The Ethereum Name Service (ENS) DAO uses a decentralized governance model to make decisions. This means that the community, composed of ENS token holders, can propose and vote on proposals that will impact the development and maintenance of the platform.
Proposals can include changes to the ENS smart contract, funding for development and marketing, and other important decisions.
To propose a change, a community member must submit a proposal, and then it will be open to a vote. All token holders are able to vote on the proposal, and the proposal will pass if it receives a majority of the votes. The decision-making process is transparent and recorded on the Ethereum blockchain for all to see.
This allows for a fair and democratic way for the community to make decisions and shape the direction of the project.
ENS DAO, Financial Dashboards:
Proposal for the ETH Sale
Recently, a governance proposal was put forward by a member of the ENS DAO, suggesting liquidating 10,000 ether (ETH) into US Dollars to cover operating costs over the next two years.
ENS recorded over 2.8 million domain registrations in 2022. The draft proposal, which was submitted on Jan. 18, is now being discussed among the ENS community.
There is a draft executable proposal up in the governance forum to convert 10,000 ETH to USDC, put forward by @blockchainjames
Current balances of the ENS DAO are:
Read the proposal here 👇https://t.co/3I5etihHvW
— ensdao.eth (@ENS_DAO) January 19, 2023
Proposal for Karpatkey Fund Management
The Proposal for $ETH Sale to $USDC comes on the heels of the ENS DAO “Endowment initiation”, for a newly created SAFE provided by Karpatkey and owned by the ENS DAO. Karpatkey won the Snapshot to lead the END DAO endowment after a confusing new voting system was used for the first time.
According to Santinomics.eth on the ENS Forum, Karpatkey’s plan is to “sell the 10,000 ETH within a few days of receiving the first transfer”, and then to “deploy the resulting USDC in USD-neutral strategies”. He confirmed that Karpatkey “will repeat this process with each installment received”; and after two months, they anticipate to have sold 13,000+ ETH for USDC.
Endowment Initiation for ENS DAO: A Strategic Approach
The ENS DAO’s latest proposal presents a strategic initiative to strengthen its financial standing by initiating an Endowment. This involves transferring 10,766 ETH to a new SAFE, managed by Karpatkey but owned by the DAO. This transfer marks the first of three equal monthly installments, aiming to fully fund the Endowment.
The Endowment’s structure, as elaborated in previous discussions, involves several key aspects:
- Composition: The Endowment will encompass the DAO’s entire treasury, excluding $16 million set aside for two years of operational expenses.
- Asset Management: Unearned ETH will be retained, while all other funds will be converted to USDC. The Endowment will be gradually seeded, with Karpatkey implementing risk-adjusted strategies in USD-neutral stablecoin and ETH-neutral derivatives to generate positive returns.
- Financial Breakdown: The DAO’s current holdings total approximately $67.45 million, including both ETH and USDC. A separate fund of $16 million in USDC and earned ETH will be established to cover two years of expenses.
- Seeding Process: The Endowment will start with a fraction of the funds, incrementally increasing to 100%. Karpatkey’s performance and adherence to commitments will be evaluated before additional funds are committed.
- Strategic and Financial Projections: Various strategies involving different protocols and assets are planned, aiming for an average gross annual percentage rate (APR) of 6.59%, leading to projected gross revenues of over $1.13 million.
- Review and Expansion: Post-launch, the strategy will be thoroughly reviewed before any new installments are transferred, ensuring alignment with established protocols and efficient management.
- Technical and Operational Setup: Karpatkey will be responsible for creating the SAFE, applying the Manager Role, and executing a test replication of the strategy. This process includes conducting audits to ensure security and functionality.
- Future Adaptations: To address changing market conditions, new permissions and roles, such as the Harvester and Swapper Roles, might be introduced. These roles will focus on specific tasks like claiming rewards and converting them to ETH or stablecoins.
- Implementation Steps: These include the creation of the SAFE, strategy testing, transfer of ownership to the ENS DAO, and on-chain voting for the proposal’s approval.
- Integration into DAO Structure: The creation of an ens-endowment subgroup is essential for integrating the Endowment into the DAO’s structure. This subgroup will be managed through the Metropolis app, with specific roles and permissions set for managing the Endowment funds.
While complex, this comprehensive approach by the ENS DAO and Karpatkey is seeking to establish a robust financial framework, ensuring long-term stability, financial growth, and security for the ENS Protocol and ENS DAO ecosystem.
The next step will involve the Meta-Gov Working Group working with Karpatkey to produce a refined version of their proposal that's ready to be presented to the DAO and executed.
— nick.eth (@nicksdjohnson) November 23, 2022
Current ENS DAO Treasury
The DAO’s treasury currently holds 40,746 ETH and 2.46 million USDC. The sale of 10,000 ETH would generate a minimum of $13 million in the USDC stablecoin via a Gnosis auction. This move is being proposed as a way to mitigate the risk that comes with having such a large amount of funds exposed to the volatility of the crypto market. The value of the ENS token has seen a resurgence since the turn of the year, rising from $10.73 to $13.68, but the proposal argues that this alone is not enough to ensure the long-term stability of the organization.
DAO Exposure to $ETH
The ENS DAO has an existing operating budget. The DAO is in a good position, since the project has real utility, and has both an existing treasury and reoccurring revenues. If there was a downturn in the economy and the price of ETH did decrease, then it is best for companies to have the financial runway to maintain their normal operations.
Since the launch of ENS in November 2021, the price of ether has slumped by 68.6% from $4,850 to $1,526. This significant decline in value has left the DAO in a vulnerable position, with high exposure to a single volatile asset. By liquidating a portion of its ETH holdings and using the proceeds to cover operating costs, the ENS DAO hopes to reduce its exposure to market volatility and ensure the long-term stability of the organization.
Proposals Moving Forward
The proposal is still in the discussion phase, and it is up to the ENS community to decide whether or not to move forward with the liquidation of 10,000 ETH. If the proposal is approved, it will be implemented through a Gnosis auction, which is a decentralized exchange platform that facilitates the buying and selling of assets.
The Ethereum Name Service’s governance proposal outlines the intention to sell 10,000 ETH in order to cover operating costs over the next two years. The proposal aims to mitigate the risk of having such a large amount of funds exposed to the volatility of the crypto market and ensure the long-term stability of the organization. The proposal is still under discussion and it is up to the ENS community to decide whether or not to move forward with the liquidation.
ENS DAO, Financial Dashboards: