worth including these costs in this proposal.

Steakhouse’ term as program manager is for one year only. I’m hoping that we have STEP 2 complete by the time their term ends, so that the new election for program manager will have the updated endowment amount and program managers can give quotations accordingly. It will be tricky timing though.

@Tekr0x.eth

How can we define optimal conditions? Is it at ARB price at $1, $2 or $5? This is a tough one.

@JoJo

• has there been any consideration about the meaning of having an official, advertised, sell order of a certain amount in the market? That info is not something you want around and can be gamed for profits

Ah this was the tricky part on which there was some back & forth with Matt from @Entropy. Creating a publicized sell wall is probably not a good idea, which is why we have left so many details vague and up to the interpretation of the foundation finance team, not even specifying what “similar” to the last STEP program exactly means.

@jameskbh

why have this proposal detached from the revamps criteria to allocate the funds? At the first iteration, we decided the amount as well. For example, if the committee identifies more opportunities and it makes sense to have a higher amount deployed?

It doesn’t make much sense to have this proposal before the work of the committee

The main reason to pass this sooner rather than later is so the foundation finance team has time to cook. The longer the period for conversion, the better the rate and lesser the price impact. More generally, I believe doing 1% of treasury every year for 5 years will set us up for long term success.

i hope you agree we should at least avoid the DCA over 7 weeks like we did in STEP 1. The work of the committee should proceed in parallel with transfer of funds to the foundation for STEP, not sequentially, if we are to be smart about timing.

@BlockworksResearch

Moreover, when should we expect the first round of transparency reports,

The foundation required the snapshot vote ratifying the program manager terms of tenure to be complete before signing an agreement, so hopefully should be soon as that just got over. I am hoping we get their 1st report in Uptober but it might be November too, all in the hands of the foundation at this point.

@BlockworksResearch

In the STEP Committee Recommendation thread, there was a list of general reflections, has there been any changes in the operational pipeline to answer some of the reflections prior?

@cp0x

And finally - what results will be acceptable for the community, what are the specific goals of this stage?
(It seems to me that it would be good to think through the strategy, what costs the DAO bears, how much we compensate with this program and what further steps to equalize expenses and income, if this is the goal)

Getting the funds to the finance team sooner for better conversion is the first of the changes. We were lucky in the 1st edition of STEP to obtain a decent endowment size, but we shouldn’t be relying on chance (it could have been much worse).

There will also be an incoming proposal from the STEP steering committee to work on the RFP for STEP 2, which additional asset types should be eligible, the members of the selection committee, etc