Introduction
At the time of this writing, the ENS DAO Endowment contains approximately $98.2 million in cash equivalents (Steakhouse Financial, May 2024). Established via an Executable Proposal through the DAO's governance process, this endowment supports the development and growth of the ENS protocol, ENS Labs, the Working Groups, and ENS's many service providers.
Karpatkey, a key financial partner for the ENS DAO, oversees the endowment fund in collaboration with the Meta-Governance Working Group in accordance with the ENS DAO Constitution and the Routine Treasury Management directive published by Nick.eth.
This article offers a comprehensive overview of the ENS DAO Endowment, detailing its role within the ENS protocol and highlighting the latest routine maintenance upgrade scheduled for June 2024.
History of the Endowment
The ENS Endowment was initiated through a Request for Proposal (RFP) by Nick Johnson (Nick.eth), outlined in EP2.2.4, to establish a sustainable funding mechanism for ENS DAO's long-term goals. A thorough evaluation process selected Karpatkey as the endowment fund manager, culminating in the approval of EP3.4 on March 7, 2023, which authorized the setup and seeding of the endowment safe.
The endowment safe was initially funded with 16,000 ETH transferred from the DAO wallet to the endowment multisig. This structured approach, with detailed audits and defined managing permissions, marked the beginning of ENS DAO's strategic partnership with Karpatkey for fund management and growth.
About Karpatkey
Karpatkey is tasked with optimizing returns while maintaining a conservative risk profile. Their role includes executing financial strategies approved by the DAO and ensuring compliance with the community's governance frameworks and objectives.
Karpatkey can only execute strategies approved by the DAO through an Executable Proposal. Provisional strategies are facilitated by the Zodiac Roles Modifier, an onchain permissions module for DAOs that enhances security and operational efficiency. It allows DAOs to grant predetermined permissions to certain roles.
Karpatkey provides weekly endowment updates and meticulous documentation, ensuring transparency and accountability. Audits and monitoring dashboards, such as the ENS DAO fund flow and Governance Dashboard, provide open-source accounting and financial services.
Fee Structure
Karpatkey has established a transparent fee structure, including a management fee of 0.5% of the nAUM (non-custodial assets under management) and a performance fee of 10% of the yield obtained during the previous week. Fees are calculated monthly and converted to ETH.
Policy Changes
Since its initialization on February 26, 2023, there have been three updates to the Permissions Policy (EP 4.1, EP 4.2, and EP 4.5). The fourth update, detailed in EP 5.6, changed the way fund managers are paid out.
Consequently, Meta-Governance stewards now have the ability to authorize up to a 30 ETH monthly withdrawal from the endowment to pay Karpatkey its fees.
Karpatkey’s newest proposal includes updates to the permissions policy and an upgrade to the Zodiac Roles Module, introducing new features and an updated UI.
The UI clearly displays permissions and provides a user-friendly interface to compare changes in each policy update, enhancing transparency and simplifying audits. These updates are necessary to ensure fund management remains resilient amid technological advancements and changes to market conditions.
Zodiac Module Upgrade
The Zodiac Roles Modifier facilitates Karpatkey’s proxy management of the endowment by ensuring that only pre-approved transactions, defined by the permissions policy voted on by the DAO, can be executed. In collaboration with Karpatkey, the Gnosis Guild team has significantly upgraded the Zodiac Roles Modifier module and the Zodiac Roles app.
These enhancements have resulted in a more powerful and robust onchain permissions infrastructure with the following improvements:
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Introduction of Allowances: Implementation of spending limits within permissions.
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Enhanced Call Data Scoping Toolset: This toolset considerably broadens the range of functions that can have permissions set, increasing flexibility.
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Advanced Logical Conditions: Allows for the creation of complex permissions structures to accommodate sophisticated operational needs.
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Compatibility with DeFi Kit: This feature integrates with Karpatkey’s permissions policy building module, facilitating the straightforward crafting of protocol actions.
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Improved Visualization and User Interface: The new Zodiac Roles app UI not only displays permissions clearly but also provides a user-friendly interface to compare changes in each policy update.
Roles v2 enables the ENS DAO to define the configuration of roles as declarative statements in code, enhancing efficiency, reproducibility, and transparency.
Permissions Policy Update
The latest Permissions Policy Update introduces several changes to enhance token swapping and streamline operations within the DAO. Key modifications include the implementation of token allowlists for swapping on CoW Swap, Uniswap v3, and Balancer, with specific tokens designated for IN and OUT transactions. CoW Swap is now integrated with a dedicated order signer, offering gas-efficient and MEV-protected swaps.
The update also deprecates Uniswap v2, Stakewise v2, and Compound v2 due to liquidity issues and protocol upgrades. Additionally, all outdated allowances are revoked, and new functionalities are introduced, such as Curve ZAP deposit contracts, enhanced Lido withdrawal methods, and Spark rewards claims. These updates aim to optimize token management and improve overall system efficiency.
For a full list, visit Karpatkey's Preset Permissions v5.
Conclusion
The proposed upgrades to the Zodiac Roles Modifier and permissions policy are crucial for facilitating the trustless, non-custodial management of the endowment, ensuring its perpetuation ad infinitum.
If you have any questions after reading this article, my DMs are open.
estmcmxci.eth publishes the ENS DAO Newsletter and is a Term 5 Meta-Governance Steward. They research how surplus revenue generated from protocol fees can subsidize application layer development and other open-source infrastructure.