9/10/24 Update: Centrifuge updating this initial USDC deployment to 1.5M from 3M
Centrifuge’s main priority is to execute on the goals listed below in the original referendum, without impacting short-term spending. Over the last 24hrs, members of the community voiced concerns about the following ‘big spends’ after us potentially not being able to receive funds due to a lack of USDC. We are changing this proposal so that the foundation sends back 1.5M USDC immediately if this referendum passes so this threat is mitigated.
Centrifuge is committed to working with the community to be the long-term treasury partner helping preserve the DAO treasury in earning yield on idle funds and empowering RWAs on the network, and is happy to cut the initial ask to accommodate other near-term opportunities. We believe a next step following this referendum would be to propose small incremental stablecoin deployment into Centrifuge overtime to further eliminate stablecoin shortages and build strong reserves as the amount of stablecoins coming into Asset Hub continues to grow.
It’s also important to note that the beneficiary wallet listed is the Polkadot Community Foundation multi-sig wallet - in no way is Centrifuge involved as an added layer of risk in being responsible for sending back the 1.5M.
The updated instructions for the foundation are listed at the bottom of this referendum.
This proposal is aimed at supporting the long-term sustainability of the Polkadot Treasury. We propose that the newly formed Polkadot Community Foundation on behalf of the DAO, deploy USDC into real-world assets to earn stable yield, grow Polkadot TVL, grow the treasury, bolster RWAs within the Polkadot community and support a leading parachain, Centrifuge. This investment would follow the investment that the Web3 Foundation made in January of this year into the Anemoy Liquid Treasury Fund. This is also a strong marketing opportunity for Polkadot as it begins to engage in RWAs, specifically being a talking points at this years RWA Summit this October at the flagship event in NYC.
This proposal is for 1.5M USDC to be deployed into Centirfuge’s T-Bill pool, Anemoy Liquid Treasury Fund. This referendum resulted from the previous discussion about onboarding the Polkadot Community to Centrifuge.
The investment will be fully managed using XCM, directly depositing from the Polkadot treasury into the pools on the Centrifuge parachain.
This proposal is important for Polkadot to manage its funds responsibly and support growth and long-term stability. Having a mix of different assets that don't all move in the same direction is crucial for public organizations like DAOs and endowments to earn strong returns over time.
Quick Links:
Grayson - BD & Research at k/f (Centrifuge contributing organization): grayson@k-f.co
Ivan Postavskyy - Centrifuge Governance Facilitator: @ImdiorCKZ (Telegram)
Anil Sood - Cofounder at Anemoy Capital (Centrifuge-native asset manager): anil@anemoy.io
Ryan Haczynski - Centrifuge Ambassador and DAO Active Contributor: ryan@luckyfriday.io
About Centrifuge
Centrifuge is the largest protocol built on Polkadot rails, and operator of the Centrifuge parachain. Founded in 2017, Centrifuge is one of the original and most sophisticated real-world asset protocols, having financed $600M+ in assets, and with $300M in current TVL. Some of our previous work includes working alongside Web3 Foundation, MakerDAO, Aave, BlockTower Capital, and GnosisDAO.
Centrifuge’s History with Polkadot
Centrifuge was launched on the substrate in July 2021 as a live network on Polkadot. In 2022 Centrifuge secured a 9th parachain slot on Polkadot in the second batch with 5,435,161 DOT raised from 27,101 contributions. That was the highest participation in the 2nd batch! In November 2023, Centrifuge successfully self-funded a new lease via para ID3353. In addition, the Web3 Foundation invested into the Anemoy LTF pool.
Centrifuge successfully delivered 2 grants for Polkadot Community:
Centrifuge is building on Polkadot for several reasons:
- Scalability: Polkadot’s parachain architecture offers scalability, allowing Centrifuge to handle a large number of transactions efficiently.
- Interoperability: Polkadot’s interoperability enables seamless communication between different parachains and blockchains, which is crucial for the liquidity and RWA tokenization.
- Security: Polkadot’s security features enhance the trustworthiness of Centrifuge’s platform.
- Cost-Effective Transactions: Transactions on the Centrifuge chain are notably inexpensive, fast, and easily adjustable when compared to the Ethereum network.
- Efficiency: Fine-tuning and endless possibilities with upgrading and improving existing infrastructure.
- Decentralization: All parachains on Polkadot are independent which makes this system fully decentralized.
Centrifuge leverages Polkadot’s infrastructure to make real-world assets more liquid and accessible in the DeFi space.
Why RWAs are Beneficial to the DAO
This proposal is aimed at growing the Polkadot treasury by earning yield on idle stablecoins. Diversifying the treasury in stable, yield bearing assets will better position the DAO to meet long-term liabilities, and overall support the longevity of the treasury. Additionally, this is a major step on behalf of the DAO to support real-world assets on Polkadot.
Investment Details
TVL Accrued to the Parachain
Centrifuge’s parachain is a Substrate network purpose built for the Centrifuge protocol. Not only would TVL accrue to the chain, but there would emerge a great commercial partnership opportunity around marketing RWAs on the network.
T-Bills as the first RWA for the DAO
Treasury bills (T-Bills) are short-term debt securities issued by the U.S. Department of the Treasury with maturities ranging from a few days to one year. Anemoy focuses on durations less than six-months and the fund earns an average of 5% annual yield. T-bills are considered to carry zero risk because they are backed by the full faith and credit of the U.S. government, making them one of the safest investments available. This low-risk profile makes T-bills a popular choice for investors seeking a secure place to earn yield and preserve capital.
Below is a chart showing the yield the DAO can generate by USDC deployed.
Increase positive brand sentiment through marketing/ PR
The Centrifuge marketing team will promote the investment across earned and social media channels, drawing attention to the long history Centrifuge and Polkadot have together, why we decided to build a parachain and the fact that Polkadot is further investing in their ecosystem and growing their treasury.
If passed, Centrifuge would also be proud to share the advancement at the Real- World Asset flagship event this October in New York. The RWA Summit is the premier event series dedicated to the intersection of traditional and decentralized finance, with the largest networks, protocols, and traditional firms all in the one venue for two days. See here a summary video from last years summit.
About the Anemoy Liquid Treasury Fund (LTF)
The Anemoy Liquid Treasury Fund invests exclusively in U.S T-Bills with a maximum maturity of 6-months, focusing on maximizing interest rates and minimizing price and duration risks. U.S T-Bills are held directly by the fund with the custodian and the individual asset holdings can be viewed onchain. The fund is a BVI-licensed fund open to non-U.S Professional Investors.
View the fund in our app
Below you will find the current asset makeup of Anemoy’s Liquid Treasury Fund as of 8/6/2024.
The Centrifuge app takes transparency seriously as a core value to investors. In the assets tab, anyone can see the individual Bills held by the Anemoy Liquid Treasury Fund, with the CUSIP securities identification number available.
Above is a detailed view in the Centrifuge UI of a single T-Bill security.
Source: Anemoy Deck
Benefits of the Anemoy structure include:
- Instant Liquidity: Anemoy has recently begun offering instant liquidity.
- Direct Ownership: The tokens serve as direct evidence of ownership of the fund shares, allowing cost-efficient redemptions and providing full legal claims on assets.
- Investor Protection: Prospective investors adhere to requirements of a BVI-regulated professional fund, ensuring a secure and transparent investment environment well-protected from regulatory risk and sanctions enforcement.
- Transparency: Centrifuge provides real-time onchain visibility of holdings, returns, and tokenized U.S. Treasury Bills.
- Ultra-low fees: Fees for the fund are 15bps annually (7.5bps Anemoy management fees + 7.5bps Centrifuge protocol fee).
A list of third-party service providers are here:
- Primer Broker: StoneX
- Banking: First Citizens Bank
- Fund Admin: Trident Trust
- Fund Auditor: MHA Caymans
- Custodian of T-Bills: unnamed U.S bank custodian [name can be revealed privately upon request]
Returning Funds - Liquidity
There is no lock-up period for the investment - a redemption / return of funds simply requires aproposal outlining such actions. These actions are for the Polkadot community to decide.
Once a sell order has been passed by the DAO, funds can be returned on the same day.
Instructions for the Foundation
Once 1.5M or more is in the foundation’s control, they should immediately send this amount back to Asset Hub where the USDC came from. Then the foundation should proceed with the process as originally set out with the remaining 1.5M USDC: 1) Begin KYC/KYB with the Anemoy Liquid Treasury Fund and fund administrator 2) Invest into the Anemoy Liquid Treasury Fund immediately once investor onboarding is complete to reduce the opportunity cost of yield.
Centrifuge has been in contact with Autonomous Projects, who proposed the referenced Polkadot Community Foundation, and now serve as administrators of the foundation.
Conclusion
The DAO investing into real-world assets, alongside the W3F, provides stable yields, grows Polkadot TVL, diversifies the treasury, bolsters RWAs within Polkadot, and supports a leading parachain, Centrifuge.
T-Bills are a natural first step for the DAO as it looks to target idle USDC earning no yield for the community, and are highly liquid when needed. This is an exciting first step for the community to utilize the newly setup Polkadot Community Foundation, to access real world opportunities otherwise not available to the DAO. Centrifuge is committed to growing RWAs on Polkadot, and would be thrilled to share this development with the broader blockchain community.
Previous discussion links are 404 for me.