We have 460E in the vault that’s not earning anything. We know soon is coming but until then we should be earning. Even when soon happens, it’ll be a happy moment and we’ll only eat a reasonable gas fee of ~.2E. We mainly need to trust the contracts we’re staking with. If we trust LIDO https://lido.fi/ we can be earning ~4% APR or 18E per year simply by staking (making a transaction). If we go with something less credible like Bancor https://www.bancor.network/, we can be earning 34% APR or 156E per year; it would be more than a simple transaction like LIDO, we’d need to more actively manage it by converting a portion of rewards to ETH.
The biggest risk is the smart contracts. It’s profitable and it doesn’t prevent us from instantly converting back to ETH and using it for seed investments, it’s just while we wait.
Time wise, I’d think sooner the better and it can be in a week. I’d want every lizard to share their thoughts and then we can vote.
Cost, if we use LIDO, two transactions of converting or .2E max. If we use Bancor, it could be up to 1E.
KPI, if every lizard shares their thoughts and votes! Whatever wins works but I’d rather have our eth earning eth at the end of it.
Hope all lizards are thriving and getting through this downturn alright
*Please suggest other protocols if interested in the idea. At the end, if it is a yes, it should be all available options.
I am curious about the tax consequences for the DAO for swapping to the ultimate staking token. If done so on an ongoing basis as new ETH is deposited, it shouldn’t be a big deal, but what about the ETH that has been in there for several months? I suppose now we may even be able to book a “loss”?
*edit: added rETH link. It can also be exchanged for over a DEX; token address, white paper, etc. can be found in the menu)
I should’ve included that in the original post, it’s a good idea to suggest others. All will be added to a final list that can be voted on if it’s a yes. Can you edit the post to include the link to rETH?
I believe we’d only be taxed on the ETH gained on the transactions in this case. If we deposited 10E and earned 1E, we should report 1E earnings. If we deposited the 10E and only took out 5E, we’re only taxed on .5E. If there are any tax professionals reading this, please add thoughts! (Feedback from Discord, we can ignore this for now)
This might not be a popular opinion, but I’m not sure I feel entirely comfortable with putting that much into an interest bearing contract at this time - especially given the overall sentiment surrounding the UST depeg - yes I know a depeg is not a protocol failure, but everyone is hurting from it regardless of their exposure to LUNA/UST. While the risk would be very low on something like LIDO, I am of the opinion that patience will win the day. Maybe I’m letting emotions get the better of me. There’s risk even in hodling.
What if we were to consider insuring our position in one of these protocols through something like Nexus Mutual or Etherisc? Before I consider putting my crypto into protocols like this, I always check to see if a means to insure my principal is available. I would be more comfortable with using something like Bancor if we were to insure it. I can’t speak for Etherisc, but I do know that Nexus Mutual offers cover for Bancor V2 (with support for V3 coming very soon). Right now, to purchase Bancor V2 cover for 460 ETH on Nexus Mutual it would cost:
0.9823 ETH for 30 days of cover
2.9470 ETH for 90 days of cover
11.9518 ETH for 1 year of cover
Something to consider. I’m all about trying to mitigate risk, and let’s face it - far too much money has been lost already and I’d hate for ETH Lizards to even run the risk of suffering something similar. I love you all too much!
Full disclosure: I do work for Nexus Mutual as a financially compensated community support manager. If that’s a problem, there are other alternatives we could look into. I just want to make sure the information is out there and that we do our best to be responsible stewards of this wonderful underground lounge we’ve managed to build. Thanks for considering my thoughts on this. Looking forward to seeing Lizards on the Moon!
Agree with most of what you said, imo there’s too much risk involved in staking all our ETH into Lido for 18 ETH per year. Also keep in mind we would need to unstake, swap, and transfer for every ETH transaction we do and at 200 gwei that’s going to cost a lot more than 0.2 ETH.
Its not just smart contract risk here, its also LIDO Centralisation risk. There’s a reason why the StETH, trades below peg.
LIDO is now starting to become the largest single staking entity on the beaconchain. This means if they have any network issues or downtime , LIDO and their stakers will be penalised heavily.
This is also not taking to account SLASHING risk. If for some reason, they accidently start up a ‘backup’ server with same keys - the Stake can get SLASHED and booted. This has happened with centralised services before.
This is far from a ‘risk free’ deal.
Essentially this also means we would be ‘trading’ ETH for stETH, at least until the Shanghai update, and be subject to any market/technical factors affecting stETH.
Wow, I don’t know any of this but sounds like a bad idea. Also, so glad we have extremely knowledgeable people in a variety of fields. Wish there was a better way to get everyone involved with all their expertise…
LIDO is an example, the idea is we should be using our ETH to earn more ETH. If LIDO isn’t wanted, other options like Bancor were brought up and can be suggested. If no one knows of any good ones / the contract risk isn’t worth the reward, that’s fair
Bancor is the preferred choice unless someone has another pick? It seems we’d kick LIDO off based on comments and that makes sense. I do think setting 200E in Bancor wouldn’t be an inconvenience and unless we’re planning to deploy all of our capital in seed investments quickly which doesn’t seem to be the case, it would be easy to take out if/when needed. We wouldn’t need to add new transactions if we are actively engaging in seed deals. Worse case on both sides doesn’t seem to be a worse case at all. Either 200 was too much and we already deployed 200+ in seed deals so we need more (I think lizards would be happy) or we earn another 400 that’s just sitting there so we decide to allocate another 200 to passive staking in ETH. To me, really the only consideration is smart contract risk.
Like I said earlier, I think it’s better to just wait and not rush to lock our ETH into something like Bancor. Unless we elect to insure what we deposit into Bancor (or similar protocol), it’s going to be a hard pass for me. But whatever everyone else decides, I will obviously support as best I can. I’ve just seen too many horror stories from major protocol exploits resulting in the loss of people’s funds and I do not want ETH Lizards to run the risk of having to experience that.
Yeah, I’d prefer to wait for those true investment DAO opportunities that we are all here for. I feel like anything else in the meantime will simply complicate the process, cause us to maybe miss opportunities, and open us up to potential loss or eternal discussion.
The observation I make and the conclusion I draw is that we want our money to be working and not unnecessarily being submitted to the current market volatility.
The plan was to invest in presales of upcoming projects by utilizing our network. I don’t know if current market conditions still offer these opportunities, but if that’s the case that’s what we should be primarily be focusing on in my humble opinion.
No risky temporary staking actions. I don’t have much experience in smart contract risks, but if we really want to spread our risk in this uncertain market by creating passive returns on our treasury, then my suggestion would be to pick something more detached from crypto, but still utilizing the blockchain tech. I’ve been using FWT https://freeway.io/
since march 2021 and they grew significantly since then. Their team has significant experience from traditional finance and made a solution using blockchain tech & quant trading strategies.
The company also does projects treasuries.
They promise 43% annual rewards on USD, Euro or GBP using these strategies. I’ve realized more than 43% since last year. If we want a more durable passive income strategy maybe this is also something worth looking into. This is the best introduction I can give: Introducing Freeway_May2022.pdf - Google Drive
Other notable mentions:
-Freeway’s funds are held in a fully EU regulated Prime Brokerage.
-Hive is a DeFi company that are using there services (not yet publicly announced). Also in talks with loads more.
Phoenix Community Capital are in public talks with Freeway
A Canadian public bank staked 433m Freeway tokens
I hope I’ve added some value and this leads to something good!
thank you for the proposal, but in my opinion, our fund should stay far away from the Defi which is nowadays much too risky whatever the protocol.
Risk of smart contract, risk of hack.
Even if the protocols are solid and reputable, it is a risk that it is not necessary to take.
Moreover I think that knowing this, many potential investors would refuse to join us.
For my part, I will change my exposure to the project if it were to be voted.
For only 4% the risk is enormous imo