Tribal Council Proposal - Creating a Financials Pod

Proposals
1

Tribal Council Proposal - Creating a Financials Pod
TCP - 1 (placeholder serial number, pending governance discussion)
Author: Cozeno

Summary:
The Tribal Council would create a “Financials Pod” using the provisions provided by FIP-82: Governance Enhancements. The newly created pod would be responsible for developing and publishing FEI’s target interest rate, publishing a quarterly financial statement on behalf of FEI, and other responsibilities that may be added via amendments to this proposal.

Motivation:

The desire to establish a fixed policy interest rate for FEI has been brought up many times: FIP 103: Native risk-free FEI interest rate 3% - #7 by OneTrueKirk Idea: Fei Protocol Target Rate, The road to 1B FEI - #10 by SebVentures.

Pursuant to the discussions in these threads, there seems to be considerable agreement that a target supply interest rate in the model of DAI DSR is desirable.

There are some ideas floated currently regarding how this rate can be arrived at, though the leading consensus thus far has been to base it on a basket of market driven indicators. After further discussion, I have proposed that the creation of a pod staffed by DAO members who have been keen on the monetary policy side of the protocol would be the best way to achieve this.

There are also other responsibilities of the protocol that would benefit from being formally administered. Fei Financial Report was a very interesting but unexecuted idea and something that would greatly benefit the protocol, this body should seek to publish an official quarterly financial report on behalf of the protocol.

Other responsibilities pertaining to monetary policy may be taken on by this body as well, and suggestions for other responsibilities are strongly welcome in the comments below.

Parameters:

After discussion, the Tribal Council would vote to establish a “Financials Pod” under the provisions of FIP-82. This pod would have a variable membership of up to 5 members; any DAO members who are interested in participating may self-nominate in the thread below.

This Financials Pod would be primarily a research body, and thus incorporated with minimal control over on-chain actions. Each new member would be confirmed by a simple majority vote from the Tribal Council for a one year period.

The inaugural responsibilities of this pod would be to research and compile a basket of indicators that would generate an appropriate supply target rate. The pod would maintain and publish the rate based on the parameters every month, and update the policy rate into the proposed stacking contract for FEI’s risk-free interest rate via a simple majority vote of pod members.

The secondary responsibilities of this pod would be to compile and publish a quarterly financial report for FEI: detailing all protocol revenues, all operating expenses (which would include cost of staking rewards, and other outlays authorized by the DAO), PCV profit, and, pending discussion, perhaps a balance sheet of PCV assets.

Amendments to the responsibilities of the financial pod may be submitted for forum discussion and adopted by a simple majority vote from the Tribal Council. Pending community discussion, this proposal could also serve as a precedent/template for the incorporation of other pods. proposals that directly invokes Tribal Council actions may be serialized with the TCP-xx format for record keeping.

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By the present post, I nominate myself to be part of the TribeDAO Finance Pod.

I’ve proposed the FIP that might create the need for this Finance Pod to manage the Fei Saving Rate. I’ve also proposed FIP72 to improve the DAI-FEI peg.

I’m a founding member of the MakerDAO Open market Committee that propose parameters on MakerDAO. I’ve done extensive research on managing stablecoin issuers balance sheet.

I spearheaded the financial reporting of MakerDAO used by Messari and praised by Arca. Also providing some financial analysis support for Angle.

Happy to help TribeDAO.

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Absolutely in favor of the creation of this pod and excited by your continued involvement @SebVentures. Will support as a member of the Tribal Council.

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In my opinion the financials (or Treasury) pod scope could be more execution focused, granted a subset of optimistic powers from the Tribal Council that are related to Treasury management such as Fei Savings Rate, PCV movements, and FEI/TRIBE deployments. It makes sense to me that the research focused entity would be able to actualize that research in concrete proposals.

The Tribal Council and Nope DAO would be able to veto any actions that the Financials (or Treasury) Pod proposes.

Note that other teams have been providing financial reports in various forms via grants such as Llama DAO and Messari, open question how their work relates to this pod if it is implemented.

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It would certainly be appropriate to expand the financial pod’s responsibilities to include ones @joey has mentioned such as Treasury management, FEI deployments, PCV movements etc. It is just that as the author of the current proposal I have not fleshed out the parameters of such responsibilities in any detail.

I would love to hear more about what your idea of such an execution focus would look like so as to incorporate it into this proposal! Would you say that moving FEI in and out of Raripool8/AAVE as market conditions demand, would constitute as such execution? currently almost every PCV movement has been executed via a FIP, do you think that should be done optimistically?

Regarding the financial reports provided by others, namely Messari, I agree that it is very high quality indeed and should be collaborated upon. https://messari.io/article/state-of-fei-q1-2022 ; but in that very report, the author mentioned that :

Tracking the PCV’s yield generation will reveal the efficacy of the DAO to manage the assets in the PCV. Unfortunately, it is difficult to track revenues produced by allocations currently. As the steward of the PCV, the DAO is incentivized to optimally allocate both PCV assets and protocol-owned FEI. This risk/reward balance should directly impact the value of the TRIBE token.

This has actually directly inspired me to include publishing a quarterly report as part of this pods responsibilities, as I have had difficulty myself ascertaining the organic revenues of different programs of the protocol, and tracking the exact liabilities/net profit of the protocol overall is more difficult still. To my knowledge no such detailed report of Fei’s revenue and liabilities exist, and having it published would be of immense benefit to investors of TRIBE.

The financial pod may very well collaborate and cross reference works done by external grants and publish its own report. Alternatively, it could instead provide the necessary data to these external actors and commission these external actors to compile the said report. (superseding grants)

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In this separate post, I would like to nominate myself for participation in the Financials Pod.

I have proposed the parameters and structure of this pod earlier in this post, and would like to participate in its creation and initial operation.

I have proposed some time ago the idea of https://tribe.fei.money/t/idea-fei-protocol-target-rate/ and would love to be able to perfect such a basket of parameters for the operation of a FEI fixed savings rate.

I have been involved with the Tribe DAO since genesis, and have served on the inaugural Optimistic Approval board. In that capacity I have proposed and participated in some of the earlier actions to expand FEI’s use case and its monetary policy.

I am very happy to see folks chiming in and contributing their ideas to this proposal, I would be honored to serve as part of this budding pod.

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It is not clear to me the benefits of starting with a bigger scope. I would focus on the most important tasks and then increase the scope as we see the Pod working and delivering results.

Especially PCV management, I think we need to be more cautious and we can continue to do it with snapshots, but maybe executed by this Pod.

I believe a gradual delegation of power for pods is an approach where we can learn by doing and evaluating the results.

It would be also good to have a financial results call per quarter. This Pod could work together with Llama or other providers in the production of the financial reports.

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Hi Everyone :wave:

Llama would like to express a keen interest in continuing to provide detailed analysis of the PCV and Tribe DAO finances to the community. Llama has already made a solid start, invested a lot of effort and is now in a position to really drive the FEI, PCV and TRIBE analysis forward. It was fantastic to see Messari using the publicly available Llama analysis to form the basis of their research. Llama intends to work more closely with Messari, share the not-so-public-facing data and help craft the narrative around the performance of the PCV and FEI of over time.

Llama recently published the Tribe DAO Q1 Financial Presentation and Report on the Tribe DAO governance forum, as well as the FEI Stablecoin Key Metrics and FEI Lending Markets on Dune.

The PCV is really complicated and unfortunately, Dune is not the ideal tool for analysing its performance. Dune will continue to be the high level externally facing analytical tool, meanwhile Llama’s system will be the engine room for deep analysis.

Llama has already developed a preliminary alternative backend system that maps out every transaction and assigns it a home on the Income Statement. We intend, in the next grant, to continue building upon the high level Tokenflow Statement to include more details of what is happening within the PCV and more generally, start doing a lot more granular analysis on the PCV.

The vision is to enable analysis of the relationships between community decisions, on-chain actions and the effect they have on FEI, PCV and TRIBE. With this granular, detailed understanding, the community can craft data-led proposals to target pre-defined/agreed objectives, or north stars. Upon completing the itemised Tokenflow Statement in Q2, our attention will then focus on the massively complex task of creating a Balance Sheet. Creating a Balance Sheet is a daunting task and probably something to be looked at in Q3 2022.

Llama would like to continue working with Tribe DAO, building on the original grant to provide deeper analysis and act as an enabler for more informed decision making with how to manage the PCV, TRIBE and FEI. Llama’s scope can go beyond analysis, to initially include suggestions on how to manage the PCV, improve the FEI peg and how to use the TRIBE inflation schedule to improve FEI’s growth across the ecosystem. This is a large task in itself.

Ultimately, the partnership can be expanded to include on-chain implementation. However, our suggestion is to enable Llama to focus more on the analytics, support the community decisions as best we can and then get more involved with on-chain implementation with time. We can certainly help out with implementing smaller scope on-chain along the way. A full holistic analysis, reporting, recommendation and on-chain implementation is something to work towards in time. Llama is certainly excited to be working with Tribe DAO and we put forward the following team to become the core of the Treasury pod.

@Matthew_Graham
Bachelor degrees in Mechanical Engineering, Investment Finance and Corporate Finance. Contributor to the Llama community overseeing the Aave Treasury Management grant and co-lead of the Finance Nest at Index Coop. A Tribe DAO genesis investor (100% TRIBE) who hasn’t sold and is a TRIBE delegate.

@Elliottwatts
Chartered Financial Accountant with the ICAEW. 6+ years of accounting and financial management experience, 3 of which with a Big4 Accounting firm. Co-lead of the Finance Nest at the Index Coop and a Contributor at LlamaDAO. Actively involved in crypto since 2019, DeFi user and investor.

@scottincrypto
Data Scientist with Bachelor degrees in Mathematics & Electrical Engineering. He likes to flex his data skills on crypto protocols, especially in DeFi, building dashboards & solving data problems

ethpanda
ethpanda is a crypto enthusiast based in San Francisco where he has been working as a data scientist for a tech company over the past 5 years. He loves digging into the intricacies and subtleties of novel dapps and innovative protocols and building Dune dashboards to understand them a bit better.

@PrairieFI
Bachelor degree in Finance, Master of Business Administration, CFA charterholder. Core Contributor for the Index Coop Finance Nest and contributor at Llama Community. 10+ years of banking experience in credit and finance.

@green
Austin has been an engineer in crypto for close to five years. He’s worked on governance proposals for DAOs such as Aave and Uniswap. He’s also a TRIBE genesis investor and TRIBE delegate.

If @SebVentures and others would like to join the pod, that would be awesome as we can run a channel in the Tribe contributor discord and discuss all the great work we can do together.

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I would agree with Bruno here, that perhaps it would be wise to launch the financial pod with a smaller portfolio of responsibilities, which wont include PCV management, and add such responsibilities later. With the FEI saving rate gaining momentum and potential adaptation in multiple proposals, I think it would be wise to launch this pod and take charge of that rate sooner rather than later.

With regards to financial reporting, I think many of @llama Llam ideas for integration are sound; though per the proposals outlined earlier and per long standing DAO practices, it would be advised that the individual members wishing to self nominate for this pod come forward themselves in a simple post. Ultimately, I think we can all agree that FEI would benefit from a more thorough reporting of its extensive and complex holdings, and the revenues/profits that are generated thereof.

With the Tribal Council on-chain votes passed, we can soon move to have the Tribal Council deliberate on this proposal.

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In light of the LUNA-Anchor protocol depegging event, I believe that the dual mandate of financial reporting and risk free risk setting of a financial pod becomes more urgent.

Since the FEI savings rate may represent a substantial net liability for the protocol, the total annual outlays from FSR should be contained to be less than that of organic protocol revenues. This is impossible to do without accurate accounting.

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After consultation with Tribal Council members, I am bringing this proposal to a last call for nominations.

After deliberation and discussion, the scope of the Financial pod will start at a modest scope and include the following functions, which were also outlined in the original post:

  • To research and compile a basket of indicators that would generate an appropriate supply target rate. The pod would maintain and publish the rate based on the parameters every month, and update the policy rate into the proposed stacking contract for FEI’s risk-free interest rate.

  • To accomplish the adjustment of interest rates, a multisig with a 4-day vetoable (subject to both nope-DAO and Tribal Council vetoes) timelock will be created. This multisig will be able to adjust FEI’s risk-free interest rate as chartered by FIP-103 Snapshot. The rate may be adjusted by a simple majority vote of pod members.

  • To compile and publish a quarterly financial report for FEI: detailing all protocol revenues, all operating expenses (which would include cost of staking rewards, and other outlays authorized by the DAO), PCV profit, and a balance sheet of PCV assets. The Financial Pod will take over the grants function of commissioning external research from Messari/Llama, and consolidate those findings into a singular quarterly report.

The Tribal Council is called upon to deliberate on this proposal. Each tribal council member can reply with their vote and reasoning either on this thread or at the newly created discord governance thread. A simply majority of the Tribal Council members voting in favor will invoke FIP-82 and create this pod.

If the Tribal Council approves the creation of this pod, they are then called upon to elect each DAO member who has self nominated in a similar fashion for one year terms.

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This reply constitutes a vote of YES for the creation of a Financials Pod as described above.

Requesting that @llama members or others who wish to participate as voting members of the pod individually self nominate, as constraining the size of the pod to 5 as discussed seems reasonable to me. Will add support for specific members in an additional message after all nominations come in.

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Please describe how the members of this pod will be able to do so. As you will need to gather data from the blockchain and extract it so that it can be used for proper financial accounting. As it stands currently reporting comes from third parties.

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Hi @cozeno, @OneTrueKirk,

Thank you for tagging Llama here.

Following on from the discussion above, we intend to keep our proposal as a united team in providing a service to Tribe DAO. Each team member adds value to the proposal and is a specialist in their own field.

Llama recently submitted a grant to create the Llama system required to generate a detailed Tokenflow Statement and Balance Sheet. We were unable to create these financial reports using Dune and as a direct result, we elected to invest in creating a new backend system to generate these reports.

For this Financial Pod to generate accurate financial reports, it will require moving away from Dune and utilising developer resources. Llama has front end developer resources already working on this and had planned to deliver live financial reporting and analytics directly to the fei.money and Llama website. This work will be put on hold learning how things have progressed here.

The Llama system would have enabled all the metrics being discussed in this thread to be built out and made readily available via the fei.money and Llama website. There was some discussion around creating an Investor Relations or Financial Analysis section on the website that detailed all the analysis being performed/requested by the community.

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part of the desire to create this pod is to assemble a team of DAO members who would be able to research and develop a more accurate reporting based upon on-chain sources. alternatively, its possible to change the mandate slightly, to allow the financial pod to commission Llama to generate a block-chain derived cash-flow statement (edited)

this information is critical to the interest rate side of the mandate, as the annual emissions from the FEI savings rate should not greatly exceed free cash flow generated by the DAO, lest we have a repeat of Anchor-Luna dynamic

In which case the Llama team, who wishes to remain as an unit, would be enlisted as a service provider, and there should be alternative members elected to the financial pod in their place.

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Thank you for the clarification, I appreciate the desire to function as a united team and am in favor of ongoing relationship on those lines. I do not anticipate the pod members to entirely “in-house” collecting and analyzing data, the Financials Pod interfacing with Llama as a research and data provider makes total sense to me.

The scope of the current proposal is the establishment of a five member financial pod of voting members who in the future would have optimistic powers such as FEI Savings Rate adjustments, and who would serve for a one year term unless removed by the Tribal Council.

In light of this, if there is any Llama member or representative who might want to sit as a voting member on the pod, please let us know. I would also support the Llama team collectively serving as one member of the pod.

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pursuant to the discussions on Discord, I feel that the financial reporting responsibilities of the pod is best limited to publishing only a balance sheet for now.

It has been highlighted by @arcology and @Matthew_Graham creating a detailed income and cash flow statement based on live on-chain sources is not something that could be done quickly nor easily.

This information is critical to the interest rate side of the mandate, as the annual emissions from the FEI savings rate should not greatly exceed free cash flow generated by the DAO, lest we have a repeat of Anchor-Luna dynamic.

Though for the purposes of publish interest rates we would not immediately require very precise reporting, a roughly ballpark estimate of Free Cash Flow would suffice and that doesnt necessarily mean it can’t be achieved with external analytic tools for the time being.

Therefore it would be wise to separate these projects for now, and limit the scope of the financial pod to publishing only a balance sheet; with building out a detailed front-end financial reporting feed as a task to be integrated in the future.

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