DAO Fund: Leveraging Yelay Vaults for Sustainable Growth and Treasury Management

Shutter DAO DAO Proposals
1

Context

In agreement with @franklivid and @5pencediscussion on optimizing the use of Shutter DAO 0x36’s non-SHU assets. Merely holding USDC presents a missed opportunity, with this I would like to propose an alternative that aligns with the long-term goals of Shutter DAO 0x36.

Opportunity

Shutter DAO 0x36 has the potential to optimize its USDC holdings by establishing a Shutter Ecosystem Fund through a Yelay (formerly Spool) vault, which can generate ongoing yield and create sustainable support for ecosystem growth.

Yelay

Yelay offers permissionless community vaults that invest principal into a curated set of bluechip DeFi strategies. These vaults dynamically reallocate capital between strategies, optimizing returns while managing risk in fluctuating market conditions. Benefits include reduced gas costs, risk-adjusted APY maximization, minimized labor, and mitigated exposure to black swan events.

Yelay’s strong track record includes:

  • 3+ years of successful operations
  • $281M in Total Value Routed (deposited in vaults)

Yelay vaults integrate strategies from leading DeFi protocols such as:

  • Aave
  • Compound
  • Convex
  • Curve
  • Yearn
  • Morpho
  • Gearbox
  • Ethena

Security is paramount, with audits completed by Trail of Bits, Chainsecurity, and Hexens.

Example Vault

For context, here’s a vault created as an example:

Community Vault

By utilizing Yelay vaults, Shutter DAO 0x36 can earn a consistent yield on its principal and other deposits made, basically allowing community members to contribute with the generated yield to the ecosystem. Importantly, the yield generated is assigned to a specific address as determined by Shutter DAO 0x36.

These permissionless and non-custodial vaults enable anyone to deposit or withdraw at any time, while ensuring that the yield always benefits the Shutter Ecosystem Fund.

Shutter Ecosystem Vault Proposal

Shutter DAO 0x36 can create a custom Shutter Ecosystem Vault, tailored to its preferred DeFi strategies, desired APY, and risk tolerance. Seeding the vault with an initial deposit of 1-2M USDC would provide a solid foundation, with community members invited to make additional deposits.

All yield generated would be allocated to the Shutter Ecosystem Fund, supporting grants and furthering ecosystem development.

Why Community Members Would Contribute:

  1. Supporting Shutter’s Vision: Aligning with the mission of Shutter DAO 0x36.
  2. Airdrop Opportunities: Potential eligibility for future airdrops from Shutter DAO 0x36 or Yelay (e.g., SHU or SPOOL/YLAY tokens).
  3. Payment for Shutter Services: For instance, Shielded Voting on Snapshot is currently offered to all DAOs free of charge. However, in the future, it may cost $50 per DAO per month. As an alternative to paying in fiat or crypto, a DAO could deposit 7,203 USDC into the Shutter Ecosystem Vault, which would generate and assign $50 in yield per month (at 8.33% APY) to Shutter DAO 0x36. In a nutshell, yield generated through deposits in the Ecosystem vault can cover future service fees.

Vault Creation and Operations

Yelay will create the vault according to Shutter DAO 0x36’s specifications. Both the DAO and community members will be able to deposit and withdraw funds through the Yelay dApp or custom transactions. Yield will be automatically compounded unless withdrawn by Shutter DAO 0x36, with decisions on withdrawals handled via Decent governance votes.

Shutter Ecosystem Fund

The purpose of the Shutter Ecosystem Fund should be determined. Here are some potential uses for the fund:

  • Grants: Providing financial support to projects integrating or building on Shutter technology, such as wallets encrypting transactions or voting platforms using Shield Voting.
  • Governance: Shutter DAO 0x36 could decide on fund allocations through full DAO votes, subcommittees, or other mechanisms like QF rounds.

Process

  1. Vault Creation: Yelay will set up the vault according to Shutter DAO 0x36’s preferences.
  2. Initial Deposit: Shutter DAO 0x36 deposits an initial sum to seed the vault.
  3. Community Deposits: Invitations are extended to the broader community to deposit additional capital.
  4. Yield Generation: The vault begins generating and reinvesting yield.
  5. Withdrawals: Shutter DAO 0x36 can withdraw principal and/or yield as necessary, based on the DAO’s needs.
3 Likes
2

Thank you for putting up this proposal!

Just wondering how much do you propose to subscribe in this valut? DeFi has been much safer but it still has inherent risk. would be better the DAO members are aware of the risked amount

Additionally, look like this proposal actually imply the creation of investment fund which I believe is better to discuss separately and have be voted on first including its mandate etc

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3

Regarding your first question:

Yelay offers instant withdrawal capabilities and currently attractive yields of circa 15% on conservative strategies. Therefore, we recommend depositing the entire $2.3M to ensure the treasury capitalises on the bullish market sentiment and earns the highest risk-adjusted return. As it stands, this will generate circa $28,500 per month ($345k annualised) for the treasury which can either be auto compounded or drawdown for DAO spending.

The DAO will have access to self-service dashboard which means funds can be added / withdrawn at anytime

If the DAO decides to deposit a lower amount, this is also possible.

Regarding the investment fund:

From our understanding the purpose of the generated yield was not yet decided however, Yelay provides flexibility in how Shutter DAO can utilize its generated yield, which is a key differentiator. Hare some ways Yelay can help automate and optimize its use:

  1. Compound the yield to grow the treasury further, creating a compounding effect on returns.
  2. Direct the yield to support ecosystem builders, fostering growth and innovation within Shutter DAO.
  3. Use the yield for buyback initiatives to create positive buy pressure for SHU tokens.

All these actions can be automated through Yelay’s vaults.

4

Also, regarding the risk, just adding some info:

Yelay serves as the “yield layer,” delivering optimal risk-adjusted yields to depositors by leveraging sustainable, thoroughly vetted strategies across the DeFi ecosystem. Strategies are selected through a rigorous risk assessment framework and are added to the pool of yield sources only after approval. Once live, these strategies are continuously monitored by Yelay’s risk team to maintain performance and security.

For Shutter, Yelay is creating a dedicated vault with 3-4 conservative strategies. The DAO will have full transparency into the capital allocation for each strategy, the underlying risk assessments, and the on-chain locations of funds.

Central to Yelay’s approach is its robust risk management framework (link to docs). Each strategy undergoes comprehensive analysis by the risk team and is subject to continuous oversight. With over $400K invested in audits and a $1.5M bug bounty program, Yelay emphasizes treasury safety. The vault is dynamically managed, adapting to changing risks to ensure funds remain in top-performing strategies without compromising security.

5

The Yelay proposal is live on Snapshot:

https://snapshot.box/#/s:shutterdao0x36.eth/proposal/0x94aa0d049330cbcf96df72fb315defad810001e47107023826cb6e426f52d8eb

6

Hello Everyone , leaving some highlights of our proposal to tackle some points that were raised:

• Yield Ranges: Currently, the yield ranges from 15%-20%. You can clearly understand how since, in our proposal we detailed which strategies would be present in Shutter DAOs Vault. Also, our vaults cannot incur negative yields.

• Security and Audits: We have invested over $400K in security audits, collaborating with top-tier firms such as Hexens, Chainsecurity, and Trail of Bits—known for their work with major platforms like Polygon and Lido. Our strategies are rigorously vetted by our dedicated risk team before being audited.

• Risk Management: At Yelay, risk management is a core pillar. Our vaults are designed to diversify risks while delivering robust yields. This commitment to risk management is foundational to why Yelay was created so there is never excessive risk in a vault, these exist to automatically rebalance obtaining the best risk adjusted yield.

• Ease of Use: An Yelay vault offers a complete “set and forget” approach. Users know funds are automatically allocated to the chosen strategies in order to maximize the risk adjusted returns. Yelay wouldn’t need to handle anything on behalf of Shutter DAO.

Thank you for considering Yelay and feel free to ask any question!

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