STP-3: Synthetix Ecosystem Fund

Simple Summary

This STP proposes the creation of a Synthetix Ecosystem Fund. This fund will make investments on behalf of the SNX Protocol to better align incentives with partner protocols/communities and capitalize on market opportunities to increase the Treasury for the SNX community. It aims to create a pool of funds that is allocated to funding ecosystem projects as well as diversifying the treasury into liquid crypto tokens.

Abstract

The proposal is to eventaully allocate up to 10% of all SNX Treasury assets to this initiative. However, the fund will initially be seeded with 1m SNX and 1m sUSD. The Treasury Council will establish a new discretionary multisig that is mandated to invest in both liquid crypto tokens as well as early stage projects within the Ethereum ecosystem, with a specific focus on the Synthetix ecosystem on Optimism. There will be a 3/4 multisig address controlled by the Treasury Council, which will deploy the capital for ecosystem investments, as well as hold any tokens or signing rights on behalf of those investments.

The flow will be:

TC to send funds to SEF (Synthetix Ecosystem Fund) Multisig SEF Multisig to deploy funds based upon ¾ signing from TC members SEF Multisig to receive and warehouse signing rights and tokens SEF Multisig to perform any trading or LPing for liquidity or yield purposes based upon ¾ signing from TC members SEF Multisig to distribute back liquidity to Main TC Wallet upon ¾ signing from TC members

Motivation

The reasons for this STP are (1) Incentive Alignment amongst DAO’s and Partner Protocols and (2) Missed opportunities for protocol returns on behalf of the SNX community. In the current state, Synthetix does not have a mechanism to invest directly in the ecosystem, and the DAO is not perceived to be actively investing in the ecosystem. This proposal aims to address these gaps.

Incentive Alignment: As DeFi continues to grow from the Pool2 days its is gaining real traction, utility and product market fit. But given this superbloom, there has grown to be community/DAO divergence amongst protocols. Oftentimes it is for ideological reasons, but more often that not that divergence could be attributed to economic and financial issues. Whether it’s fee sharing of protocol revenue, staking economics, or the like, protocols are starting to have to interface with each other in more ways than just collaboration. These things are now in the wild and there are real economics on the table - and protocols/DAO’s/and communities are starting to vie for their share of the pie.

Protocol Returns: SNX has been at the forefront of Ethereum DeFi and Dapp Technology for nearly half a decade now, and during that time, it has seen numerous early stage technologies that have become core primitives in the ecosystem. Whether it was the sETH/ETH pool on Uniswap, the sUSD markets on Curve, being one of the biggest and earliest partners for LINK, or first to the game developing rollups alongside Optimism, SNX as seen many many billions of dollars of value created from our collaborations. What if we, as a community, were able to not only invest our dev power, but also our community capital?

Specification

Overview

A new multisig will be deployed on Ethereum, SNX and sUSD will be transferred into this multisig for the sole purpose of investing into the Ethereum ecosystem. The TC will meet on a monthly basis to review the current state of this fund and make decisions about any new opportunities. Community investment by the TC will allow us to take part in the capital appreciation and growth in partnerships.

Operations - As described in the abstract, the flow will create a separate multisig for which the investments and operations live, to allow for transparency to the community. There is a potential for these investments to be traditional illiquid instruments such as SAFE’s/SAFT’s/and Equity, but the TC will only do these sorts of deals DAO direct, meaning the ultimate beneficiary will always be the SNX DAO.

Investment Decisions - The Investment Decisions will be made by the currently elected TC members on a ¾ vote, which will be ratified by the multisig.

Liquidity and Portfolio Management - The SEF will manage the investments to its highest and best use, making sure we capture as much economics as possible for the SNX Community. Whether that be Staking, Lending, LPing, as well as trading and de-risking the investment. These investments are long term oriented, but given the volatility of the Crypto Markets, we will reserve the right to hedge the investment when necessary. But these actions will be in alignment with all stakeholders involved.

Rationale

Historically the Synthetix DAO has been extremely conservative with respect to allocating funds towards anything other the protocol expenditure. This defensive stance has ensured that the DAO has been sufficiently well capitalised to cover the continued operational expenditure of the DAO. However, other than the SNX token the DAO has very little expsoure to the success of the Synthetix ecosystem or the wider Ethereum ecosystem. It is an opportune time to correct this by begining to allocate capital towards liquid tokens and early stage opportunities to capture upside from the continued growth of the ecosystem. Given the depressed prices of many assets in the ecosystem a policy of cost averaging into liquid crypto will allow the Treasury to acquire assets at low valuations over time in the expectation that the market will eventually recover and many of these assets will experience significant price appreciation.

Financial Specification

Assets to be transferred to a new 3/4 multisig controlled by the current Treasury Council: 1,000,000 SNX 1,000,000 sUSD

Copyright

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