RAI Legion (RAI LP DAO proposal)

General Discussion
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Objectives

  • To form a more coordinated social layer of RAI market participants
  • Make it easier for ETH holders to “yeet” into RAI LPing by just sending ETH instead of setting up your own safe/LP/savior
  • Accumulate FLX in strong, well-aligned hands

Introduction

  • RAI is offering good FLX rewards, but the setup and management is still complicated for some
  • Gas costs also make it disproportionately harder for smaller participants
  • Yearn vaults are cool for tokenizing farming positions, but our monthly distributions make using yearn tricky (not to mention they charge 2% mgmt / 20% perf fees)
  • Instead, we can pool our funds in a DAO and try to work around the edge cases

Plan

  • Deploy a Baal (new & improved MolochDAO) at ETH Denver on February 14th (Valentine’s Day)
  • 1 week YEET window until Feb 21st to send ETH to the DAO (using a 3/5 Moloch MinionSafe)
  • On Feb 21st, we roll all the ETH into a RAI Safe + RAI LP (curve?) + Savior
  • As we accumulate FLX, every month the multisig redeems and sends to the DAO guildbank (ragequittable)
    • 5% (or something) of the accumulated FLX could stay in the multisig (non-ragequittable) to pay for operations
  • The multisig admins would be responsible for optimizing for FLX by managing liquidation risk and increasing / decreasing the collateral ratio over time
    • With the savior, the downside is capped to $2,000 per liquidiation, so it probably makes sense to operate at around 150-160% collateral ratio and get rekt occasionally

NFT Moyais

  • To add our own fun twist to this DAO, we would combine it with a NFT PFP project
  • Everyone who joins will receive 1 Moyai NFT PFP (up to 1,000 total)
  • The more ETH you deposit, the higher your priority order in choosing your Moyai PFP
  • We will update Baal such that the NFT actually represents your membership
    • e.g. transferring to another wallet means that wallet can control your votes - similar to Univ3

Redemption / Ragequit

  • It isn’t possible to natively “ragequit” to unwind the whole CDP + savior without additional code
    • We could commission said code and migrate to it after launch (see below)
  • We would only offer redemptions once a month, after each FLX drop, to simplify accounting

New Memberships

  • Only be admitted by vote from the existing members
  • Once a month → proposals would have to be submitted 1 week ahead of time
  • shares / ETH based on current DAO share value (expected to rise against ETH)

Details

  • 3.14 ETH minimum to YEET
  • DAO Voting Period - 4 days
  • DAO Grace Period - 3 days
  • Use Railegion.eth (from someone on discord)

Challenges

  • The multi-sig has a lot of responsbility, and larger ETH whales might not feel comfortable joining until they can ragequit at any time.
  • If the NFT PFPs are tied directly to the memberships, then they can’t be traded / hoarded as legit NFTs… an alternative is just to grant them for fun?
    • Then again, like Univ3, the NFT is actually backed by your membership, which is cool
  • Baal made itself 51% attackable with no grace period, so if NFTs can be traded, then the DAO is a lot more dangerous
  • Baal introduced transferrable shares, but I’m pretty sure this lets people double-vote

Questions

  • What’s the point of using a MolochDAO if there is no ragequit?
    • Well, it could be adapted to add the ragequit.
    • This sort of ends up being a glorified tokenization of the position…
  • Strawman alternative: What if we use Tally Safeguard and a multisig for the whole thing
    • How would users vote? They still need some token that represents their share…
    • Also Tally Safeguard doesn’t provide an actual path to decentralization via ragequit…

Ragequit Registry

  • We could add a “ragequit registry” to Baal which tracks other contracts to ragequit
  • Then we add the SafeMinion to the registry, so when the user calls “ragequit” loops through the ragequit registry and calls “ragequit” on each contract (gas limit concerns)
  • The SafeMinion would be programmed with its own “ragequit” method with the DAO as the only authorized caller, which would unwind a portion of the assets and transfer to the DAO, which would then transfer to the user
    • so if the user goes to ragequit and they have 10% of the shares…
    • the safeminion would remove 10% of the LP from the savior
    • then withdraw 10% of LP from the (curve?) pool
    • then swap any other stables for RAI
    • then pay back the RAI debt and withdraw corresponding ETH
    • and transfer the ETH to the DAO and then to the user
    • note - ^ the above should have no effect on the collateral ratio

Moyai NFT Art

6 Likes
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Love this.

My notes and Q’s:

  • Why such a high ETH min?
  • NFT PFP seems like a huge distraction. Lots of work to make the core DAO function as needed already. I’d recommend getting the DAO running first and then move on to NFT fun after the dust has settled.
  • The voting period seems very short for a DAO that could easily administer $1MM of funds. A proposal could be submitted on Monday at midnight and pass before Friday morning. 3 day grace period doesn’t mean much when funds are held outside of RQ. Might as well extend vote period and decrease grace.
  • Why use a Baal instead of the more battle-tested Molochv2?
1 Like
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NFT PFP seems like a huge distraction. Lots of work to make the core DAO function as needed already. I’d recommend getting the DAO running first and then move on to NFT fun after the dust has settled.

Yea, agree with this now. Was thinking that share transferability would allow duplicate voting and NFTs would fix it but Ross pointed out why that isn’t the case. We can do NFTs after.

Why such a high ETH min?

I suppose it could be lower. I was thinking if we were minting NFTs then it would cover the gas, but if we’re skipping that part then it seems fine. Maybe we change it to 0.314 ETH (~$1,000) to be more inclusive.

The voting period seems very short for a DAO that could easily administer $1MM of funds.

Hopefully even more! But I think you’re right as well - the DAO could in theory have a malicious vote that the multisig holders would have to veto during the grace period (assuming it passed at the last second of the voting period). We’ve done 2 weeks for MolochDAO / VentureDAO and could keep that for this.

Why use a Baal instead of the more battle-tested Molochv2?

One neat feature of Baal is token transferability, which somewhat alleviates the concerns around monthly redemption windows. Another is arbitrary transactions, but you sort of get that with the SafeMinion anyways. Baal also has better delegation, yanked from Compound. I like that Baal cleans up some of the clunkier aspects of Moloch v2, like having a separate token whitelist vs guild tokens, and removing the “pull pattern” that was more important in the context of an investment club with many tokens of various quality. Admittedly though, Baal isn’t audited yet which is a major point in favor of Moloch v2.

I’m going to look into scope reducing the Baal to see if we can keep the quality-of-life improvements, transferrable shares, and delegation, but remove the rest and get an audit.

If the audit takes time, in theory we could actually launch with a Moloch v2 + Safe Minion and then simply upgrade the Moloch v2 DAO to Baal once it is ready. The upgrade wouldn’t be very difficult since the actual funds would be in the Safe Minion.

2 Likes
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Good and bad with this proposal from my perspective.

The negatives:
Absence of a hard cap limit on this DAO - what we don’t want to see is it dominating total liquidity.
It would be a tragedy if it farming the RAI/DAI LP is centralised to this DAO and it’s multisig.
Aiming to get wrecked occasionally and risk total liquidation of the ETH (eg. as would occur with saviour failure or a black swan event) is not in the interest of the protocol and not really appropriate for mult-sig management. Might be different if proposal is changed to cratio 250%+
Unclear “ragequit” mechanism - does it mean the accumulated FLX for that user is distributed to the remaining DAO participants?
Complexities with DAO structure add risks that may not be well understood by DAO participants.
The strength of the uniswap v3 LP lies in the diverse group of participants moving their liquidity to best meet the needs of the protocol - this proposal will centralise and push out smaller individual farmers. This is the antithesis of the ethos of RAI and the Money God League.

The positives:
The accumulated FLX within the DAO is a positive for the FLX price.
Multisig might reduce the risk of single actor corruption.
DAO farming at a safe cratio of 250%+ combined with a multisig and a capped total % of LP pool could be a positive and increase liquidity.
NFT proposal is interesting.

Overall I’d prefer to see people take personal responsibility and farm directly or if the barriers are too high instead choose to provide liquidity to the Curve LP which will be easier to manage.

5

Thanks for the feedback!

Absence of a hard cap limit on this DAO - what we don’t want to see is it dominating total liquidity.
It would be a tragedy if it farming the RAI/DAI LP is centralised to this DAO and it’s multisig.

I agree that we wouldn’t want this pool to dominate RAI LP, especially while the ragequit isn’t setup and individuals can’t easily exit. I’m not sure we need a fixed hard cap, but I would be generally in favor in limiting the size to around 20% of the total RAI LP, possibly opening it up more once the ragequit is in place.

Aiming to get wrecked occasionally and risk total liquidation of the ETH (eg. as would occur with saviour failure or a black swan event) is not in the interest of the protocol and not really appropriate for mult-sig management. Might be different if proposal is changed to cratio 250%+

This is a good point. The risk is always present that ETH drops too fast for the savior to cover the debt in a black swan event, in which case the cost wouldn’t be as trivial as just paying $2,000 for someone to trigger the savior. A major crash also poses a risk to FLX stakers who get slashed if the protocol takes on bad debt. Our goal would be to never get liquidated, even in a black swan event. We could start off with a 250% liquidation and lower it over time if the members are comfortable doing so (we could put it to a member vote).

Unclear “ragequit” mechanism - does it mean the accumulated FLX for that user is distributed to the remaining DAO participants?

No, all FLX rewards would be distributed pro-rata. If we are limiting redemptions to a monthly cadence, then we would wait until the next round of FLX rewards, claim them, and the send the user their share of accumulated historical FLX rewards, plus their share of the most recent FLX rewards, plus their ETH.

Once the ragequit is properly implemented, users would be able to exit in the middle of rewards round. This would make claiming your fractional share of the current month’s FLX rewards more complicated, because the DAO would have to reconcile with you once it receives the FLX rewards based on the time fraction of the month you were in.

Complexities with DAO structure add risks that may not be well understood by DAO participants.

Agreed, would try and be as clear as possible about the structure + risks upfront.

The strength of the uniswap v3 LP lies in the diverse group of participants moving their liquidity to best meet the needs of the protocol - this proposal will centralise and push out smaller individual farmers.

If anything, the proposal is meant to do the opposite by offering smaller individual farmers a way to pool funds and save on collective gas costs, especially with the constant rebalancing that univ3 requires. The choice of farming strategy is TBD though, depending on how the Curve LP pool progresses as well.

As for the positives, I generally agree, and that’s pretty much my motivation in proposing this.

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If we are keeping the c-ratio to 150%-160%, and if we are kind of expecting liquidations to occur a few times, do participants who put in lower amounts get pro-rated amount of ETH back when the withdraw ?
If yes, then this is an amazing opportunity for smaller participants to leverage the savior functionality that they otherwise couldn’t use because of the savior liq fees ($2000).
This way, they won’t have to pay $2000 each time but just the pr-rated amount calculated against the whole pool, right ?

7

That’s right. All costs, including gas costs, rebalancing slippage, and the occasional $2,000 savior fee (if triggered), would be absorbed pro-rata by the DAO members.

1 Like
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Strongly supportive of this proposal, though as others have mentioned the PFP seems to be less important

1 Like