Summary

We’re requesting 65ETH from the DAO to implement:

• Nouns Treasury Management (NTM - a decentralized yield bearing asset manager)
• A completely revamped treasury page
• A pilot program to generate more revenues from the treasury using NTM.

Introduction

Our main goal is to ensure that NounsDAO is self-sufficient.

We want to ensure NounsDAO is maximizing productivity of its assets to sustain long term funding of the operations that proliferate everything Nounish. While the treasury has been well capitalized thus far, we’ve seen the Nouns auctions drop from an average price of ~80Ξ → ~30Ξ. At the same time proposals have been increasing in scope and complexity, requiring more funding.

For the DAO to continue operations at its current scope and with its current vision, we need to start putting more emphasis on treasury growth and self-sustainability.

The recent stETH (#217) proposal was well received by Nouns members, a great indicator that a majority of the members are interested in safely increasing the DAO’s available capital.

As of today, NounsDAO has ~5-10% of the treasury in Lido and it’s yielding ~18Ξ per month or 215Ξ annually (equivalent to ~7 auctions). This is a great first step to increasing the treasury without assuming too much risk onto the DAO, as Lido is one of the most trusted staking providers, managing billions of ETH.

The next logical step is to productionize the stETH in the treasury as well. We plan to do that by creating the Nouns Treasury Management.

The Team

This proposal is brought to you by 0xPiney.eth, ramenboy.eth, and pinkglasses.eth. Collectivey, we’re known as 1560 Studios. The sum of three Nouners united to produce Nounish infrastructure that will maximize DAO efficiency and potential.

• Noun 575 (0xpiney.eth) - All things on-chain and smart contracts
• Noun 576 (ramenboy.eth) - All things web + design
• Noun 409 (pinkglasses.eth) - All things DeFi and Decentralized.

We are industry veterans who have worked in big tech and exchanges before diving into the web3 ecosystem exploring NFTs, DeFi, and DAO’s. Since the start of the year, we’ve been working full-time to create all things Nounish and decentralized.

Nouns Treasury Management (NTM)

NTM is a bespoke solution for NounsDAO that will manage a portion of the treasury and be completely governed by NounsDAO - a decentralized asset manager.

Strategies can be created by absolutely anyone. Our aim is to create truly decentralized asset management infrastructure that can be used by anyone and everyone, with the approval from governance. We’d like to kick off NTM with a pilot program that’ll serve as a foundation for future yielding strategies.

For the pilot program, we want to focus on creating yield from the current stETH sitting in the treasury. We want to focus on stETH for 2 main reasons:

1. stETH is not used for proposal funding, and ETH withdrawals have yet to be unlocked. Even after Shanghai is merged, there will be withdrawal queues in order to convert the stETH to ETH. The DAO’s stETH will be ‘sitting’ in the treasury for the foreseeable future. This creates an opportunity for us to yield in the meantime.
2. The most battle tested protocols with huge TVL’s support stETH. This allows us to generate yield using relatively low risk strategies.

NTM is inspired by Yearn vaults which currently hold over $400M in AUM (and peaked at around $6B AUM). These contracts are extremely battle tested and a reference in the yield aggregator domain. NTM’s general architecture will look like this:

The key contracts + terms:

Preface: For security reasons, all contracts will be audited and non-upgradeable. No proxies anywhere.

Vault: A contract that stores 1 asset (ETH, stETH, USDC, etc). Vaults manage the assets by deploying them into various yield bearing strategies. All vaults will:

• be ERC4626 compatible
• have privileged access to NounsDAO
• be withdrawable by NounsDAO at any point (pending governance vote).

Strategy: A contract that implements a yield bearing strategy - eg. take stETH and LP it into Curve, and sell the Curve emissions daily into ETH. Vaults deposit assets into specific strategies; ergo, the DAO sets the desired strategies employed.

NounsVaultManager: The NounsVaultManager creates vaults and manages the strategies and assets used within the vaults. The DAO will interact with the Vault Manager through the TransactionBuilder. All these vaults are ERC4626 compliant and deposit/withdrawals will only be able to be accessed by the DAO (TransactionBuilder).

NounsStrategyFactory: The factory that creates different strategies for assets.

Yield Strategies for the Pilot Program

NTM is first and foremost a platform that is completely governed by the DAO. Any Nouns members is able to create a strategy for any existing vault and the DAO can vote to accept the strategy or not - a completely democratic and Nounish treasury manager.

For the pilot program, we have researched a few strategies taking into account yield + risk for the treasury. While there are a wide range of possible strategies that take into account different models for analyzing risk/reward, we see these first two strategies as being ideal for the pilot program of NTM.

1. LP stETH <> ETH into Curve. Today, 90%+ of stETH <> ETH swaps go through Curve. By LP’ing into Curve, we’d get returns from supplying this market.

   • Yield: Low to Medium (~2.5% APY currently with $LDO emissions). ~125ETH ($200K USD) yield in 1 year with our stETH in treasury.
   • Risk: Low.
     • There exists two main risks with this strategy:
       1. stETH depegs. We’ve seen stETH deviate away from ETH so this is a potential risk the DAO would assume. stETH and ETH are expected to trade closer to - if not exactly 1:1 once Shanghai is deployed, since stETH will be directly redeemable.
       2. Curve gets exploited. We see a minimal risk of this due to the time these contracts have been deployed on-chain, and the audits performed on them.

   If the peg diverges by a significant amount, we may see a different amount of stETH to ETH in our LP position. Past attempts from external actors to destabilize stETH in the past resulted in the peg converging to a 1:1 ratio regardless, with interesting returns for the LP’s.

   When exiting or entering said strategy we would pledge both assets in order to minimize negative slippage (pledging ETH <-> stETH instead of just stETH).

   Strategy #1 Summary: Interest generated by this strategy could (at current APY) help fund the cost of grants at a rate of 10 ETH/month, while exposing the DAO to minimal risk by using a trusted protocol with already $5B in TVL.

2. LP stETH <> ETH into Balancer and stake into Aura Finance. Balancer is a popular DEX and Aura Finance is similar to what Convex is to Curve (governance and emissions from Balancer).

   • Yield: High (~8-10% APY currently with $AURA and $BAL emissions). 400 ETH (600K USD) in 1 year.
   • Risk: Low
     • There are three main risks associated with this strategy:
       1. stETH depegs. See above.
       2. Balancer gets exploited: Same reason as Curve above - battle tested DEX + has been operating with hundreds of millions in TVL.
       • Aura gets exploited: Aura has had extensive audits done to its contracts, works closely with Balancer, does continuous code reviews, and holds $450M+ in TVL.

   Similar to Strategy #2, we’d be earning additional yield by depositing into a second order protocol. Based on the amount in TVL and the similarity of the smart contracts with Convex, the risk profile is very similar.

   We would, however, need to sell (harvest) 3 separate tokens. This would potentially increases the gas costs of this strategy, but the rewards being ~3x the Curve strategy would cover any increase in transaction fees.

   Strategy #2 Summary: With this strategy we could generate 32 ETH per month. This would be enough to fund the Nouns Prop House in its current form without any drains on the treasury.

Timeline + Ask

We believe implementing these two strategies will be the most fruitful for the pilot program based on risk <> reward. We estimate it will take ~1 month for the implementation of NTM, auditing of contracts, and implementing the new treasury page.

We are asking for 65ETH from NounsDAO to implement the above, with an additional 100 ETH + 100 stETH that would be used to pilot this project (with future expectations to allocate more capital to NTM if the results are favorable). These pilot funds will first be sent to a multi-sig with trusted Nouns members (see below), until the NTM contracts have been audited and deployed.

The funds will go towards:

• Contract audit (30 ETH for C4 audit).
• ~11 ETH each (3 members) to get this version of NTM into production (implementation + audits) + treasury page. We estimate this will take ~1 month.

Following the launch of the pilot program, we’d be requesting:

• 50% of all yields (no principal) will go to 1560 studios until we hit 175 ETH.
• After we hit 175 ETH, we would take a 2% management fee on further generated yield (no principal).

To emphasize, we want to profit alongside the DAO, in order to properly align incentives. Rather than making a large ask and risk t, we’d prefer to win if our output is legitimate and positive-sum.

We’re excited about the idea of working on this, and we hope to deliver a treasury that’s more capital efficient and less dependent on primary sales for funding. This proposal is the first step in NounsDAO becoming 100% fully self-sustaining.

Looking Ahead

1. If the pilot program proves to be profitable and well-received, we will submit another proposal to allocate more stETh to NTM for the current strategies.

2. The team will continue maintaining NTM and researching new strategies alongside Nouners.

   • We will be actively taking feedback and working with any Nouners that are interested in developing strategies.
   • A low hanging fruit could be to create a strategy to productionize our lil nouns by LPing them into Sudoswap.
   • Design and UX is a huge focus for us so we will be constantly improving NTM and the treasury page.

3. Following the initial development of NTM, we want to generalize it as a service (we've acquired ntm.wtf as the domain) for every on-chain treasury. We're going to be actively listening to feedback and speaking with Nouns members about how to build this in a way that properly benefits Nouners and the DAO itself.

   • Prophouse like plug and play service for other treasuries to generate yield using NTM.
   • Potential kickbacks back to the DAO for every new DAO integration.
   • Push NTM to be premier on-chain treasury management service for all DAOs.
   • To foster conversations about self sustainability, we will be sharing frequent updates of new developments and ideas.

4. Our team is dedicated to building infrastructure and tools that proliferates all things Nounish. Stay tuned!

Proposed Transaction Description

We'd be sending:

• 65 ETH to our team wallet (0x79f08F2e75A8C99428DE4A2e6456c07C99E55da5) to cover audit and development costs.
• 100 ETH + 100 stETH for the pilot program to a 5/5 multisig (0xF4B99Bfb0500c6b1141DF1E0B7ED86c6e19B0ca6) with the following owners:
  • 0xpiney.eth
  • ramenboy.eth
  • pinkglasses.eth
  • El4d.eth (Verbs team)
  • Yitong.eth (Agora core member)

The funds for the pilot program will be sent to NTM as soons as audits are done and contracts are deployed.