CIP#55 - To make the community fund self sustaining

Summary:

As most protocols are actively growing their treasury via various methods (AAVE is lending it, Yearn is farming in their vaults, Synthetix is considering minting synths and LP them on Curve, Sushi is farming Sushi amongst others), the Curve team would like to propose to use a share of the community fund to farm and lock CRV. Community members have brought up that this community and emergency should be grown and actively used.

This CIP would create a linear vest for 24m CRV over one year that would be controlled by the community grants council composed of the Curve team and the following people: https://news.curve.fi/community-council/

As those CRV are vested, they would be used to create a vault on Unit Protocol and AAVE to then draw stable coins which would then be deposited on Curve. 20% of the CRV would b then locked for four years.

  • Farmed CRV will be locked and used to repay collateral
  • Admin fees will be used to buy CRV (and lock it or repay collateral)
  • Voting power will be used to vote to pools with the most volume
  • Pay out community grants and make the community fund self sustaining
  • No CRV would be sold

Motivation:

Whilst the size of the community fund is considerable, it has been pointed out that most protocols are actively growing them. This proposal would allow the Curve council to begin doing so and thus ensuring the treasury is self sustaining going forward.

Poll:

http://dao.curve.fi/vote/ownership/42

8 Likes

I’m wondering if there are a few negatives:

  • If you are posting CRV as collateral, this would decrease CRV’s borrow cost and possibly make shorting cheaper or incentivize it? Are there other secondary effects of larger CRV supplies to borrow (seems like they could skew negative to me)?
  • Dilutes other CRV stakers and LPs proportional to how heavy the community fund enters
  • Centralizes voting power to this small group that already has a lot of power

I don’t see that many positives here to the current CRV stakers and LPs. If you had a strict CRV burning policy (ie the community fund will service it’s borrow debts and burn the rest - not aiming to increase its nominal 24m CRV, but increasing its value by burning CRV) then that seems like it would be more mutually beneficial to me.

Just thoughts/questions at this point. I’m skeptical

1 Like

Basically in its current form it seems this proposal, over the long run, would (in a roundabout way) retroactively increase the community fund’s CRV allocation. At the expense of CRV stakers (we get less admin fees bc we are diluted) and LPs (we get less newly minted CRV and trading fees). So it’s like the original token distribution is skewed by this. Over the next years the community fund will have been allocated 24m + x CRV - and that x will be taken out of the CRV that was meant to be distributed to LPs. Not to mention dilution of admin/trading fees, and governance

2 Likes

In my opinion, I am against managing “community funds” in the context of “community”.
Because the group “community” is unknown.
I think that “community” is a general term for an unspecified number of individual stakeholders.

It is desirable that the CRV managed as a “community fund” be distributed to an unspecified number of stakeholders and their candidates in some way.

I think community funds should be used to expand the community and give preferential treatment to individual stakeholders.
This is because it is not the “community” that runs Curve, but an unspecified number of stakeholders.

At the very least, these proposals must benefit existing and future stakeholders.
The current proposal appears to undermine the interests of existing stakeholders through the benefits of missing (destination).

2 Likes

I think the purpose of this proposal is to make sure the community fund has the means to pay for grants and development in perpetuity. The purpose isn’t to accumulate CRV to the fund, but to funnel earnings back into the community and developers working to improve Curve (and the wider DeFi ecosystem).

On the one hand, the strategy here would dilute some CRV and admin fees that would go to stakers/LPs (although I don’t think this would cause noticeable dilution. There are much bigger whales on Curve than the community fund). On the other hand, the goal here is to direct resources toward people who are ensuring Curve continues to grow and succeed. I think we need to take the long view that an investment in people is how we create real sustained value, so it’s important that there is some strategy in place to make sure the community fund persists indefinitely.

2 Likes

I would have love for this process to have been more transparent and for a discussion to have occurred in the governance forums to get feedback from the community about different ideas and options on utilizing the community funds to generate cash flow from investing CRV. It appears to me that this process happened behind closed doors and we are now presented with an option without much input from the community. As a DAO, I would like for us to be more transparent specially with these types of matters where the community funds are being considered for investment purposes.

With that out of the way, I am in full support of utilizing the treasury to start generating cash flow from CRV that is sitting idle. I had a similar proposal last year about doing something similar:

The proposal presented here has good merits but I don’t think it is wise for us to use the funds in our own platform to yield farm more CRV. Our community treasury is already composed solely of CRV and we should look at diversifying instead. Some ideas from my end:

  1. Divest a portion of the funds into our native blockchain token (ETH) and use it for staking in Ethereum 2.0. See Lido or Rocketpool
  2. Divest into stable coins and use those for farming in other projects that we have officially authorized to fork Curve to other chains. This includes ellipsis finance for now but there will surely be others for other chains (polkadot, solana, avalanche, algorand, waves, tezos, etc…)
  3. Take an investment position in some of our strategic partners native tokens and stake those tokens in their platform. Synthetix clearly comes to mind since we do have very close integration with them already. Other potential candidates are yield aggregators (yearn, stakedao, convex, etc…) that integrate closely with Curve and bring us liquidity. Don’t forget about the waves/neutrino folks which have brought us large fees due to the USDN liquidity.
  4. LP on other DEXes that don’t compete with us (not uniswap obviously). A popular idea that many have asked for is to have a CRV-3pool trading pair that is liquid enough so that folks can swap their rewards directly to CRV. We have enough liquidity to create such a pool and enjoy trading fees.

These are just some ideas and I am sure the community will have others if given the chance to express them.

3 Likes

One of the reason we discussed the possibility of Curve/AAVE/Unit is because there is:

  • No impermanent loss
  • No CRV selling required

Selling CRV to accumulate a position in ETH/whatever for me presents an ethical issue that I’m not really willing to consider and was this proposal to dump CRV to accumulate YFI/CVX/SDT I would vote no for it.

Were we to choose to go for the Unit/USDP option, this means the community fund can:

  • accumulate CRV that can be locked for veCRV to vote for pools we think deserve it
  • accumulate CRV to pay out grants
  • accumulate trading fees to pay out grants
  • without selling CRV
  • with minimal dilution to other LP/community members
  • with minimal risks
5 Likes

I’m still not convinced. If this is focused on making the community fund self sustainable why is using the fund to vote on gauge weights included in this proposal? Can this be a separate decision?

  • Why not just lock all CRV for veCRV and earn admin fees? This would reduce risk and get rid of a few potential negatives I highlighted in my first reply. Only negative now is veCRV holders’ admin fees get diluted

These are just off the top of my head. Aren’t there more beneficial things the DAO can do? What if instead of investing CRV in the manner proposed here, the DAO voted on giving term loans (ie 4 years) to interesting projects to help them bootstrap in exchange for interest. Not suggesting that, but I would think there could be mutually beneficial options here instead of just using the community fund to pull CRV inflation from LPs to the fund.

1 Like

Selling CRV to accumulate a position in ETH/whatever for me presents an ethical issue that I’m not really willing to consider

Can you please elaborate on what the ethical concerns are with regards to selling CRV to divest a portion of our treasury and using that to invest in other cash flow generating activities?

If we really care about making Curve a self sustainable platform the obvious choice would be to collect a portion of trading fees and using that to replenish the community funds. Right now we split 50%-50% between veCRV and LP providers but perhaps that split can be 49% LPs - 49% veCRV - 2% treasury (just an idea, I am sure someone can do the math to figure how much that would generate roughly based on existing volume and potentially suggest a better split). This would remove the Curve developers from taking an active role in investing activies and let’s them focus on doing what they do best; developing the platform and growing the ecosystem to drive more volume which would ultimate generate more revenue for the treasury, LPs, and veCRV holders.

I think that given such an option, that the community would be more than happy to consider it as a viable alternative to what has been proposed here. Unfortunately, I am afraid that ship has already sailed and figuring out ways to make the community fund self sustaining has already been decided without any consideration from veCRV holders.

1 Like

I think we are at the point where we want some strategy to invest community funds, and there are some guidelines Charlie would like to follow with the strategy, but a final decision on that strategy has definitely not been settled on.

There are so many possible strategies now with DeFi exploding, and probably its helpful to narrow down our options with certain guiding principles. I do agree with Charlie that we should avoid a strategy that sells CRV, since we have options to earn a return without having to resort to selling any.

However, I do believe in all voices being heard, so we should form a shortlist of viable strategies and put it to a signal vote. I’d only want to go with some strategy that the DAO has signaled approval for.

2 Likes

Was I wrong in thinking that a strategy has already been settled on? An on chain vote has already been executed with quorum and support requirements met and I doubt that it won’t pass at this point in time. That is, unless we are willing to consider that a non-binding vote (I am not sure how that gets reconciled)? This would allow the community to propose some options and gauge interest via signal voting (which I think should have been done from the onset) and have that put on chain.

I think that’s perfectly reasonable if that’s a guideline that we want to follow and the community can work with those requirements in place.

You’re right it isn’t completely clear. This vote will release 24m CRV into the custody of the community council, who will then carry out whatever strategy they feel is best. Charlie has proposed taking a loan against the CRV and stablecoin farming in Curve, so that is most likely the direction we will go in. But the strategy isnt set in stone. If there’s strong preference for an alternative approach, that should be taken into consideration. And if the chosen strategy turns out to be less effective than we planned, it can always be changed in the future.

This is a list I’ve seen of proposed strategies. (And btw, we dont need to necessarily limit to only one, just it would be easier to manage):

  • Take a loan against our CRV, denominated in stablecoin. Farm stablecoin on Curve along with CRV locking for boost
  • Simply lock CRV to earn admin fees. Reinvest admin fees earned.
  • Diversify (sell CRV) to a basket of Curve partners/other DeFi projects and earn a return participating in staking/interest earning activities on their platforms
  • Single sided liquidity deposit with IL protection (Bancor). Petition for BNT incentives to the pool
  • Other Single sided AMM options (Alpha SLP offers single sided deposits. Custom farm that lets anyone deposit ETH, matches with CRV and farms on Sushiswap etc.)

Of course happy to discuss other strategies as long as they follow:

  • Minimal risk
  • No impermanent loss
  • No selling CRV
2 Likes

In addition to some of the existing lending platforms mentioned, It would good to explore creating our own lending and borrowing market via a fuse pool on Rari Capital. This will give us more flexibility around the type of collateral that we are comfortable with exposing ourselves to and setting our own reserve/collateral factors for our pool.

I don’t think we should rule out collecting a portion of fees to replenish the community funds. This might be the most sustainable option for Curve going forward. A quick look at the fees table suggests that we have collected a total of $17,973,349.23 to date. I think that’s just the portion that’s payed out to veCRV holders and doesn’t count the other half that went to LPs already. Assuming that’s the case, then 1% of $35,946,698.46 would have yielded $359,466.9846 towards the treasury. That’s since 9/16/2020 which is roughly what has been collected 7 months and 5 days. I think that will easily be over 500K in 1 year and potentially if we set that 2% (for the community to decide) then 1M+ seems perfectly reasonable.

I think a Fuse pool on Rari goes very much against the “minimal risk” discussed above.

1 Like

If sCIP#36 - Add CRV/sCRV pool passes, these funds could be used to LP on that pool and the farmed CRV could be used to fund grants and dev work.

  1. This approach would not introduce large amounts of CRV on AAVE, and would also not dilute the income of LPs in the stablecoin pools.

  2. The deep CRV/sCRV liquidity will attract more cross-asset swap volume, which in turns translates to more fees for veCRV holders.

  3. We want the whales to be buying large blocks of CRV with their BTC, ETH and stablecoins on Curve, not Binance or Coinbase.

2 Likes

Thanks, Charlie. I am not sure if the following has been considered:

Voting power will be used to vote to pools with the most volume

but the optics of the council voting on pools might look bad to an outsider. I guess what I am trying to get at is that it might seem that Curve is in the business of picking winners/losers, whereas we want to reflect being impartial as much as possible. I understand the motivation behind it but an outside project might see that negatively and potentially list their project in some other venue instead.

I think ideally we incorporate the pools’ previous week volume/fees information in the gauge weight voting page (ranked from most profitable to less) to better inform veCRV holders as they are voting on pools. Potentially, we can even have a button that will allocate your gauge weight votes proportionally to each pool base on their performance. This might be expensive gas wise and it is probably best suited to an L2 if we migrate gauge weight voting there (I think it is a good candidate).