Objective
Strategically diversify a portion of the RGT in the Rari Capital DAO (“the DAO”) treasury into stable coins via a public batch auction.
Background
Currently, the DAO treasury consists of 99.99% RGT exposure and holds less than $60k worth of Rari Yield Aggregator assets. While treasury management practices are outside the scope of this proposal, from a risk management perspective, it is generally accepted that best practices include diversifying a portion of the treasury to productive assets outside of the protocol's native token. As the DAO expands with the Task Force model, the DAO will benefit from having non-RGT assets available.
During the summer and fall of 2020, the team at Framework took notice of a team of developers and technologists working on a yield aggregation product. This team stood out to us for a number of reasons. First, they were one of the only teams safeguarding the launch of their products during the farming mania of 'DeFi Summer'. Second, this team was experienced in crypto/Web3 and had members who had already exited on their first startup despite still being university students. And third, this team had expressed their intentions to redefine finance for their generation through the work of the Rari Capital DAO.
Framework has been an early participant in and supporter of the DAO, voicing support for the original RIP-1 to mint additional RGT. On 09/16/2021, Framework doubled down on this conviction by voting 'For' the first execution of RIP-1, which minted 2.5M RGT and increased the total supply to 12.5M.
Proposal
Framework proposes the exploration of a batch auction where the DAO commits to selling up to 250k RGT, with the proceeds being used to diversify the current treasury. As part of this proposal, Framework would commit to backstop this auction with $5m+ based on a slight discount to the 30 day rolling average price of RGT, and intends to participate to increase our current ownership of the network. We believe a batch auction is the most fair method to set a clearing price for RGT, as it is open to any market participant and enables market forces to settle on a "fair" price for RGT considering the proposed lockup below.
We ask for fellow DAO members to provide feedback on the following terms:
Amount of RGT to put up for auction
- Framework proposes diversifying 10% of the current DAO treasury via an offer to batch auction 250k RGT.
Duration of lock-up period for RGT sold via auction
- Framework proposes a 2 year lock-up to ensure long-term commitment from participants.
- This could be achieved via a redeemable ERC20 with added vesting controls for transfers. More info on how this could look is available here.
Length of auction
- Framework proposes a 72 hour auction period to ensure that enough market participants are able to participate, and the DAO can get a favorable market clearing price.
Minimum price per token
- Framework proposes a minimum auction bid of $25. This would result in a minimum commitment size of $6,250,000 for 250k RGT.
- This number was produced by taking a slight discount on the current 30 day TWAP of RGT given these tokens will be subject to a 2 year vesting period. It’s important to clarify that any market participant will be able to bid above this price given the batch auction mechanism. The backstop is designed to ensure that the DAO does not sell any RGT at too low of a price, while also ensuring that the treasury effectively diversifies.
Token used to purchasing
- Framework proposes the use of USDC as a bid currency.
Max amount of USDC per address
- Framework proposes no maximum USDC contribution per address.
Platform for batch auction
Ask from DAO members
We kindly request DAO members to share their feedback on this draft. Additionally, we ask that the presented draft be treated as a means to kick start this conversation in a transparent environment given the diversity of viewpoints we anticipate from DAO members. Please also note that, if this proposal comes to a vote, Framework and its personnel will abstain from voting on it.
Important Disclosure
This proposal is provided by Framework Ventures Management LLC (the “Firm”). It should not be construed as investment advice of the Firm or a recommendation by the Firm for any individual to buy or sell any asset or engage in any investment strategy discussed herein. It does not constitute an offer to sell or a solicitation of an offer to purchase any private fund (“Fund”) managed by the Firm or its affiliates. Any such offer or solicitation shall be made only pursuant to a confidential memorandum relating to the Fund (as amended or supplemented from time to time, which provide important information related to investments in the Fund, as well as the Firm. Opinions, projections, forecasts, estimates, and other information contained in the proposal are subject to change without notice of any kind and may no longer be true after the date indicated or after the date of the publication. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results could differ materially from those anticipated in forward-looking statements. Past performance is not necessarily indicative of future results. An investor could lose all or a substantial amount of its investment in the Funds.
