Proposal: [onchain] Deposit $2.3m USDC from the Shutter DAO 0x36 treasury into the Avantgarde DeFi Yield Vault

Shutter DAO DAO Proposals
1
Proposal Title Author(s) Phase Type Date Created
Deposit $2.3m USDC from the Shutter DAO 0x36 treasury into the Avantgarde DeFi Yield Vault Avantgarde Finance II Fractal onchain 15 December 2024

Deposit $2.3m USDC from the Shutter DAO 0x36 treasury into the Avantgarde DeFi Yield Vault

Proposal

  • Proposal to deposit $2.3m USDC from the Shutter DAO 0x36 treasury into the Avantgarde DeFi Yield Vault on Enzyme, which is a mirror of the Avantgarde DeFi Yield Fund, currently yielding around 19% (annualized).

  • Diversified exposure to on-chain stablecoin yields across multiple sources, based on a robust protocol selection process and risk assessment framework.

  • Non-custodial deposit with conservative risk profile.

  • No active management required from the Shutter DAO 0x36, who still retains custody over the vault shares.

  • Full transparency into vault activity with real-time analysis.

  • Potential for long-term partnership with a leading crypto-native Treasury Manager.

After the recently successful temp check on Snapshot, “Avantgarde Finance to Support Treasury Management for Shutter DAO 0x36”, the Shutter DAO 0x36 has signalled its interest in depositing $2.3m USDC from its treasury into a yield-generating stablecoin vault on Enzyme. Accordingly, the approval of this proposal will execute said transaction from the Shutter DAO 0x36 treasury into the Avantgarde DeFi Yield Vault on Enzyme. Please find more information on the vault below.

Long-term, we can build on a partnership between Shutter and Avantgarde to implement more sophisticated strategies and a holistic treasury management structure that can sustainably support the DAO’s ongoing operations. For example, we’d be happy to manage any upcoming developments to sDAI and required portfolio changes as per the DAO’s needs and wishes.

Avantgarde DeFi Yield Vault

Vault page: Enzyme

  • Non-custodial with smart-contract based roles & permissions

  • Provides access to on-chain yields within DeFi, focusing on the largest, most battle-tested protocols

  • Currently yielding around 19% (annualized), realistic average expectations 9-15% APY

  • Aims to be diversified across stablecoins, protocols, and underlying yield sources

  • Balances the level of yield with risk and capacity

  • Actively managed

  • Competitive fees, 0.5% protocol fee and 7.5% performance fee

  • Full, real-time transparency into vault activity

Operational setup

The operational setup has changed slightly since the temp check:

  1. The vault will remain permissioned but not exclusively so: Shutter DAO 0x36 will be the only initial depositor and Avantgarde Finance will remain as the delegated manager with certain smart contract roles & permissions (ensuring that Avantgarde can not misappropriate the funds). However, the vault will remain open to other potential DAOs interested in utilising the vault for its treasury in a similar manner (this would require Avantgarde to whitelist them as a permissioned depositor). The benefit of this for Shutter DAO 0x36 is lower gas costs and slightly better overall returns. Since gas is always a fixed cost regardless of the transaction size, the lower the % share of total vault TVL that gas makes up, the less impact it has on total returns. Other than that, there will be no impact on the Shutter DAO 0x36’s deposit and yield; returns will be the same regardless.

  2. Ownership of the vault will be held by Avantgarde Treasury and controlled via a 3/5 multisig made up of two signers from Avantgarde Treasury, two signers from Avantgarde Finance, and one from Enzyme. This is to protect the DAO from scrutiny, regulatory or otherwise, and will have zero impact on the Shutter DAO 0x36’s assets and the non-custodial nature of this deposit. Importantly, any changes made to the vault won’t go into effect until after a 7-day cooldown period, meaning that in a scenario where changes were made to the vault that the DAO does not agree with, the DAO could simply withdraw beforehand. Please note that there is no reason to expect any such changes, and if there were, Avantgarde will make sure to communicate those on the forum with at least two weeks’ notice.

The rest remains the same:

  • Fees would be calculated in the vault technology and paid out automatically
  • Reporting is on-chain provable and auditable 24/7 via the Enzyme UI, and Avantgarde will provide additional formal reporting on the performance of assets on a quarterly basis, and can respond to interim questions as the community deems appropriate.
  • Shutter DAO 0x36 can withdraw from the vault at any time. Please note that the DeFi Yield Vault may hold external positions on, for example, Pendle, which ideally should be closed before a withdrawal is initiated to ensure all rewards are collected prior. Hence, while the DAO could withdraw instantly and receive its deposit value in the tokens held in the vault, the optimal way would be for the DAO to communicate its desire to withdraw a week prior to allow Avantgarde to wrap up any open external positions and facilitate the withdrawal in USDC.

Motivation

Recent discussions on Treasury Management have shown a majority interest from the Shutter DAO 0x36 community to earn yield on idle treasury assets, with a desire for simplicity and a strategy that allows for minimized governance attention, operational risk and overhead. Recent Snapshot votes have signalled that the Shutter DAO 0x36 have chosen Avantgarde to support the DAO with treasury management, namely by depositing the treasury’s idle USDC into the Avantgarde DeFi Yield Vault on Enzyme.

Links

Original forum post: Avantgarde Finance to Support Treasury Management for Shutter DAO 0x36

Snapshot proposal: https://snapshot.org/#/shutterdao0x36.eth/proposal/0x9181b434949c18bbb6baaecd3534b581b379c118d6a71a17a33c211a72a83816

Vault UI: Enzyme

Test transactions: To be executed during the week of the 16th - 22nd of December and updated with links here.

Platform

Fractal

Transactions

Transaction 1 - Approve

target: 0xa0b86991c6218b36c1d19d4a2e9eb0ce3606eb48
function: approve
parameter types: address, uint256
parameter inputs: 0x4b4c67949b887fe22584d232ed76e3e10ec8769e, 2300000000000
transaction value: 0

Transaction 2 - Deposit USDC into the Avantgarde DeFi Yield Vault on Enzyme

target: 0x4B4c67949B887FE22584d232ED76e3E10eC8769e
function: buyShares
parameter types: uint256, uint256
parameter inputs: 2300000000000, 2277000000000000000000000
transaction value: 0

Voting Options

“YES”

Vote “Yes” to approve this proposal

“NO”

Vote “No” to reject this proposal

“ABSTAIN”

Abstain for voting for or against this proposal

License

CC0: This work is marked with CC0 1.0 as dedicated to the public domain.

2

I would personally against this proposal, market making should be the top priority at the moment. Eth and eco project perfrom well and shutter token is dying. This type of yield is useless from my point of view and can not help the project get through the next bear. So use the moeny for MM is my choice

3

A Yield of 19% instead of sitting on the treasury seems good, if there are no short term perspectives of other needs for this liquidity.

It worries me that this is most of our liquidity if we don’t want to be dumping $SHU aggressively in the future if funds are needed.

A strategy where some of the $SHU on the treasury can provide returns would be more interesting.

That said, I’m not the person you want to get advice for about DeFi, looking forward to see more perspectives here.

Also, might be good to have very clearly described those roles and permissions to manage that vault. If I’m missing it somewhere here, let me know, but “certain contracts and roles” is not enough description for managing 2.3M imo

4

Curious to know more about risk profile of the DeFi Vault in general regarding some parameters that would help address this question; For some example, Which protocols will be used or if there would be a capped exposure per asset and protocol.

5

Thank you both @franklivid @zeugh for engaging with the proposal! Addressing the points below:

You are not wrong in expressing concern over price developments in the native token. As the charts show, most so-called alt tokens have seen this type of price development over time, and while it is still a very valid issue, it is not unique to the SHU token. We have great relations with market makers and would be happy to facilitate that for the DAO, but I believe this is a more fundamental issue than pure market making; about finding pmf and monetizing products/services tied to the token, and so on. Also happy to have conversations with core contributors on how we could help Shutter grow. Earning good yield on idle tokens in the meantime seems reasonable and won’t prevent any of the other points being addressed.

As Avantgarde also mentioned in the initial proposal, there are of course possibilities to take on more risk by diversifying into ETH to capture some of that upside (while not as volatile as a native token). Still, I would argue on the contrary that having a decent chunk of stablecoins like the Shutter DAO 0x36 has + generating good yield on them is exactly what will help it see through next winter, without the risk of negative price development of a native token.

But again, happy to have conversations about MM.

Agree that this worth considering, and also one of the reasons you’d diversify into stables in the first place, to avoid this type of forced short-term selling to meet operational needs. We’d be more than happy to support Shutter DAO 0x36 with a more holistic strategy for the treasury that takes things like short-term liquidity needs, contributor payments and so on into consideration. Turning the idle USDC productive appeared as a good first step towards a deeper partnership between Avantgarde and Shutter DAO 0x36, but we are of course happy to have those conversations whenever the DAO wants to. For example, we also work closely with r3gen finance (Arbitrum, Treasure, Swell, etc) to support DAOs with any operational and strategic needs related to planning, “bookkeeping”, financial controls etc. So there is definitely ample expertise and experience to provide more holistic services for the DAO if desired.

Likewise on this point, this is something we could explore together as well. For example, we strategic tool we have is to run covered call options on-chain to earn extra revenue on the native token. We’d have to run the numbers, but this is to say that there are options to explore.

The vault owner in this case is a 5-out-of-3 multisig held by Avantgarde Treasury, Avantgarde Finance, and Enzyme to protect the DAO from any type of scrutiny. The owner has the ability to update configurations and policies, but cannot access the funds within the vault since it’s non-custodial. Any changes to the policies will take effect after a 7-day delay, meaning the DAO will have time to review and, if necessary, withdraw from the vault before any changes are applied.

Changes by the owner are exceptionally rare and are generally not expected. In the unlikely event that a change is required, it would be communicated to the DAO well in advance. For further clarity, you can review the list of existing policies for this vault here.

The manager (i.e., Avantgarde) is responsible for managing the assets and executing the vault’s strategy according to the policies set for the vault. The manager can only interact with the assets and integrations permitted by the vault and must adhere to any additional policies set by the owner.

In this case, the main policy to consider is the cumulative maximum slippage tolerance of 10%, which means no trade or DeFi activity can occur if cumulative slippage exceeds this threshold. If the limit is reached, Avantgarde’s trade permissions are automatically revoked. While this limit can be adjusted lower if the DAO deems it too high, it is designed to protect against most malicious actions and prevent trades that significantly harm the vault’s assets.

Additionally, we can add further specific permissions to control which integrations can be used (current ones here). However, this may slow strategy execution, as any new changes would also take seven days to take effect. Ultimately, we believe the DAO’s key objective should be to avoid any loss of funds, and the slippage tolerance is designed to address this.

Hope that provides some clarity. If you’d like any more details or have questions, feel free to ask!

6

Thank you @Juan for your comment.

The manager (i.e., Avantgarde) can only interact with the assets and integrations permitted by the vault and must adhere to any additional policies set by the owner. The protocols/integrations available on Enzyme can be found here. If requested, we can also add specific permissions to control which integrations can be used. As mentioned in my previous reply, we believe the DAO’s key objective should be to avoid any loss of funds, hence why we have included the slippage tolerance to address this.

As for the strategy/token composition, we will look to replicate the Avantgarde DeFi Yield Fund (which is a regulated fund), which aims to be diversified across stablecoins, protocols, and underlying yield sources, focusing on the largest, most battle-tested protocols.

More info on the composition of that Fund can be found on the portfolio page:

https://app.enzyme.finance/vault/0xfa9fa21e2f38353b31ec7d67820f6df0b20f2a02/portfolio

Likewise, the Avantgarde DeFi Yield Vault that Shutter DAO 0x36 will be using will have real-time tracking and updates available on Enzyme, see here. Here you can also find policies and so on.

Let me know if anything is unclear or feel free to ask further questions, thank you!

7

Hi all, we will vote against this proposal. In my view swapping half of the USDC into ETH for example would be a much better, less riskier play (probably had to do it much earlier but it is what it is, right?). If we want yield why not enter the ETH-USDC farm using sickle on https://vfat.io/ instead of this or just one of the stable pools available there?

8

Thanks for your comment @acidbird! We did include this option in the initial proposal, but saw no comments or feedback on that particular point so we removed it. We wouldn’t have done this unless we recognised the point you’re making. However, don’t think many would agree that ETH is less riskier than USDC, though there could of course be significant upside to capture (but likewise, there is the possibility of the reverse). How speculative does the DAO want to be with its treasury?

As we have commented elsewhere, we are more than happy to formulate a more holistic treasury management strategy for the Shutter DAO 0x36. The snapshot proposal would suggest that there is broad support to productively deploy the idle USDC, but obviously there are other valuable points being raised.

Again, moving the idle USDC into the yield vault does not prevent the DAO to withdraw a portion out of it and move it elsewhere when an appropriate complementary strategy has been agreed on.

Happy to continue this discussion!

9

It doesn’t protect that USDC from hacks as well. thank you for the note. we will definitely vote against it anyways.

10

The Enzyme protocol has been on mainnet since 2017 without any incidents and is one of the most battle-tested and audited protocol’s in the industry, and we only interact with blue-chip protocols and assets.

So while there is always going to be some inescapable fraction of risk using blockchain tech, this is definitely on the conservative side.

Debating these things is healthy and we’d welcome further discussion. Again, we can always adjust the treasury strategy in a more holistic way later, and we’re happy to work with and support the DAO here. For now, earning good yield seems like a good first step for this partnership.

1 Like
11

Thank you @Avantgarde for this proposal. At Kleros Labs, we fully support it, as we believe it is essential for ShutterDAO to adopt a low-risk approach guaranteeing yield on its stablecoins.

Unlike some other projects with a central entity handling Treasury management, ShutterDAO is truly decentralized. This structure makes it much slower to execute any Treasury management actions. While we are not opposed to including some ETH in the DAO’s asset mix—as we do for our Cooperative, as outlined in this report — ShutterDAO will require a clear strategy and robust risk management framework because the DAO cannot react quickly to market changes.

We believe this proposal is a strong first step in ShutterDAO’s Treasury Management journey. Avant-Garde and Enzyme are well-known in the space, the underlying protocols they used are battle-tested, and ShutterDAO retains full custody of its funds (allowing us to adjust the strategy at any time).

1 Like
12

First of all, I would like to acknowledge that this Avantgarde proposal is a significant improvement over the previous one in terms of transparency and communication. However, I will outline our rationale for voting against this proposal on Snapshot, as we still intend to vote against it.

The proposal estimates a 10% APY before fees, which translates to approximately 9.2% after fees (excluding the development costs to deploy the fund, previously around $5,000 ). While this is roughly in line with current stable annual returns, the DeFi risk profile is notably different. The counterparty risk in this setup is much higher compared to depositing funds into one or two well-established stablecoin-only vaults.

The most critical concern is current annual burn rate of $2 million, while the entire treasury holds only around $3 million. This raises questions about the feasibility of depositing into this vault in the first place. If the initial deposit is $2.3 million with monthly withdrawals, can Avantgarde handle flexible redemptions? Are there any redemption fees? @Avantgarde If so, the final return could be significantly lower than the estimated 9.2%.

Additionally, even with an annual return of 9.2%, this would yield approximately $200,000, which is insufficient to cover expenses for the next year—assuming we do not spend any of the remaining $700,000. This prompts us to question whether it is worth risking such a large portion of the DAO’s treasury for an estimated 9% return.

The primary concern is not the DeFi protocols themselves or Avantgarde but rather the risk posed by the small size of this DAO’s treasury. Should any hack, unexpected significant loss occurs, this project will be default dead instantly. Given the current financial situation, we do not think it is safe or worthy to take on this level of risk.

1 Like
13

Thank you for sharing your feedback @han, appreciate your acknowledgment of the improvements in transparency and communication in the revised proposal. Addressing your concerns below:

  1. APY Clarification: While the proposal mentions an average range of 9-15% APY to anchor realistic expectations, the exact return depends on prevailing market conditions. The 9.2% net return you project is not an unreasonable estimate within this range, but at the lower end and not a fixed outcome. Lately, the yield has been sitting at the higher end of a 15-19% range. The benefit of the DeFi Yield Vault is also the diversification of yield sources and risk mitigation through robust protocol selection you get.

  2. Redemptions: There are no redemption fees for withdrawals. To address concerns about flexible redemptions, we could pre-agree on monthly cash flow needs or receive advance notice for withdrawals to optimize external positions and ensure USDC availability without impacting yields or operational efficiency.

  3. Treasury Size/Risk: While we see your point about treasury size, Enzyme’s track-record speaks to its security, including the vault’s non-custodial nature, 7-day cooldown period, and diversified portfolio. At the same time, doing nothing with the idle assets will not help the treasury situation.

  4. Sustainability/Returns: While the yield alone will not cover the annual burn rate, it provides incremental income to supplement expenses and reduces the reliance on idle funds. Again, better to do something than nothing, especially when you can get good yield at low risk. Coupled with a holistic treasury strategy over time, it can help improve the DAO’s financial position without requiring intensive governance involvement.

As we’ve reiterated here and elsewhere, we remain committed to collaborating with Shutter DAO 0x36 to improve the financial health and sustainability of the treasury. We see this as a valuable first step, and as the treasury begins to generate yield, we can work together to design a broader strategy that addresses ongoing expenses and supports long-term goals.

Please let us know if you have any further questions, and thanks again for engaging with the proposal!

14

In agreement here, well put Han. Yield on the portion of stables makes sense, but this entails risk-taking and the treasury will still be underfunded. We believe that it should be carefully considered how much is kept in stables and locked in vaults and whether a certain proportion should rather be placed in riskier assets. By placing a smaller part of the treasury e.g. in ETH, the treasury would be taking a largely similar level of risk but on a smaller part of the portfolio and with higher chance of getting better funded.

15

We tend to agree. With a small percentage of Ether allocation, we probably can achieve similar return with less counterparty, security risk. This is worth further discussion

16

We are not against the idea of allocating a portion of the treasury to ETH strategies for this reason, in line with the DAO’s risk profile. In fact, if you check our initial temp check proposal, we mentioned this option to see if there was any interest in pursuing such a strategy, but did not receive any comments on it; hence we moved forward without it.

While the intention for the time being is to move this proposal forward, we are very open to host a deeper discussion on the treasury in the near future, collect survey data from the community, and draw up a more holistic strategy for the DAO.

Thanks for your comment @dbas!

1 Like
17

Thank you for clarification on the redemption schedule. Would you estimate the return based on this monthly redemption schedule?

In case DAO just allocate some asset to ether, it is probably, more such safer keep the asset in DAO contract and with some USDC convert to sDAI or directly deposit into Aave or Compound.