FLOOR Treasury Diversification Proposal

[burstingbagel]

Background
This proposal aims to update the portfolio allocation of the FLOOR treasury to achieve the following goals:

1. Allocate the treasury to new NFTfi strategies
2. Obtain better yield for treasury assets
3. Increase the diversification of treasury holdings
4. Prepare the treasury for v2, for which a substantial amount of ETH will be needed

The suggested approach involves selling low-yielding positions and converting the proceeds into ETH, from which the ETH will be allocated to various strategies. Moreover, it is proposed that the 55 MILADY’s in the treasury be staked on NFTX to obtain yield. An initial allocation for 10% of the proceeds is detailed in the “Initial Portfolio Allocation” below. It is expected that depending on the results of the Sudoswap and SpiceFi allocations, future votes can be held to further allocate the remaining 90% of the liquidation proceeds.

Please find below the list of assets proposed for liquidation, accompanied by their respective amounts, and estimated APRs. The asset values and APRs have been derived from

FLOOR_DAO

0x91e453f442d25523f42063e1695390e325076ca2 Profile | NFTX Yield 0xa9d93a5cca9c98512c8c56547866b1db09090326 Profile | NFTX Yield.

Initial Allocation of Proceeds from Liquidation

5% - Spice NFTfi strategy

• Spice Finance runs automated, and diversified yield-generating NFT-backed loan strategies across various NFT lending marketplaces. By depositing $WETH or $ETH, depositors gain exposure to a diversified set of loans, NFT collections, and LTVs with minimal gas costs due to transaction socialization

5% - NFTXv2 MILADY/ETH Pool

• It is proposed that a 5% of the proceeds from the liquidation be used to pair with existing MILADY’s to LP in NFTX’s MILADY/ETH pool

90% - stETH

• The treasury needs to prepare ETH liquidity for v2, during which 10ETH will be used to allocate to various NFT collections per week as voted by governance. This proposal aims to optimize the returns to the treasury by allocating to stETH, a highly liquid form of staked ETH, which will allow the treasury to earn a 5% yield as opposed to 0% yield for just plain ETH. stETH can simply be turned back to ETH when needed by the treasury.

SpiceFi
Spice Finance runs automated, and diversified yield-generating NFT-backed loan strategies across various NFT lending marketplaces. By depositing $WETH or $ETH, depositors gain exposure to a diversified set of loans, NFT collections, and LTVs with minimal gas costs due to transaction socialization.

Spice Vaults provide ETH borrow liquidity for loans against CryptoPunks, Azukis, BAYCs, and Miladys, among other collections. Read more here: NFT Collection Selection - Welcome to Spice Finance

As of 04/24/2023, the historical performance for their prologue vault stands at 17.37%. The team posts weekly performance updates in their discords and you can track Spice’s loan history on this dashboard: https://snowgenesis.com/profile/0x3e60C12997d3Bb062530e5F7e7f0400FBB9aEcA5?loanPanel=history&loanRoleType=lender

Resources to learn more about Spice:
https://www.spicefi.xyz/
https://docs.spicefi.xyz/

https://twitter.com/spice_finance

Audited by Zellic

Execution Plan

1. Initiate the liquidation process for the specified positions in the same week. The PUNK and MAYC positions are expected to be relatively easy to liquidate, while the SQGL sales should be conducted more strategically, aiming to sell one every other day.
2. Incrementally purchase stETH
3. Deposit ETH into SpiceFi, coordinating with the SpiceFi team as necessary
4. Allocate ETH and existing Milady’s to NFTXv2 MILADY/ETH Pool
5. Ensure weekly updates on NFT sales and Spice/stETH allocations

Execute FLOOR Treasury Diversification Proposal

• Yes
• No
• Abstain

[yieldchad]

Strong support.

I would like to see how the Spice vault performs before potentially allocating more to it.

I think in general LP’ing Milady’s is a great move given the yield.

[Lux]

@burstingbagel - what kind of return would we expect from a set up like this?

[Shreddy]

Hey Floor,

Shreddy from Spice here - if you have any questions about Spice I would be happy to tackle them.

Excited for this proposal!

[burstingbagel]

As mentioned above, the prologue vault has historically yielded 17% APY. APR for NFTX Milady - ETH LP APR is 65% according to yield.nftx.io and stETH yields 5.2% as shown on the Lido website.

[logic]

Yup. I like this. Let’s crank that yield.

[burstingbagel]

I agree with the sentiment of adding more to the Spice Vault if the results are promising. By being a depositor in Spice we may also become eligible for future airdrops of the underlying protocols that Spice deploys our ETH into (NFTfi, Arcade, Blur, Paraspace, Metastreet)

[Lux]

thanks for the breakdown - thats definitely more productive than the 1.9% apr being generated now. I also like that w/ a 90% allocation to stETH the treasury remains very liquid.

[caps]

Love the proposal and the detail, really appreciate you making the effort to do this.

If this was a personal portfolio it makes a ton of sense, why hold assets that are low yielding when there are other options? Floor otoh was built to provide long-term support to partners that make it into the treasury - providing instant liquidity and access to new financial applications without fear of getting the rug pulled at any time.

This is changing in V2, where collections that do not have the (onchain) support of FLOOR voters can be sold and rebalanced by the DAO. For example, if Punks or Squiggles didn’t want to see our inventory hitting the market, or DeFi liquidity/utility being reduced, they’d accumulate FLOOR or bribe voters for support.

This at least gives them a chance through the onchain mechanism to fight for their survival in the treasury.

As it happens, I believe that in V2 Punks and Squiggles will both find very few votes each week, and so rebalancing these will almost certainly happen. But I’d vote to wait until that mechanism is in place.

Also re the new strategies like Spice-Fi etc I think what you’ve proposed compliments what Nobi and Toes have been working on and are publishing today, so definitely look to collab there.

[javery]

Nice work on the proposal Bagel.

I like the idea behind the NFTfi Spice strategy but am against major/complete liquidations of positions for projects that have been voted in.

There’s been plenty of discussion about PUNKs being overweighted in the treasury and as a yield returning asset it has not provided the yield some other positions have done. There’s certainly an argument to rebalance some of those holdings for larger yield generating, however considering long term holdings for the FloorDAO the PUNK holdings are going to be the most stable in value store which should be part of the consideration when rebalancing.

Removing 100% of the Squiggle LP is not something that should be done.

From my point of view FloorDAO is there to generate self sustaining yield by creating liquidity markets for NFTs. When the DAO votes in a collection that is a confirmation that the DAO will allocate liquidity towards the collection for that sweep, and then potentially other gauge war votes in the future. The DAO should not be removing existing NFT positions to hold unused ETH (even if it’s staked earning yield) to increase yield.

So yes, rebalance the treasury to free up 10% of the funds mentioned above that could be redistributed to better NFT yield for Milady and to test out Spice, but the remaining ETH should remain in positions that back collections voted in by the DAO.

These two strategies might even tie in nicely with the other proprosal open.

Side note: I accept that there are times when liquidating treasury assets are required, but for me that would only to extend the runway for paid members of the team who are vital for the ongoing delivery of an improved FloorDAO.

[burstingbagel]

The polling period for this proposal will end Sunday at midnight (UTC). On Monday, a snapshot will be posted at 3 PM UTC and run for four days.

[yieldchad]

FLOOR is not beholden to projects that do nothing for FLOOR.

Squiggles and Punks bring very little to the table and are not even active parts of the FLOOR community, let alone token holders. Commitments work both ways, otherwise it’s just an abusive relationship.

While I agree that Punks should be a major component of the treasury as they are the most stable NFT in terms of value, we are reducing our punks exposure by roughly 20%, so we still have a very sizable allocation to Punks, and still the largest holding by far in the treasury.

Squiggles I have no qualms in liquidating completely.