RWA Reserve Fund Allocation: Winners

EthenaLabs_Research
Thu, 10 Oct 2024 11:49:19 +0000
General

Summary

The Risk Committee has completed its deliberation on the submissions for the Ethena Reserve Fund RWA allocation. This post formally announces the results of the contest and gives a brief overview of the rationale behind the allocations.

Any unsuccessful submissions are welcome to request specific feedback via the email governance@ethenafoundation.com.

In total the Committee received 25 submissions from various issuers proposing an allocation of the Reserve Fund (viewable here) to their products.

As a reminder, the Ethena Risk Committee consists of 5 voting members from industry leading risk and advisory firms:

Gauntlet

Block Analitica

Steakhouse

Llama Risk

Blockworks Advisory

as well as Ethena Labs Research as a nonvoting member.

Members conducted due diligence on each RWA product and based their recommendations on the following non-exhaustive criteria:

Product Maturity

AUM/TVL

Liquidity

Redemption Time

Risk Adjusted Yield

Legal Design

The Ethena Foundation also conducted an independent legal review of the allocations the Risk Committee recommended.

Results

The following assets ranked best across all of the criteria assessed by Risk Committee members and accordingly received the most number of Yes votes. The allocation weights were decided by taking averages from a blind voting system, whereby each voting member privately submitted recommended allocation weights for each approved asset.

The below table reflects the results of the vote:

Asset | Issuer | Allocation
BUIDL | Securitize/Blackrock | 40%
USDS | Sky | 29%
USDM | Mountain | 16.5%
USTB | Superstate | 14.5%

The Ethena Foundation approved the results of the vote and have instructed the allocations be administered accordingly.

To note, an sDAI allocation was approved before Maker’s transition to Sky, and the sDAI currently in the Reserve Fund will soon be migrated to USDS.

Notes

The below is a sample of some of the Risk Committee member notes provided during the deliberation process for the successful proposals:

BUIDL

Leading RWA, strong brand. Proven track record. BUIDL will allow for USDC subscriptions and redemptions. Currently $75M in the redemption fund as per this dune dashboard https://dune.com/Marcov/blackrock-buidl. Excellent redemption time. Current AUM is high at $500M.

USDS (previously sDAI)

Current APY should always beat short-term US Treasury Bills. Fully onchain, can verify real time collateral backing. Excellent liquidity, sDAI can always be instantly redeemed for DAI and DAI trading volume is usually in the 100s of millions + MakerDAO targets a cash reserve balance of 25% of DAI supply in USDC. Excellent reputation and track record, very low risk, slightly higher yield than Tbills. Secondary market liquidity is currently $265M on various liquidity pools and DEXes. One of the most available tokens on the secondary markets. Liquidity size is 5x larger than current Ethena’s reserve fund size. Liquidity rating: Excellent

USDM

Good liquidity, 24/7 redemptions are ensured through just-in-time liquidity from: 1) BUIDL USDC redemptions, 2) Market makers like Wintermute who accept USDM 1:1 against other stablecoins. Good reputation, licensed, backed by leading investors and integrated in several DAOs. Lower fees than BUIDL, same redemptions, good reputation make it a good candidate to spread risk from BUIDL.

USTB

Mint and burns happen once a day, settlement on the next day max. Reputable team. Lower fees than BUIDL, same underlying, fast redemption and high AUM make it a good candidate to spread risk from BUIDL. Leading yield and strong structure.