Solid plan and good use of treasury funds. A portion of the algo should be put into the algo lending market. While the rate of return will be lower it will help lower algo borrow rates.
It sounds strange from the security perspective to put protocol treasury into the protocol itself. Isn’t its purpose to “protects users’ funds from potential hacks”?. I’m not against productive allocation of these funds per se, just with proper risk diversification.
I too would rather see the Algo deposited as Algo rather than xAlgo. It would benefit Algo borrows and ultrastake users.
I don’t love the idea of my USDC deposit rate taking a hit, but I guess USDC borrowers would be in favor.
it will not affect USDC interest rates in reality. people take & payback loans, deposits & withdraw USDC etc all the time. market will balance difference against other lending markets quickly. probably your yield will be 0.X% lower like day or two.
General comment:
what comes to ALGO, it makes sense from treasury point of view to stake first to get higher returns. Question is, do we prefer treasury over possible platform activity and users? Thinking from treasury point of view, ALGO should be staked first and then deposit xALGO tokens.
But if ALGO is deposited, then it might benefit platform users and lead to higher platform usage. Hard to know real impact, but in theory. From my behalf both are fine.
@nmadon65@algolog@ROAM@braudel@Tryvis
Thank you all for your feedback. The goal of this proposal is to increase the treasury amount while maintaining a low-risk profile. That said, the proposed xALGO allocation will instead be deposited as ALGO in the lending market. Although this approach provides lower immediate returns compared to direct xALGO staking, it can lead to a greater amount of Algo being borrowed, resulting in revenue for the treasury. As for USDC, its deployment will benefit the market, as there is clear demand for borrowing it.
Thank you for the feedback. One of the purposes of the treasury is to cover potential losses. In addition, the funds have previously been used for other operations through voting sessions, so the page description will be updated accordingly. That said, we believe that the risk of the proposed allocation is very low, considering both the nature of the assets and the platform’s track record. Regarding proper risk diversification, what is your idea on this?
I was thinking about low-risk yield generating protocols with completely independent smart contracts (opsec and code isolated). It could even be your rivals on other chains, e.g. AAVE. Any allocation back into Folks reduces user’s chances for recovery if something bad happens.
I see your diversification point but this involves centralized parties. We could potentially do this with xChain’s treasury in the future, once it has grown.