Treasury diversification proposal

Treasury diversification proposal

:cat2: Greetings to all! :cat2:

Like many of us, I believe that we should diversify some of our governance funds.

Diversifying adds more stability to governance funds and this stability could help the governance, if the community decides so, to support liquidity, or support the community fund to pay current costs and contributors/recruit new contributors during this bear market (non-exhaustive list).
Therefore, I asked @Marty to work on a diversification proposal.

How to?

To do so, we could crowdsell some TORN and acquire WETH on governance contract.

To avoid having a negative impact on the TORN price, we could implement a crowdsale.

This consists in setting up a crowdsale with TORN-v-1 sold at a 20% discount with a lock period.

For this, we could use the 1inch limit order protocol.

What is TORN-v-1?

TORN-v-1 is a vesting TORN token that must be transferred to governance. After TORN-v-1 being transferred into the governance contract, 1 TORN-v-1 is directly transformed into 1 TORN, giving access to the staking yield and the vote.
Then, the investor will have to wait for a given period of time (here a period of 365 days is suggested) to be able to unstake.

Advantage of this sale

This is not just a simple sale. Sold TORN will be locked in governance, which means that there is no selling pressure at the moment. It’s a good way to attract strategic partners, so they can help our governance funds to diversify by buying TORN at a discount, while being able to vote and earn yield.

Let’s set up some parameters

Here are the parameters we need your opinion about:

saleAmount - 60_000 TORN, amount of TORN to be sold
saleDiscount - 20%, discount from market TORN/ETH price at governance proposal execution moment
rateLowLimit - 0.008, minimal TORN/ETH rate for sale (minimum 0.008 ETH for 1 TORN)
saleDuration - 14 days
vestingDuration - 365 days

Below are polls to see what parameters you would like to see in the governance vote.

saleAmount

saleAmount ?
  • 70,000 TORN
  • 60,000 TORN
  • 50,000 TORN
  • Refuse

0 voters

saleDiscount

saleDiscount ?
  • 30%
  • 20%
  • 10%
  • Refuse

0 voters

rateLowLimit

rateLowLimit ?
  • 0.009
  • 0.008
  • 0.007
  • Refuse

0 voters

saleDuration

saleDuration ?
  • 30 days
  • 14 days
  • 7 days
  • Refuse

0 voters

vestingDuration

vestingDuration ?
  • 365 days (12 months)
  • 273 days (9 months)
  • Refuse

0 voters

Warning

These two points may dissuade potential buyers from purchasing TORN-v-1:

  • As the market is not waiting for us, the TORN price could drop during the proposal execution, which could make the proposed price higher than the current market price.
  • As governance contract has canWithdrawAfter[user] parameter which says when an exact user can withdraw his tokens (common date for all user’s tokens), users can’t stake TORN-v-1 on governance if they already have locked tokens on it. Buyers should then be cautious and use a new wallet in that case.

I would like us to discuss this diversification proposal and the different parameters with you before we launch any governance vote :smiley_cat:

:sunny: Have a wonderful day Tornadoes! :sunny:

How is this proposal necessary? The TORN/WETH rate (DEX Screener) is doing pretty well and shows that TORN is valuable by itself. TORN DAO has no obligations in WETH, so it is unclear why WETH is needed.

2 Likes

This question is already answered on the proposal:

There is enough liquidity. Current cost can be paid in TORN. Contributers can be paid in TORN and exchange it to whatever they want. Right now, there is over 40k TORN sitting in Community Fund Tornado.Cash: Community Fund | Address 0xb04E030140b30C27bcdfaafFFA98C57d80eDa7B4 | Etherscan and another 50k TORN is added automatically over the rest of the year. Should this ever be not enough, there are millions of more TORN available to unlock by governance proposal - intended for this purpose.

Dumping 60k TORN, as of today worth about 1MM USD, especially at a discount is not going to be “no selling pressure”. Even with a one year vest it is going to have this effect: Less people are going to buy TORN at current market rate, resulting in negative price impact.

A 20% discount doesn’t appear justified, because locking TORN is already incentivized by staking rewards. Locking TORN is one of the best staking deals in Web3 already: A coin performing historically well against ETH yielding double digit APY based on utility revenue.
It should be reasonable to reconsider this proposal and reevaluate whether necessary at all.

If it is necessary, consider something that has truly no price impact and benefits TORN holders, like:

  • 25% discount, 5 year lock, no governance/staking rewards.
2 Likes

No one is going to buy at a 25% discount with a 5 year lock without staking rewards

But one year is too short.
"If it is necessary, consider something that has truly no price impact and benefits TORN holders, like:

25% discount, 5 year lock, no governance/staking rewards."

!!!2~3 years can be accepted!!!

1 Like

https://tornadocash.eth.limo/governance/13

Vote is live

This proposal is not thought through. I can only advise everyone to vote against it.

  • HODLers will simply dump and rebuy at 20% discount.
  • Dumping results in 20% price drop and stops only then
  • Speculators will follow and there will be more price drop
  • DAO will be worth at least 20% less, only to own some WETH it doesn’t need

People will not be able to claim their TORN before 365 days of staking, so they are not going to be able to dump instantly.

DAO will not be worth 20% less because of this proposal, it is 50,000 TORN that is being sold through a crowdsale, which is 0.5% of the total supply.

On monday, Whales/HODLers will have to dump TORN they posess now to rebuy TORN from this sale at 20% discount.

You are making the assumption that only non-holders are going to participate in this sale.

Does that make sense to you? Everyone who is committed for more than a year anyways will have to take this deal to immediately improve their position by 20%.

Therefore, this proposal incentivizes a dump of 50K TORN by existing holders to flee devaluation of their position until price has crashed 20% and rebuying from the sale is not attractive anymore.

Two days ago, a single UNISWAP order of less than 1K TORN moved the price by almost 25%. Good luck with having 50K dumped.

2 Likes

I never made this assumption.

During this crowdsale, the price of TORN in WETH will be fixed.
So if the price drops as you suggest, it will no longer be interesting to buy, as it would be cheaper on DEX/CEX.

If the price is cheaper on DEX/CEX, no one will buy during this crowdsale, that is the risk listed below on the @ayefda proposal.

“As the market is not waiting for us, the TORN price could drop during the proposal execution, which could make the proposed price higher than the current market price.”

Correct. Once the price has dropped at least 20% as a consequence of this proposal:

  • Price will be kept suppressed for two weeks or until 50K are sold, in which case it will likely crash harder

Also:

  • No auditing happened
  • Economic incentives not audited
  • Solidity code not audited

This proposal is a recipe for desaster.

1 Like

Hello, here is Solidity code audit report. Sorry I forgot to add it to the repository initially.

1 Like

I did a coffee audit and believe to have found this bug:

**! TORN-v-1 is freely transferable ! **

(see source code here)

If correct, it has these implications:

  • After buying from sale, TORN-v-1 itself will be transferable/tradeable
  • Liquidity miners can provide a TORN-v-1 vs. TORN pair on e. g. Uniswap
  • Investors will not have to lock TORN-v-1 in governance and wait a year as intended by this proposal
  • Investors can freely trade TORN-v-1
  • Vesting only kicks in if the investor/buyer sends TORN-v-1 to the governance contract, but they have no obligation to.
  • Vesting is fixed to one year after the sale, not one year after the transfer of TORN-v-1
  • A transfer of TORN-v-1 does not affect or reset a vesting period: All TORN-v-1 can be unwrapped to TORN one year and 14 days after monday no matter where or when or from whom it was bought.

Therefore TORN-v-1 is just a TORN wrapper token with an incentive not to send it to governance. Because there it would become untransferable.

This directly contradicts the proposals promise and intent, cited here:

This is not just a simple sale. Sold TORN will be locked in governance, which means that there is no selling pressure at the moment .

Instead it should read

Sold TORN comes in a 1:1 wrapper token that can be freely traded or locked in governance. The wrapper token is guaranteed to be unwrappable one year after proposal execution. It can also be unwrapped to governance any time where it then will be locked until one year after proposal execution.
Vesting only affects those buyers who elect to send it to governance.

2 Likes

TORN-v-1 is freely transferable - it is expected behavior and not a technical bug.

From the business logic point of view TORN-v-1 is a freely transferable token with two usage options:

  • Users can lock TORN-v-1 in Tornado governance for a vesting period (365 days). In which case users can use them for governance voting and withdraw as TORN after the vesting period
  • Alternatively, users can swap TORN-v-1 for the same value of TORN after a vesting period
    (text from proposal repository readme file)

All other usage options (any type of derivative market) are not technically restricted by the contracts. We have decided to do it for:

  • smooth integration with 1inch protocol
  • the simplicity of the proposal code base
  • we don’t see a strong reason why these potential derivative markets should harm TORN token price
1 Like

The 20% discount is too sloppy, why not start with 1%, if no one wants to buy 1%, then 2% is fine, the direct 20% discount is really not sensible

2 Likes