[RFC] Gro Protocol Treasury Diversification

Hi everyone,

my name is mZeroNine and I’m the Cat Herder for the mStable TreasuryDAO, and in collaboration with the Gro Core Contributors we would like to request feedback from both of our communities in regard to a possible treasury diversification.

I have duplicated the RFC from our forum below for visibility, and would love to hear your opinion on this idea moving forward. Since I just created the account, I had to remove some links from the RFC, but you can check the thread on our side for reference.

Of course keep in mind that some notions and sections are skewed towards readers of our forum, so feel free to adapt them for yourself as you see fit, as they could go and be seen either way :))

If you got any questions or would like to know more about mStable, then please don’t hesitate to ask on either forum, and I’ll do my best to provide the answers :grin:

Usually, we use these RFCs to gauge the wider interest of our community, and if the overall sentiment is positive, we move it into a more formal proposal, so I’d suggest to do the same here, but with feedback from both communities taken into consideration, instead of just our own.

Very much looking forward to hearing what you all think about this, and wishing you a Happy Friday and a great start into this weekend! :partying_face:

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Summary

It is suggested to diversify the mStable Treasury with a governance token swap with Gro Protocol, as they exist in the same vertical as mStable. This would be done in order to diversify risk, grow affiliation with a protocol that will likely utilize mStable in some way in the future, and put idle capital of the treasury to use due to the suggested long-term commitment of the other party involved.

Abstract

Gro offers their users protection on deposited stablecoins (PWRD), and also leveraged yield (Vault) in exchange for protecting PWRD and getting higher risk exposure.

In an effort to diversify both treasuries, it is suggested to swap a set amount of MTA for GRO in order to stake these tokens in the respective 80/20 pool on Balancer v2. It is further suggested to stake the resulting LP tokens in each others’ staking contract for additional rewards.

This action allows for the swapped amount to be diversified into 20% ETH, while also allowing for long-term token accumulation of the native governance tokens MTA & GRO respectively.

With this collaboration, both protocols would perpetually compound rewards back into the position for at least 24 months.

It is suggested to consider between 125,000 and 250,000 mUSD worth of native governance tokens for this endeavour.

Motivation

Both the mStable and Gro Protocol Treasury consist largely of their own native governance tokens, which make them hard to utilize in a capital efficient way. With this proposed swap, both protocols would be able to put a portion of these assets to use, while at the same time hedging a part of the received tokens into ETH, which is arguably a save long-term bet to make.

Furthermore, this would allow for rapport to be built between mStable and Gro, and create further collaboration opportunities down the line. Swapped tokens would be ensured to remain in responsible custody for the agreed term, with the upside that any rewards would also be kept by the protocol and not immediately sold on the open market.

This could be strengthened by agreeing to perpetually keep these tokens in custody, and therefore effectively remove them from the open market, while also gaining a trustworthy member in the respective DAO that could participate in each others’ decision making & governance processes, and leverage the expertise.

Pros

  • Diversify the mStable Treasury with a pool token that consists of both GRO and ETH that also generates further GRO rewards
  • Hedge risk by allocating native tokens into another protocol that might very well utilize mStable’s technology in the near future & vice versa and thus benefit from this exchange on a fundamental level
  • Build rapport with the Gro core contributor team and its community in order to enable further collaborations down the line
  • Gain the ability to hold the native governance token of Gro (and vice verse for Gro with holding MTA), which might be utilized in beneficial ways in the future (i.e. directing Gauge rewards, Boosts etc…)

Cons

  • Gro is still relatively new, and thus not as established as other protocols, and thus carries additional risks with it
  • High Fully Diluted Value relative to the current Market Cap / Tokens in circulation
3 Likes

I think this is a great idea for both protocols as it:

  1. Creates a diversification for their respective treasuries
  2. Strengthen relationship between the two protocols
  3. Creates a stakeholder relationship in the DAO for cross-community interaction and ideas
2 Likes

I think it’s great for Gro to be able to accumulate MTA. It gives us more reason to integrate with mStable, and the MTA can be used at the discretion of the DAO to further boost our APYs at no cost to users

That said I wonder how much it makes sense for mStable currently to accumulate GRO through the liquidity mining program. We have set as a DAO for the liquidity mining program to be capped at 9m (open to further voting). A ballpark guess to how much have been allocated through the liquidity mining program would probably be somewhere around 1.5m GRO. Furthermore currently GRO’s tokenomics after the recent vote is going to be primarily centre around product development and user oriented activities

So with that said, I wonder if it is more suitable for mStable to accumulate Vault/PWRD instead of GRO or in addition to GRO

Would love to hear from the team also @graadient @joyce

1 Like

Thanks for the thoughtful comment as always :slight_smile:

We’ve discussed with the mStable team about diversifying their treasury with PWRD that would generate yield while offering protection from exotic risks. The mStable team is open to the suggestion and this would likely be the next step 2-3 months down the line, but it’s a great point that we should consider baking this into the proposal if/when we proceed.

HI guys, and many thanks for the feedback provided.

I agree with the sentiment here, and I do feel that once a Feeder Pool of mUSD/PWRD is a reality, Gro Protocol and it’s valuable stakeholders would see a real world benefit from having MTA staked and able to influence our newly released Emissions Controller Dials to favor the muSD/PWRD pool.

Overall, I’d just like to once again commend Gro Protocl Core Contributors and the wider community for creating a really friendly, open, and most importantly collaborative space to Gro with each other, love what you guys do, and we’ll get there soon! :innocent:

4 Likes

Hey @mZeroNine thanks so much for getting involved!

We’d love to explore this idea further and to pick up on @joyce 's suggestion maybe a good place to start would be by testing the water and using each other’s protocols?

Even a relatively small ($100k) deposit from Gro into the mStable Save product would allow the DAO to start earning yield and exploring mStable in more detail. mStable might then want to put some stables in Vault or PWRD in return and so it begins!