Idea: bZx Treasury Diversification with RAI

Hi bZx!

I’m Stefan from Reflexer where we build RAI. RAI is an ETH pure stablecoin that is not pegged to anything. We had an amazing summer with multiple integrations in protocols like Aave, BarnBridge and Idle as well as a Coinbase listing. For more information on integrations, you can check our website.

I posted on Discord about the potential to diversify bZx’s treasury with RAI and earn yield on it. To give you a general idea about yields, here’s a list of platforms with associated incentives:

  • BarnBridge offering BOND rewards for senior tranche depositors and the option to “lock in” yields using the senior tranche. BarnBridge also collects stkAAVE
  • Aave offering stkAAVE for RAI depositors
  • Our own Fuse pool that will soon have no governance
  • Idle which deploys capital in Fuse and Aave and plans to offer IDLE rewards on top of the collected stkAAVE

Would love to hear what you think and what other information I can provide!

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I think this is a great idea.

Treasury diversification is very important, especially with a large treasury like BZX (approx 50m BZRX and 355m vBZRX which are slowly vesting into BZRX - at current prices worth anywhere between $60m and $160m, depending on how the vBZRX is valued, making it one of the largest DAO treasuries).

Now that we’re making the transition to a full DAO, I think it is a good idea to plan a treasury diversification to protect against having all DAO funds in BZRX. As Stefan points out, we could also earn yield on other assets like RAI in a variety of ways uncorrelated with BZRX performance, which is even better.

The details of the diversification will need to be worked out, but as a starting point, we should consider 10% or 20% of the treasury to be converted to other assets (slowly, to limit price impact on BZRX). We’ll have to decide which other assets and in what proportions, but I think we will definitely want some ETH and one or more stables. The more decentralized the better.

In that context, I think RAI is a great choice as it is only backed by ETH and is also unusual in not being pegged to a USD price, so more like a “low volatility asset” than a stablecoin. Perhaps something like ETH, plus 1 or 2 dollar pegged stables (USDC or PAXUSD but they are completely centralized. DAI is much better but more than 50% backed by USDC at this point. Maybe LUSD which is completely ETH backed), plus some RAI so as not to be tied to a dollar peg (I have not looked into it, but I think we can probably get more yield on RAI than the other stables too).


I think this is a good idea overall. Diversification is key to building a strong treasury to back the protocol and bring continued developments as time goes on. The yield that can be generated from RAI is also something to consider as it is not just a simple diversification but can bring further yield to the protocol itself. Details on exact percentages, rebalance, and sell-off structures need to be hashed out but I do believe some form of diversification is necessary.



I would just slightly push back against saying that RAI is not a stablecoin :stuck_out_tongue_winking_eye:

It’s probably the only stablecoin around because everything else is mostly a pegged coin. Daily RAI volatility is many times equal or lower than the one that SAI experienced so even low volatility doesn’t do it justice.

I think Rai is great and deversified Treasury makes sense. Seems Rai has attributes that separate it from USDT, dai, USDC, etc in that it is backed by Ether and less likely to build surprise risk inside its collateral

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Its a great idea to diversify treasury. An idea I had in mind is build slowly stable part of the fund using fees from protocol earnings. Right now stables are converted to 3crv and non stables to BZRX. what I would do additionally is stake those 3crv into curve to earn even more crv.

Another idea is to invest in an crypto index.

If we do plan to diversify … we need to diversify to stables really since all other crypto are strongly correlated

Yes, good idea to diversify, just make sure you convert the bzrx treasury after the rebrand and there’s nice positive price-action going, that way you won’t negatively impact price and get more buck for your bang. Also it should be slow/low enough that arbitraging won’t be worthwhile.

OK, so there seems to be a general consensus that a) treasury diversification (including with RAI) is a good idea and b) we should wait till after the rebrand when we expect the BZRX price to have improved.

I think this makes a lot of sense.

What do people think of a targeting 10% of the treasury in other currencies? Not all at once - the selling will be in stages to minimize price impact.

Perhaps something like: 5% in USDC/DAI/LUSD etc, 3% in RAI and 2% in ETH?

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why do we have to sell at all? when we can just wait until 3crv rewards will build up ? as you can see on a timelock tere is already 5k 3crv

the reason it makes sense to sell is that the accrual of fees to diversify the treasury will be very slow and will expose the treasury to market cycles which is not good for the protocol long term. Having a cushion in a stablecoin to cover expenses for potentially numerous years will allow for the protocol and treasury to withstand bear markets without a) diluting current token holders as treasury holdings are not currently in liquid supply b) reduce the ability for treasury to capture the potential upside of the developments and initiatives being funded. If 10% of the treasury is in stables, those stables can have yield generated on it to grow the treasury even more and can also be what is used to cover labor expenses.

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Quick update: there are now three groups holding RAI long term, two of them being DAOs. DXdao just joined in holding $3M worth of RAI for their 5 year stables treasury.

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My guess is that the BZX rebrand is likely to be in October, and I think there was general consensus that we would look at diversifying the treasury after that (there will be a token swap to a new token etc but once that housekeeping is done).

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