while MKR is mooning, the “strategic patience” people in MakerDAO’s chat are rationally talking about the Surplus buffer.
Some discussion is already going on in separate threads regarding the need to increase the SB to keep up with the larger amount of DAI minted (now >1.3 billions) and with the need (soon, when the Foundation will dissolve) to self-sustain the DAO (read: salaries).
Today @NikKunkel wrote in the chat:
plus we could always reinvest funds in the surplus buffer to earn yield… since theyre not user funds but protocol funds
Which makes a lot of sense. @LongForWisdom wisely replied with:
- So having them in compound or Aave sounds bad, because it directly makes our competitors cheaper. Having the buffer + PSM funds as DAI-USDC uniswap tokens seems nice.
I started this thread to collect good ideas along the lines of: how can we invest the (inactive part of the) SB?
I start with my 2 cents.
IDEA: As a variant of what @LongForWisdom proposed, it might be cool to LP on Uniswap the MKR/DAI pair. So, concretely:
- Use some of the money of the SB to buy MKR (this is separate from the burning mechanism).
- We then become Liquidity Providers on Uniswap on DAI/MKR.
- MKR gains liquidity, of course, which is always a good thing.
- Unlike other forms of investment, which are questionable (everybody could say: nah, just give me my share and I will invest it by myself!), this investment does the good of all MKR holders, increasing liquidity.
- Since MKR holders’ goal is to vote to increase the value of MakerDAO (and therefore of their MKR), all MKR-holders should be considered as bulls on the MKR/DAI pair, hence LP this should make sense for all MKR holders.
- Finally, of course, we get the LP-fees, producing the desired yield.
- Additionally, if the MKR token goes up in value, the LP tokens gains in value (vs the initial investment measured in DAI) and so we get even more gains.
- What could go wrong? The MKR token goes down in value. This means that our LP tokens loses value (bad news) but it also means that it represents a growing and growing amount of MKR (>50%) vs DAI (<50%). Well, if the loss is judged too heavy, we can return the LP-tokens, collect the MKR and burn them (feeding the burning contract instead of buying MKR in the market) so overall it’s not a terrible deal.
Anyway, this was just a random idea
@LongForWisdom’s idea is much simpler and basically risk free, so arguably better.
I am curious to see hear other ideas.