Lil Nouns DAO

Earn Treasury Yield With stETH & OETH

Summary:

This is a proposal to convert 350 ETH into stETH and 50 ETH into OETH to earn yield for the Lil Nouns treasury.

Abstract:

This is the staking proposal that has been under discussion for months, to safely earn yield for the Lil Nouns treasury by utilizing a combination of liquid staking tokens: Lido’s stETH and Origin’s OETH. It is a followup proposal to the previously passed OETH test prop, which confirmed that Lil Nouns can safely earn high risk-adjusted yields for the treasury by utilizing OETH. 30, 60, 90, and 180-day subsequent OETH yield reports were shared with the DAO via Discord to keep DAO members in the loop on OETH performance and new utilities.

Motivation:

From earlier props and weekly discussions, it is confirmed that the Lil Nouns community is interested in earning yield on the treasury to help fund technical upkeep, administrative needs, and for the long-term growth and prosperity of the Lil Nouns project. On its own, ETH does not earn yield sitting in the treasury, and Lil Nouns holds a lot of ETH.

Lido’s stETH is the largest staking protocol in the world, by billions of dollars. StETH holds more than 70% of the mainnet LST market share and contains a massive Lindy effect. Yield on holding stETH earns 2.9% APY. OETH is an LST aggregator that generates blue chip yield while sitting in your wallet. OETH is backed 1:1 by stETH, rETH, frxETH, ETH, and WETH at all times. Yield on holding OETH earns 3.93% APY. Both stETH and OETH yield is paid out daily and automatically through a positive rebase in the form of additional stETH and OETH.

Splitting the treasury assets between stETH and OETH allows for both greater yield generation to the DAO and increased diversification between treasury assets. At the recommended amount of 350 ETH into stETH and 50 ETH into OETH, the expected total interest earned is $35,007.66 (12.105 ETH), or $2,917.305 per month (1.0071167435935497 ETH at current prices). The 70 ETH remaining in the treasury is more than enough to fund additional proposals over the coming months.

Transactions

This prop will execute with two transactions: the first to deposit 350 ETH into stETH using the stETH submit function, which will return 350 stETH, and the second to deposit 50 ETH into OETH using the OETH zapper deposit function, which will return 50 OETH. The OETH yield opt-in function will not need to be called for this prop, because the Lil Nouns wallet is still opted-in from the previous OETH prop. This is confirmed by using the public getter function on the OETH contract, function number 13.

Usage of Funds Generated

To reiterate from the OETH test prop, with the additional ETH that will be generated for the treasury from the stETH and OETH yield, here are several avenues for using the funds: Subsidizing public goods spend Subsidizing Lil Nouns marketing to offset the cost for future movies, paid promotions, conference expenses, swag, and Noggles Subsidizing Lil Nouns infrastructure and auction expenses Subsidizing cost for collaboration with other projects Funding large team efforts for less Extended DAO runway

Potential Risks and Mitigation There are seven possible risks when using stETH, and Lido is making sure to reduce each risk as much as possible: Smart contract risk: Lido conducts regular security audits of its smart contracts by reputable third-party auditing firms. Lido’s contracts are also open-source, allowing the community to review and contribute to their security. Liquidity/market risk: Lido provides liquidity for stETH through decentralized exchanges and liquidity pools, helping to ensure that users can buy and sell stETH even during periods of high volatility or when needed. Lido also incentivizes liquidity providers through additional rewards and fees. Slashing risk: Lido’s staking infrastructure is designed to minimize slashing risk by using a distributed and decentralized network of validators. Lido’s liquid staking model also ensures that users receive stETH tokens that are not directly exposed to slashing events.

Counterparty risk: Lido enacts robust security measures to protect user funds and operates with transparency to build trust with its users. Lido’s governance model also allows stakeholders to participate in DAO voting and hold the protocol accountable.
Protocol risk: Lido aims to minimize protocol-related risks by closely monitoring the upgrades and developments in Ethereum 2.0 and actively contributes to the protocol’s growth and improvement, all while adhering to web3 best practices. The risks for when using OETH and how Origin is mitigating those risks can be found in the previous OETH proposal. An important update to mention is the passing of the OETH simplification proposal. With a simplified OETH, the possible attack surface will be shrunk, as less smart smart contracts will be used behind OETH. Other LSTs will no longer be used for minting new OETH, as yield strategies, or as collateral. OETH strategists have already begun divesting collateral LSTs back to ETH where it will be deployed to the AMO and/or Morpho, and the redeem fee will be heavily reduced or removed completely. Origin’s new product, ARM, can assist with near 1:1 exits back to ETH with zero slippage for both stETH and OETH.

Sponsored on behalf of lintcouncil.eth - please do your own due diligence here.