With the recent decrease in rates and continued onboarding of new Core Units, the RWF team thought it would be prudent to review and update the budget simulator that @SebVentures built. Please find the updated simulator here. All existing and prospective Core Units are listed with an associated status, as well as corresponding MKR budgets if applicable. All CU expenses are included in the forecast and P&L calculations.
While we are forecasting to finish 2021 at nearly 10x 2020 FY revenue, the rolling 12 month forecast is less favorable. Assuming no change in our assets generating stability fees, we are forecasting $48M in revenue broken down by the following income streams.
Interest (Stability Fees): maintain stable at current levels
Liquidation Fees: Feb - July 2021 average excluding May. In May we saw significant decreases in DAI generated from risk assets with ETH-A vaults alone decreasing nearly $1.2B from peak, corresponding with $4M in liquidation fees. With lower leverage in the system, we expect lower liquidation fees in the near term
Trading Fees: July 2021 average - lower PSM outflow fees will generate less trading revenue going forward
Opportunities to drive incremental revenue not included in forecast:
- Over $3.1B USDC in the PSM that could be invested to earn interest
- Scaling Real World Assets (NS-DROP $5M DC → $20M, SolarX $21M, 6S $15M, Treasuries), etc.
- Investing in DAI Derivatives (i.e. D3M)
- Leveraged G-UNI Vault
- Flash Mint Module
- Institutional vaults, SushiLPs, CropJoin
With the SB buffer approaching $50M, we still have a cushion in the event that downward pressure on rates continue and cash flow turns negative, assuming Liquidations continue in an orderly fashion and we do not incur any bad debt. However, this is quite far below the CET1 (3% - 4.5%) and liquidity ratios recommended by risk and we should avoid drawing down the SB while we remain below these levels (approximately $56M and $160M at a 3% CET1 and liquidity ratio respectively).
As a reminder, non-cash expenses reflect the MKR compensation; green highlighted plans have been approved, yellow has had the DAI budget approved, and orange has had neither approved. While these expenses impact Net Income, there is no impact on cash flow. While cash flow is positive, the SB will continue to increase and MKR will continue to be burned at the current approved 75% SB / 25% burn ratio. The model assumes a safe scenario where no MKR is burnt until the SB is above risk targets.
As with all models we share, please feel free to download and include your own inputs and assumptions. If you have any questions, please let me know.