Resubmission: Extension of the COMP Yield Strategy

Resubmission

Back in May this year, Avantgarde initiated a strategic pilot on behalf of the DAO to start earning yield on a portion of the idle COMP sitting in the treasury (see proposal thread and latest proposal version).

This strategy utilized the MYSO protocol to deliver 16.22% and 15.07% annualized yield on two tranches of 17,600 COMP, generating a total premium of $53,058 USDC (net of fees) subsequently deposited into Compound V3 markets (see this link).

These tranches expired as of the 11th of August and have not yet been rolled over as we await the outcome of this proposal, and the full COMP amount has been returned to the Avatar safe.

With OpenZeppelin recently highlighting the infrastructure setup used to execute this strategy as a recommended new standard for trust-minimized fund management for the DAO, we believe this pilot has, in more than one way, been a great success.

We believe extending the pilot of the COMP yield strategy makes a lot of sense at this stage as the DAO rallies behind the new Compound Foundation to “Make Compound Great Again”. This is an exciting time for all of us involved as new investments are being made towards growth, with hopefully plenty more to come—which at the end of the day will all require funding.

Reliable Revenue to Support Financially Sustainable Growth

The COMP yield strategy will help improve capital efficiency on treasury assets and strengthen the DAO’s financial sustainability by providing a reliable source of revenue. The strategy’s use of idle COMP complements the USDC-denominated reserve management of Gauntlet extremely well; not only asset-denomination wise but also by providing upfront premium income that can be used to cover a significant share of the ongoing operational costs if deployed in meaningful size.

This would help reduce gradual depletion of the treasury as growth-initiatives and costs are potentially ramped up, and allow the reserves to remain as reserves for the foreseeable future—ensuring the DAO has ample funds to support growth for many years to come.

This proposal suggests adding another $7.4M worth of COMP to the pilot’s existing ≈$1.6M capital to bring the total amount to $9M, which at a targeted 15% yield would generate $1,350,000M a year for the DAO.

Funds will be split into multiple tranches and in a staggered manner continuously rolled over targeting overall 15% APY within a +/-5% range in the short term as we aim to keep the probability of COMP to USDC conversion as low as possible. USDC premiums will be deposited into Compound’s USDC market until the DAO wishes to spend it or says otherwise.

If the strike is hit on any of the tranches and COMP were to get converted into USDC, these will similarly be deployed into MYSO to buy back the COMP while also earning upfront premium. Once bought back, the COMP will again be cycled back into MYSO to generate yield.

Implementation, Execution, and Fee Remains the Same

As an extension of the initial pilot, the full program would continue to be managed through the same operational setup as outlined in the pilot proposal and detailed in OpenZeppelin’s article Trust-Minimized Treasury Management, using the same Avatar Safe and managed by the same Manager Safe.

As explained in the article by OZ:

"Avantgarde’s trust-minimized solution demonstrates substantial benefits for the Compound DAO by significantly reducing risks associated with third-party operational activities … [as] it prevents funds from moving beyond DAO visibility, improving transparency and accounting … [while] the DAO retains recourse to reclaim allocated funds."

As a reminder, execution of the strategy will be done through the MYSO v3 protocol, and the entire process is decentralized, trustless, and transparent, avoiding counterparty risk whileretaining full asset control.

MYSO is a DeFi protocol specializing in onchain structured products for high-net-worth individuals, treasuries and asset managers, and enables users to earn yield on idle tokens through bespoke covered call and cash secured put strategies. MYSO is actively working with leading treasuries like Aave, Across, Gitcoin, and Obol, to name a few, to provide seamless access to onchain structured products, sourcing the best quotes from multiple OTC desks and settling fully onchain without handing over custody to trading firms.

The protocol contracts are publicly available in the official MYSO V3 repository and have been thoroughly audited (see Omniscia Audit Report + public repo).

The fee also remains the same as a flat 15% fee on the earned premiums and will be distributed automatically by the MYSO protocol.

Once the program is live, we’ll report back to the DAO with details as tranches are executed, including achieved yield and other relevant info for the DAO to actively monitor the strategy.