Putting the insurance fund to work

Hi everybody,

Does anyone else think we should put the insurance fund to work by purchasing MSOL or a basket of crypto assets?

By simply buying MSOL the fund would generate more yeild then is currently earned by v3 revenue…

I propose splitting this between msol, steth and BTC and leaving 5M in USDC for access to quick liquidity if needed.

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One note: currently ~$10M in USDC are committed as “quick liquidity” to be distributed by the mango v3 program to resolve bankruptcies automatically. The remaining $58.6M are in a DAO controlled vault.

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I agree with this proposal, capital should always be at work if possible.
The reserve assets can be mSol, stETH, BTC as @Deaneedog suggested.
The mSol, stETH can further be deposited to saber or mercurial to earn more yield.

I totally agree with putting the fund to work.
However i dont think that we should purchase mSOL or any other cryptocurrency for the USDC.
From what i have understood mango revenue comes mainly from trading fees. I dont know if there is revenue coming from the lending portion but if there is, what im going to say next applies to that aswell.

When the prices of cryptocurrencies are high the revenue of mangomarket is high aswell since dollar wise since there is just more money on the market, some of which flows through mango generating revenue . And when crypto prices are low the revenues become lower since the same ammount of crypto flowing through mango is worth less, generating lower profits in $.

Also the money is supposed to act as insurance aswell and having a insurance pool be made up of the most volatile assets on the market is not ideal.

This is why i dont think the mango reserve should be traded to cryptos since that means if the prices on the markets are low = Low revenue, low capital reserve.

Instead what i would like to propose is that the USDC be deposited to different lending protocols on Solana like Tulip and Solend (more protocols are better because that lowers risks of losing a large sum due to a hack or something else). This way mangomarket can still generate high revenue even if the prices on the market are low, enabling us to pay devolpers and other expenses even in a market recession.

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I support deploying parts of the treasury for the sake of earning interest and lowering borrow rates for traders on the mango v3 platform. Not sure about other lending protocols, possibly through a wrapper like Ponzilabs

I think depositing it to mango is wrong since it is supposed to act as insurance and if we were targeted by a hack that insurance might be stolen aswell.

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Hello, we are PonziLabs DAO (creating the realm this week). We have built a lending protocol aggregator, and our bestAPY strategy automatically deposits your funds into the protocol with the highest return.

We would be more than happy to support Mango and other DAOs to manage part of your treasury with our vaults.

In this way, when depositing, the DAOs’ treasuries would be contributing to different protocols in the Solana ecosystem by providing liquidity to them when they need it most, gaining the best performance and also alleviating the ecosystem on a whole

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Why do you call yourself PonziLabs?

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Well… we dedicate ourselves to the research and study of Ponzi strategies! since their the highest yield component of most defi strategies, we want to harness this power for our own users.

names can be fun! we like the name mango markets as well, makes people think that this DAO focuses on selling Mangos :mango: , which I guess we actually do :grin:

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Hey everyone–

I agree with @booom here in that the returns of the insurance fund are inversely or un-correlated to instances where it would be deployed. So that generally rules out holding non-stable crypto assets or being short-volatility (basis trades, put selling, etc). I think that short-term debt denominated in stables is an ideal solution.

I’m building Castle Finance, which will offer a product for exactly this use case. Our Vault is a money market fund for stablecoins that earns yield from diversified sources across the Solana ecosystem and prioritizes safety of funds over achieving the absolute highest returns.

We have a one-pager here:

We’re currently in devnet only, but will be shipping to mainnet as soon as we get audits completed. Please let me know if you have any questions or other feedback!

P.S. If this breaks any rules about shilling/self-promo, happy to delete and move to DMs with the team instead.

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I wonder if it makes sense for the dao to hold native assets on other chains e.g. eth on eth, dai on eth etc., maybe these could be held in multisig wallets of core devs. Will protect against nuclear option of our beloved solana losing users.

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Owning assets on other chains requires a ton of infrastructure be built out (I think). But I agree with this sentiment

This was discussed on the last dev meetup, took a few notes:

We probably want to distribute funds to different lending protocols to reduce risk, protocols should just open up governance votes if they want to host our funds.

In addition we will invite Katana & Friktion to the next dev call to pitch us their products.

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strongly in favour of putting insurance funds somewhere. I think it would make sense to put them on lending protocols trying to distribute them to avoid concentration. I don’t think we should put them on Mango itself (wrong way risk). I look forward to hear Katana/Friktion devs on the call though for now I’m very against putting them in their vaults as that can have a net negative return when there is high volatility - which may be exactly when the insurance fund is needed most

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I think this is a perfect example of the type of task that should be delegated vs. directly managed by all members of the DAO. I was on the dev call for the discussion last Saturday and the entire team spending time weighing the merits of various lending protocols seems like a misallocation of valuable team resources.

We are talking about allocating max $60mm of capital to mostly stables so this is $3-6mm in annual income (5-10% APR). That is nontrivial and I am 100% in favor of deploying the fund but treasury strategy will have a miniscule impact on Mango’s ultimate success.

We have so many bigger challenges to overcome and cool product improvements we can make. Having our leadership and overworked dev team focus on the treasury feels misguided.

I believe this should be a two-person execution effort with voting approval required by the DAO. Someone with spare capacity compiles a report with objective pro’s/con’s of various investment options including stable lending projects on SOL, non-stable assets (BTC, ETC, SOL) and structured option vaults.

Lending project criteria include: (i) security evaluation (open source, audit, TVL, has Mango team reviewed the code), (ii) yield estimates, (iii) team openness to our investment, (iv) historical collaboration with Mango and (v) other criteria as relevant.

The second member of the treasury team would be a senior Mango contributor and assist with any issues associated with the report preparation. The draft report would include proposed allocations of the insurance fund across the lending pools, non-stable investments and option vaults.

Upon completion, a draft of the report will be published on the forum for a two-week comment period. These comments are then incorporated by the Treasury team. A final recommendation is published and subsequently put up for a DAO vote. The DAO vote will determine whether the allocation should occur as outlined by the report.

In my opinion, this approach optimizes for (i) near-term insurance fund deployment, (ii) rigorous due diligence on allocation options and (iii) minimal distraction for core team members. This is also a good test exercise for how Mango can leverage committees to execute more projects in parallel.

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I really appreciate Brian Smith’s proposal. I’d be very supportive of a working group forming around this task.

In addition I’d like to report, that I started to gather the Solana native DeFi protocols to propose possible integrations into the governance UI for the upcoming Solana Hackathon. Matty from Solana liked the idea to establish a dedicated “Governance” track in the upcoming hackathon and so we are trying to start working on the actual technical issues of enabling this allocation of capital.

Any DeFi protocols lurking here, would be great if you could join this effort and propose an integration in this doc by the coming Tuesday so we can move forward on the hackathon organization: SPL Governance ❤️ DAO Treasuries - Google Docs

As an update, Max reached out to me and we agreed to form a treasury working group. We are proceeding with the plan as laid out in my prior post. A more formal outline of the plan including a tentative timeline is available here: Notion – The all-in-one workspace for your notes, tasks, wikis, and databases.

The working group is currently Max and I. If anyone else is interested in discussing the process or contributing, please contact one of us. You can ping me in the Mango discord (brian_smith_0#3366) or twitter (@brian_smith_0).

I am currently looking for precedents of other DAOs (especially on Solana) that have followed a similar process. If anyone has examples they believe would help inform our approach, please send them my way.

Any Solana projects that believe they should be considered for an allocation but are not as well known as the primary lending protocols (Jet, Solend, Apricot, etc.) should also reach out.

I will provide periodic updates here on our progress as we work on the allocation proposal.

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Here is a draft of the treasury allocation strategy. Note the allocation amounts are for discussion and have not been approved by Max, Daffy, etc. I hope this is a more effective starting point for discussion within the community. I tried to articulate the purpose of this process and objective pro/cons of each asset type.

After discussion has been received in upcoming days, we can update the document to reflect community views, corrections and decide how to move forward. Regardless of the actual allocation amounts, I hope a clear process and a document reflecting the rationale of the DAO is helpful as Mango scales beyond core contributors.

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Just discovered these forums can do polls. Interesting way to gauge feedback informally.

The draft proposal was for the DAO to allocate its $70mm USDC insurance fund as follows:
-15% BTC
-15% SOL
-20% on-chain USDC lending
-30% off-chain USDC loans to market makers
-5% on-chain stable-farms
-15% uninvested USDC in wallet for immediate reserves.

Please vote below with your belief on how the fund should be invested:

  • Status quo - 100% USDC in isolated wallet
  • Less risk than proposed but some BTC/SOL or stable lending OK
  • Generally agree with proposal
  • More risk than proposed - large SOL allocation and aggressive stable lending

0 voters

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Amazing draft, I will summary it into Chinese and share with the community !!

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