I agree with the idea of getting some extra yield of actual treasury, and that it must be done with a low risk instrument of investment.
I was thinking on different options to consider and for doing so, the main variables might be :
- TVL (even though high TVL is not a guarantee of nothing after we saw Terra’s case)
Some options (listed in order of the risk to which the DAO would be most comfortable to adopt) :
A) Solo -Staking
B) LSD Index
C) Run a Node with Rocket Pool
D) Run a Node with Abyss
A) SOLO STAKING
- Full rewards as validator
- More “reputation” for the DAO since it will show it’s full support to Eth PoS and decentralization.
- No dependence on a third party
- Need a dedicated computer connected to the internet ~24/7.
- You would probably need to delegate the task to run the node to an individual person, who must:
a) Have some technical know-how.
b) Have Skin in the game:
This factor is the most important and also difficult to fulfill in my opinion.
You can think of the possibility of providing this person a share of the rewards. If you do so, not only you will probably end up getting some similar yield than with pooled staking, but also you won’t cover the weak point of the penalties and slashing: These losses wouldn’t be equivalent (much bigger proportionally) to the skin in the game of the person in charge might for getting a fee on the rewards.
In the other hand, you can commit this person to have a significant deposit as insurance of, for example, 10 ETH. The problem with this is that this person could run its own node with similar amount of ETH (16 at Rocket Pool actually but is planned to reduce it to 8 or even 4) and in terms of profitability, freedom and responsibility, this person will find more convenient to make use those ETH for himself (even though, you can accept stETH or other LSD as “insurance” so he can keep on maximizing yield, but it implies also more layering risk)
B) LSD INDEX
We could create a Diversified Staked ETH index with main liquid staking derivatives such as rETH, stETH, sETH2.
We can do it in a “manual” way: Exchange ETH for this LSD weights according to certain parameters (you can do it via TVL, or via independent nodes, for example) and re-balance this portfolio every 1 month.
Also, you can just buy an Index token like the one of IndexCoop which include the most prominent liquid staking derivatives - rETH, stETH, sETH2 - with weightings that favor # of node operators and distribution of stake across node operators ( it’s planned to be launched in October) :
- Stakewise sETH2 - 26.67%
- Rocket Pool rETH - 44.11%
- Lido stETH - 29.62%
This second option makes the process easier but implies being exposed not only to the risks of LSD’s but also to the risks of the company who issues the “index”.
C) RUN A MINI-NODE WITH ROCKET POOL
As RocketPool isn’t as “famous” as Lido, it’s logical to have less confidence on the protocol. But it’s important to know that RocketPool has been created even before than LIDO and where the first to think on a LSD (their history).
It’s impossible to know whether it will be a good choice or not, but to get a full understanding of Rocket Pool you check my notes here and this message on PoH Telegram group.
The idea will be using 16 ETH + 15% worth of that ETH in RPL to create a Mini-pool and run a node on RocketPool via AllNodes.
This will enable us to run a node earning 100% validators fees + 15% extra validators fees from ETH depositors + RPL rewards (you can check my Math for long term valuation)
Actually, there is a queue of about 140 persons approx for your node to start “working”.
Based on my research, I think it’s not such a high risk investment as many might think, that’s why I will appreciate checking the sources I mentioned, so all can get their own conclusion. (I can also do an oral presentation for then exchanging ideas)
D) RUN A NODE WITH ABYSS
If we check on Ethereum org web, we can see that there is an option between “Solo-staking” and “pooled staking” (LSD providers) : Staking As A Service options where we can find options such as Abyss, where you can now provide liquidity with your DeFi tokens, lock LP tokens and enjoy free unlimited Ethereum 2.0 hosting service for your validator nodes.
I don’t make research on this possibility because it is run also via All nodes (which I think it’s not bad, but it makes it similar to Rocket Pool) and you need to buy Abyss tokens.
Their social media is inactive since May (red flag for me) and this kind of tokenomic model I prefer to stay with Rocket Pool since it’s also permisionless and also gives us the possibility of using All Nodes.
Note: Please remember that good decision processes not always mean a good outcome, since the results relies on many other external factors (awesome book about this).
In addition, I have no technical background, so I can’t check by myself of the protocols mentioned in the post, so I relied on audits.