[DAO Discussion] WTM - yieldchad

Hi Everyone,

Below, you will find my proposal for my candidacy for TM, which is comprised of:

  • Vision for Wonderland
  • Background
  • Why I’m running
  • Treasury plans
  • Investment strategies
  • Compensation

By the way, if you are reading this and I have NOT reached out to you personally, please DM me so I can introduce myself.

Brief note on doxing - I have already doxed to Sky and will dox shortly to the rest of the team. I am happy to dox myself to the wider community, but need to understand my liability first and ensure that I am not opening myself up to any trouble, and so am consulting a lawyer. Rest assured I am who I say I am in my background :slight_smile:

Vision for Wonderland
A highly effective DAO that:

  • Attracts the best talent in DeFi to manage and invest the treasury.
  • Utilizes its collective knowledge and reach to make special investments not possible for individuals.
  • Delivers reliable returns regardless of market conditions.
  • Is 100% committed to the best interests of its long term holders.

Background
5 years in European real estate private equity, part of a team managing around EUR 1.5bn. My job was to look at all aspects of the property market, and buy and manage the best risk adjusted yield.

Left 2 years ago to attend MBA at Wharton (UPenn).

Traded crypto and developed quant strategies pretty much full time for the past 1.5 years
Currently managing a small fund focusing on market neutral returns.

My career has been a singular focus on investment and fund management. It’s what I love to do, what I’m good at, and what I am doing currently with my own fund.

Why I’m Running
99% of projects facing the obstacles that WL has faced in the past year would not have survived. To do so proves WL’s resilience. Today, thanks to top class mods, an intelligent and dedicated community, and tactful stewardship, WL has laid the framework it needs to not only survive, but return to long-term growth.

It may sound corny but I love DeFi and investment management – it doesn’t feel like work to me. When I raised my fund last year, I chose this as my career path.

Because of this, I am in a unique position to be able to commit full time to WL treasury management and bring the strategies I develop for my fund to the benefit of the WL treasury. WL will benefit from my tradfi experience and defi knowledge, which allow me to deploy specialized, market beating investment strategies.

Treasury Plans

  • Add trusted community members to multisig as Treasury Officers

    • A responsive and motivated multisig is key to investment performance – so it is critical for WL to add trusted members ASAP
    • Regardless of the outcome of my TM candidacy, I intend to help to the fullest extent possible in finding a TO and moving the process forward
  • Protect existing treasury value

    • My investment style is to take measured, high EV bets - I make bets I know I will win
    • I will not long or short unless I have extreme conviction. I will leave the directional trading to the provenly adept Sifu via the treasury’s Sifu.vision exposure
    • This does NOT mean the treasury will be doomed to 3% yield in the 3pool
  • Reward wMEMO stakers with revenue share and treasury growth

    • Plan to deploy the treasury to earn market beating yields via various strategies without directional price risk
    • Profits will be distributed via revenue share and treasury growth.
  • Honor existing redemption proposal for Q3 and hold votes once halt value is hit.

    • I believe the redemption should also benefit long term holders (or at least be net neutral).
  • Raise capital for treasury if wMEMO trades at a prolonged premium.

  • Buybacks if discount > expected annual return for the treasury.

Investment Strategies

Hedged LP - Matic-MaticX

  • 16-20% APR on Balancer and Quickswap.
  • Additional 8% APR on MaticX.
  • Hedge with 1x Matic short on DyDx (currently positive funding but can assume cost of 2% pa).
  • Annual return of 9-11%.

This example can be replicated elsewhere (cannot reveal all the alpha just yet).

Folding collateral position

  • DAI collateral-USDT borrow on AAVE.
  • DAI collateral base rate + AVAX reward = 3.6%.
  • USDT borrow base rate – AVAX reward = 1.4%.
  • Can fold this 40x at 95% LTV to achieve 38% APR.

This example can be replicated elsewhere (cannot reveal all the alpha just yet)

Options arbitrage

  • Arbitrage differences in IV between options to earn market neutral yield.
  • Can completely hedge out delta and gamma exposure.
  • Cannot provide more specifics without alpha dilution.
  • Projected returns = 15-25%.

Strategic acquisitions of distressed treasuries

  • Wonderland’s redemption process is well practiced and returns value to token holders

  • Given the market carnage, there are a plethora of struggling projects sitting on significant treasuries but no immediate path forward to a viable product.

  • I would utilize WL’s reach and community of talent to partner with and acquire tokens of struggling projects and unlock value for token holders: short term capital seeking exit liquidity, and longer term capital by raising backing per token.

Compensation
5% of profits paid on a monthly basis with a floor ($15k per month suggested, to be voted on by DAO)

Summary
I am extremely excited and humbled to be applying for Wonderland TM – I love this stuff and that passion flows through to my work. I’m ready and committed to bring value and work tirelessly for WL :blush:

5 Likes

This is a solid proposal.

I think given the still uncertainty, that there is a necessity to have a fixed payment for the TM position. A profit share alone would not work at this point in time.

I’d only edit 5% of profits to be paid at the end of the calendar year or when leaving is what I’d propose.

I will assume that the term of the TM here will be indefinite until a RFC or vote would call for a re-election (similar to a no-confidence motion in Parliament). I would propose this is ok.

However, proposals must include a minimum of a 3 week notice period if a TM decides to resign on his/her own, as there is time needed to elect an replacement.

Given that - I’d strongly recommend that we move forward with this particular candidate for RFC and a WIP vote (amongst other candidates).

4 Likes

I support this as long as CHAD:

  1. FIGHT for WL
  2. Make sure Abra not Steal anymore.

but CONFIDENT he WILL. So I approve.

I want to run as deputy tho.

5 Likes

I will DM you on Discord.

1 Like

Why would we pay out 5% of profits at the end of the calendar year? Makes more sense to do this quarterly since that’s how we pay out holders (they can redeem quarterly). Also, we would be forced to keep the TM until the end of the calendar year regardless of performance. I think perhaps your idea is that it will protect us from paying out profits during volatile quarters where one quarter were up and the next quarter we are down, although we would have a watermark parameter correct? So that would make this concern a moot point for the most part, as the loss would need to be recovered over the following quarters.

4 Likes

Regarding the Balancer Strategy: Balancer has recently found a scripting exploit that they claim is unlikely to impact holders. Regardless, my concern is future exploits and SC risk on this network given exploits are already being found here. The consensus was that the script could only be exploited by those on the multisig at Balancer. Either way, a bit concerning that it wasn’t discovered sooner, leading me to believe there may be other SC risk here.

3 Likes

Great insight.

My response is that the hedged LP strategy does not need to be done on Balancer, it is repeatable on other DEX’s.

4 Likes

Looks good. So far the most detailed one I have read while still not giving everything away strat wise. Multisig fix is a key component to any TM proposal so they can execute timely and we limit project bias outside of WL.

1 Like

Pretty rude to shill your own application in someone else’s ser

1 Like

I’d like to start by saying I like the idea to take over the multisig and setting up redemptions to not punish long-term holders like paying out the 25% of total BSGG did (but thanks).

Critiques of the proposal

Strat: matic/maticx LP
The matic/maticx LP positions have less than 10M in liquidity between them and neither of them have get any meaningful return from swap fees. That means if WL were to invest even 10M, the returns would cut in half (assuming the incentives emissions remain the same). Now we’d be looking at 9% returns that need to be hedged so likely closer to 5-6% ROI.

Strat: Looped Aave
The looped Aave strategy has already reduced to ~24% and Wonderland adding any size would wreck the borrow rates. Additionally the Max Borrow on Aave against DAI is 75% not 95% so the returns would actually be limited to ~4%.

Strat: Options arbitrage
Not many details and I don’t have enough knowledge to challenge anyway.

So overall, I don’t see anything actually detailed in this proposal that could generate meaningful yield for WL. I understand that revealing the actual strategies would be giving away alpha, but the ones listed here wouldn’t do much to grow WL’s treasury. The GLP proposal could be promising, but I hope to attract some meaningful conversation around this proposal.

Edit: I see that emode changes the LTV possible for like assets which bumps the collateral factor on aave for DAI up over 75% to 97% :man_facepalming: Will leave it for the lulz.

2 Likes

Agreed with Brab above that there haven’t been any viable strategies shown here. The Aave strat can’t be leveraged 40x for 38%, 40x would require a 97.5% CR which exceeds the max possible. Additionally, there is liquidity concern which prevents doing this with any reasonable size. You’re also looking at slippage losses on the usdt to dai swaps as usdt is still slightly under peg.

I would love to hear more about the options arbitrage, and some strategies which we can meaningfully use.

2 Likes

How do you think your experience in real estate and private equity will help you fill this role?

Did you have any specialized focus in regards to your MBA?

How would you compare and contrast the differences between conserving money and Investing/Spending it?

Do you have any relevant experience in IT/networking/programming/BC tech?

So I think Sifu and StableBrab make a good point about the ability to scale any of these strats due to liquidity. I get that you could potentially allocate very small portions of the treasury perhaps, but your still gonna need either some other strats that scale, or about 30 more strats of similar scalability in order to sufficiently deploy the full treasury at its current size. Perhaps if you can show us some meaningful strats, as Sifu mentioned, it would instill confidence…

1 Like

Hi everyone,

First off, thanks for the insightful commentary. Very much appreciate the thoughtful analysis you all are giving to my proposal.

Overview
I wanted to address concerns about the liquidity/practicality of many of my strategies detailed in my WL TM proposal - I am aware that the strategies I posted have liquidity issues. I have put careful thought into my portfolio construction for WL and so have been providing examples of strategies without divulging too much detail or sharing the most liquid strategies.
The more detail I provide, the more alpha I give away from the treasury and into the hands of smart market participants who are on top of governance proposals (I know from first-hand experience that there are dashboards tracking governance proposals that the top on-chain funds subscribe to for actionable alpha).
So anything I post on the forum, immediately becomes market knowledge.

To highlight an example of this, let’s look at what happened to the AAVE USDT market on Avalanche since my initial proposal.

4 July 2022 – Proposal Date
65.5% utilization rate on USDT market, roughly 249mn USDT borrowed

7 July 2022 - Today
89.0% utilization rate on USDT market, roughly 339mn USDT borrowed (additional 89mn USDT)

  • Whoever borrowed this could have earned 17.5% APR using 10x leverage. You can swap 89,000,000 USDT for 88,869,000 DAI on 1inch on Ethereum – slippage of 0.1% which would be paid back in 2-3 days at 10x leverage.

It was a good investment, and now it is no longer available to the WL treasury or myself. Fair play to whoever snatched it.

Summary
I know the liquidity issues in the strategies I posted. The more detail I provide on my WL portfolio construction, the worse returns WL will get.

  • Most of these strategies rely on some form of arbitrage where anyone with a multi-million $ wallet can come and extract all the available profit, until someone else exits the position/removes TVL.
  • Deploying $100mn is hard, which is why I am planning to commit to TM as my full time job, and why I have put a lot of thought into the investment strategy of the treasury.

Conclusion
I have put together a spreadsheet showing my suggested portfolio construction as of today, with sensitive details blacked out - the returns take into account the dilutive effects of adding the additional liquidity. These are strategies I have worked on for over the past year - they are essential alpha that ensure the longevity of my personal fund’s returns. To divulge them is a massive risk to my personal interest. I want to give everyone comfort while also protecting myself. It is a delicate balance and I’m not sure what the solution is. Eager to hear suggestions from the community.

Portfolio and Cashflow Model

  • Distressed investments have no allocation as they would require a WIP and DAO approval to execute - these do not impact the total APR shown
  • AAVE levered position was removed as it is no longer profitable
  • Options IV Arbitrage was removed as I am not willing to disclose any further detail on it at all, so I feel it is not fair for me to model.

Portfolio


Cashflow

Appendix - Work to Show Calculations on Utilization Rate for AAVE USDT**

image

1 Like

Worst case scenario: USDT depeg to 95 cents, what happens with our investment then?

We make 50% on our money as we are 10x short USDT.

Shorting a stablecoin? WTF? Ok, then what if it goes up to 1,02 dollars?

I think it was Sifu. :joy:

Also 17.5% APR, for how long? I guess you won’t hodl for a year.

It seems we are at an impasse that will require either a trial period with a leap of faith (perhaps another discussion), or we come up with an alternative solution given we have no way to determine the viability of any strats you will deploy. I do understand your concerns, however regarding safeguarding your ideas.

We’ve had this discussion on discord already. USDT going to $1.02 is highly unlikely unless USDC depegs and everyone shifts funds to USDT…an unlikely scenario. Limited scalability for this idea anyways at the moment so it’s a moot point.

Everybody thought Terra / Luna will never depeg, and it went to zero in days.
Also, USDT depegged to 1.03 dollars in December 2021. Unlikely scenario, but not unprecedented.

What was the conclusion on discord, what happens at $1.02?