[RFC] Pickle Pro: Targeting DAO Treasuries

Background
There has been a lot of talk about differentiating Pickle Finance amidst an ever-expanding competitor set and a reduction of the TVL pie across many L2 chains. With the recent utilisation of Pickle Finance for Squid DAO’s treasury growth, there is an opportunity to target a new audience who currently aren’t directly catered for.

Messari lists DAO Treasury management as one of the big trends for Web3 in 2022 (https://messari.io/crypto-theses-for-2022. We are starting to see traditional asset managers join DAO’s to help them better manage their vast treasury funds. With an uncertain future for where crypto markets will go, keeping treasury funds safe and growing is an important puzzle DAOs need to stare into in the coming year, Pickle Finance can help facilitate this safe growth. As DAO Asset Management is less fickle, we can assume that DAO’s would provide more stable TVL, versus the constant revolving TVL of retail DeFi users.

Proposal
To specifically target this audience set I propose “Pickle Pro”, a new product that Pickle offers specifically for DAO’s with treasury assets under management.

What is Pickle Pro?
Pickle Pro is a dedicated set of jars that allow DAO’s to get varying levels of yield across chains. The jars would be:
• Stable e.g. Liquity and B.protocol compounded yield on stables, MIM3crv
• Blue Chip e.g. stETH or wBTC
• Native DAO asset e.g we create specific jars for the DAO’s governance tokens so they can get compound returns on their own native asset

Pickle Pros fee structure would be cheaper than regular jars to attract TVL, but also realise that larger TVL from DAOs would offset lower fees. We would provide peace of mind for DAOs by insuring the principle investment they invest each year e.g. Invest 10mm 2022, insure the 10mm. Growth to 11mm in 2023, insure 11mm.
Note: Insurance would be just against smart contract risk, not market risk

Fee Structure
Regular hedge funds and asset managers utilise the 2 and 20 fee structure. 2% asset management fee and a 20% performance fee. To differentiate ourselves we would set up the 1 and 10 fee structure. 1% fee on the assets (we could justify this against the insurance we would potentially have to pay. This also helps us counteract capital fleeing in and out of the jars) and 10% performance fee.

How would we insure treasury assets?
Probably the most important aspect of this proposal is the insurance on the jars. If we can provide DAO’s a guarantee that their money is safe, then they will be more inclined to deposit into these specific jars, rather than just going to a regular yield aggregator. It is also the most dangerous aspect of this proposal, because we must be ultra-certain in the security of our jars. One hack could be crippling.

How we could provide this insurance:
• Option 1: We get Nexus Mutual to list Pickle as a protocol where cover can be bought, and we buy the requisite cover required for each jar deposit
• Option 2: Create a proprietary insurance pool on our site that pays out Pickle emissions. It’s essentially us taking on the Nexus mutual function without them
• Option 3: We set aside capital (like a bank) that cover losses in case they are to occur. This would be a more costly option and leave us unable to utilise our treasury capital efficiently which is a trade-off we would need to understand better

Other Considerations
• This product could be used more generally for high value TVL (e.g. $250k+) deposits. However, I think we should at least market this proposition initially as a DAO treasury asset growth tool.
• We might want to create some sort of direct channel for DAO’s to reach out to the team to answer questions, and provide a more relationship managed feel for such high value clients

5 Likes

I really like the thinking behind this proposal. We as a DAO look to diversify our own treasury, utilizing the likes of Maple as an example. And as mentioned, there’s a huge potential market out there.

Two practical hurdles to overcome would be:

  1. the current Jar set up doesn’t allow for a two tier fee structure. We also can’t duplicate Jars for the same assets … and if we could, would both go into the DILL gauge? So we’d need to think through how to manage a ‘pro’ tier.

  2. I can’t quite compute how the insurance side would work, nor decide how necessary it is. I’m sure it could help attract some blue chip protocols, but also that there’s a huge market without insurance. That’s kinda the point of diversifying, as we do.

Definitely worth further discussion though :green_heart:

interesting train of thought, and I’m very pleased about creative thinking, but I think this is a bad idea. First of all, I think when talking about treasuries we should think in millions rather than 250k.

1 main opportunity for Pickle lies with small users who
a) can’t be bothered to compound themselves
b) at smaller sums don’t care about the fees, even small fees are significant for $1m+ deposits

further considerations:
2 insurance can’t be offered, we can’t insure anything above $4m, if deposit gets hacked and we are really insuring it for 4m, we hand them over our treasury and direct ALL future profits from ALL farms forever to them, and close operations, while PICKLE Token goes literally to 0. We don’t have capacity to insure
3 people managing treasuries are the same sharks we should avoid, they understand DeFi and yields, will take the best offer and leave when the offer is no longer brilliant
4 treasuries will not accept the counterparty risk
5 another tier adds bloat to the interface and adds complexity, while I think the path to success is to reduce complexity (see uniswap) - IMO the better path is to offer small ants ETH deposits and let them forget.
6 currently the best offer for treasury-like investments is on Convex, and we don’t have the most popular Convex jars on Pickle Finance while I think we should.

"Pickle Pros fee structure would be cheaper than regular jars to attract TVL, but also realise that larger TVL from DAOs would offset lower fees. "

This part doesn’t make sense to me. Why a protocol should have lower fees than a large client?
We’re trying to attract small treasuries at $250k but not large single depositors at 250k?

Lower fees was more to create.a competitive edge. I also mentioned that we could have the jars set up as purely for large depositors, but I think the way you market it is to treasuries.

Interesting point on the DILL gauge considerations… Didn’t think that one through

Perhaps we create a test jar or two without insurance, perhaps line up a friendly DAO we have a relationship with and see if we end up attracting any more suitors after its creation. I think the stable/ blue chip jars would be most useful in this instance.

While I don’t think that marketing to DAOs will work (but attracting larger depositors with lower fees could potentially work), you have touched an interesting subject of how Pickle is not generally unsuitable for large depositors in its current form.

Having higher fees for small deposits and lower fees for larger ones could potentially work, it’s an idea worth exploring, but it could upset smaller depositors. We could potentially obfuscate it so that it’s not a hard pill to swallow for smaller depositors.

Let’s look at 2 examples in a 30% APY farm (used to be our average):
ETH:
1 User with $5k will get rekt compounding himself, he desperately needs Pickle
2 User with $500k will have a tough choice between the 20% fee and gas cost of compounding

Arbitrum/polygon/aurora:
1 User with $5k will waste time compounding himself, he needs Pickle but not desperately
2 User with $500k will compound himself to avoid the 20% fee

Keeping the current structure, Pickle should aim for small fish. With altered fee structure, there is potential for convincing larger depositors to not compound themselves.

I think defi insurance products are failed products so far, not many people want or need them, insurance has failed to take off, for the right reasons I think (another topic).

While I don’t have strong feelings for or against lower fee tier for large deposits, I think we should keep the higher fees for larger deposits that we currently have :slight_smile: