Summary
We propose to start incentivizing veBAL holders to vote for the sNOTE gauge in order to increase the sNOTE incentive yield on Balancer. Moreover, we propose to use the DAO’s AURA and BAL tokens that will be received as grants from the Aura and Balancer grant programs to increase the sNOTE pool incentive allocation by converting them to veBAL and vlAURA, respectively.
Finally, we present two options to modify the DAO’s ongoing reinvestment of COMP. The options we propose are:
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Reduce weekly COMP reinvestments from 200 COMP to 65 COMP and augment with 10,000 NOTE per week.
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Sell the DAO’s COMP for BAL, convert the BAL into veBAL, vote on the sNOTE gauge and use the proceeds to incentivize sNOTE holders.
Context
The Notional DAO treasury currently controls the following assets:
| Asset | Usd value |
|---|---|
| COMP | $173,500 |
| BAL | $93,750 (expected) |
| AURA | $18,750 (expected) |
| NOTE | $6,300,000 |
| cETH | $28,000 |
| cDAI | $95,000 |
| cUSDC | $99,000 |
| cWBTC | $24,000 |
| Total | $ 6,832,000 |
The DAO will receive BAL tokens from the Balancer grants program as well as AURA tokens from the Aura grant program as compensation for leveraged vault audit related expenses.
The DAO could benefit from participating in the Aura and Balancer ecosystem to boost the incentive yield it receives on the sNOTE pool.
Proposal
We propose to use the BAL and AURA tokens to create an additional revenue stream for the DAO and further participate in the Balancer and Aura ecosystem.
1) Vote escrow BAL holdings to veBAL
We propose to lock the DAO’s BAL tokens to veBAL for 1 year and periodically relock the veBAL in order to maximize its utility. We propose to use the DAO’s veBAL to vote on the sNOTE gauge in order to allocate more incentives to the sNOTE pool. The additional BAL incentives received as a consequence of these gauge votes would then be periodically harvested in order to increase the DAO’s veBAL balance. Under current market conditions, this strategy would yield about 29% in BAL incentives annually to the DAO or about $28K.
2) Vote Lock Aura holdings to vlAURA
We propose to vote lock the DAO’s AURA tokens to vlAURA and then use our voting power to vote for Notional’s sNOTE gauge. This would increase the amount of BAL incentives allocated to the sNOTE pool. These additional incentives could then be used to increase the amount of veBAL controlled by the DAO. Under current market conditions, this strategy would yield about 30% in BAL incentives annually to the DAO or about $5.6K
3) Experiment with gauge vote incentivization on Hidden Hand
We propose to experiment with incentivizing veBAL holders to vote toward the sNOTE gauge through Hidden Hand. This experiment should result in a greater allocation of BAL incentives towards the sNOTE pool. We propose to incentivize either veBAL holders directly or vlAURA holders depending on what would yield the best return per incentive dollar invested.
The treasury manager would reinvest additional incentives received as a result of this experiment to incentivize veBAL holders on Hidden Hand during the next vote. If the strategy proves profitable, we would increase bribes until the sNOTE gauge receives 2% of all votes. After that, excess profits could either be converted to veBAL, used to conduct sNOTE reinvestments, or held as USDC by the treasury manager.
While we don’t want the DAO to commit to executing this strategy over a specific timeline, we think it is worth experimenting with Hidden Hand as a potential way to increase the DAO’s revenue. We propose to start incentivizing on Hidden Hand with $2K in DAI for the first week of this experiment and reassess based on realized profitability over time.
4) COMP reinvestments
As background, after a recent bug fix, Notional pulled its funds off of Compound V2 and is no longer earning COMP. This means that the DAO’s strategy of reinvesting COMP is no longer sustainable. The options we propose are:
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Reduce weekly COMP reinvestments from 200 COMP to 65 COMP and augment with 10,000 NOTE per week. This would reduce the sNOTE yield from ~$8,000 per week to $4,600 per week but would extend the runway for this reinvestment program from ~6 months to ~18 months.
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Sell the DAO’s COMP for BAL, convert the BAL into veBAL, vote on the sNOTE gauge and use the proceeds to incentivize sNOTE holders. This strategy would make the reinvestment program sustainable but it would also significantly decrease the current yield from $8,000 per week to $1,000 per week. We could also augment this strategy with 10,000 NOTE per week, boosting the yield to $3,000 per week.
Execution
All of the strategies mentioned above would be executed by the treasury manager at the direction of the DAO.
Conclusion
The objective of these different initiatives is to increase the incentive yield of the sNOTE pool as an additional revenue stream for sNOTE holders and for the DAO. These initiatives would also reinforce the DAO’s commitment to the Balancer and Aura ecosystems.