TLDR
The current COMP reinvestment program is set to expire at the end of this month. I propose that we renew the program for another six months using the ~5,000 COMP that we have accrued over the past six months. Additionally, I propose that we remove the current treasury manager and replace him with an automated off-chain process.
The current COMP reinvestment program
Roughly six months ago we initiated a COMP reinvestment program whereby the Notional treasury manager progressively sold COMP that the protocol had accrued for ETH, and then used that ETH to mint ETH/NOTE BPTs and deposit them into the sNOTE pool. The principal aims of this program were the following:
- Attract and retain liquidity for NOTE.
- Provide backstop insurance to the Notional protocol.
- Give NOTE utility and return.
This program has been quite successful. Today, roughly 40% of all circulating NOTE is staked in the sNOTE pool. This means that 40% of all circulating NOTE is devoted to both providing insurance to the protocol as well as providing liquidity for NOTE.
In addition to the value that has driven for the protocol, sNOTE holders have been handsomely rewarded. Over the past 6 months, one sNOTE has gone from being worth 5.53 BPTs to 6.75 BPTs. This represents an annualized return of 44% which has helped to cushion sNOTE holders from the broader downturn in the NOTE price.
The next COMP reinvestment program
We propose to continue this program without much change. We will plan to use the ~5,000 COMP that the protocol has accrued over the last six months for reinvestments over the next six months at a rate of 833 COMP per month. At the current COMP price of $60 this will result in a re-investment of $300k over the next six months and an annualized return to sNOTE holders of ~21%.
Changes to the treasury manager
The current COMP reinvestment program relies on a human treasury manager who is executing the sales of COMP for ETH and then reinvesting that ETH into the sNOTE pool. This has worked well, but the original purpose of bringing on a human treasury manager was the anticipation that Notional’s treasury management would quickly grow progressively more complicated and would warrant a human manager. In practice, this hasn’t really been the case.
As some in the community have previously noted, automating the COMP reinvestment process would both increase transparency as well as decrease costs. We agree with this sentiment and propose to replace the human treasury manager with an automated off-chain process.