- TRU holders are not qualified to underwrite loans directly
- Professional credit underwriters identify TRU holders underwriting loans as a risk
- Portfolio managers have significant expertise in underwriting loans
- The DAO permissionless pools do not have the ability to fund portfolios directly
- Smart contracts support a different type of lending which uses an old system
- Pool logic relies on a set of smart contracts which manage loans
- TRU stakers approve loans directly to borrowers
To allow DAO pools to deposit to Portfolios, the Allocation Committee can borrow using the existing lending structure, then deposit those funds into a Portfolio. The TrueFi Foundation acts as the KYC entity when lending to Portfolios.
The benefits of this model are:
- Efficient: Management of funds is faster through a multisig rather than on-chain governance
- Effective: Allocation committee is comprised of experts rather than all TRU holders
- Flexible: Allows for committee to invest in multiple Portfolios
Note that this proposal is meant to act as a temporary solution (3-6 months). In the long term DAO pools will need to support lending to portfolios natively.
DAO Allocation Committee (DAC)
The Allocation Committee vets managers and lends to portfolios, the DAO oversees the allocation committee and ensures they are acting in the interest of the DAO members and LPs. Functions of the committee include:
- Establish formal process for vetting portfolio managers
- Recommends an amount to allocate, which tranche to choose
- Evaluate credit history of manager and whether they will originate good loans
The DAO would vote to approve a multisig as the allocation committee. Any member who wants to join the committee would advocate for themselves via forum post and discord discussion. The DAO would have the power to set the multisig address which has the power to submit approvals. The recommended multisig setup is a 4/7 or 5/7 multisig due the large amount of funds being trusted by this committee.
A multisig will be set up with the initial committee members. A vote will be held on Snapshot to elect this group of members.
- Committee meets every 2 weeks for 1 hour
- Can meet more frequently depending on the number of PMs onboarding
- During meeting time members review PMs and approve funding through the multisig
- Members are paid $250 worth of TRU per hour
- TrueFi Foundation passes KYC
- TrueFi Foundation signs MLA
- DAC multisig whitelisted to borrow from DAO pools
Funding a Portfolio
- DAC posts to forum & snapshot to get a signal
- TrueFi Foundation signs agreement with Portfolio Manager
- DAC multisig applies for a Loan
- stkTRU holders approve Loan
- DAC withdraws funds
- DAC joins Portfolio
- At Portfolio maturity, DAC withdraws funds with interest
- Loan is repaid to the DAO Pool
When borrowing from the DAO pools, the DAC will have to under-estimate the interest rate as compared to the Portfolio it desires to invest in. The DAC can have a “buffer fund” to make up for any potential underperforming portfolios. This can be funded through the DAO Treasury, and if there is an overperforming. Funds invested by the DAC should not be used to farm TRU rewards or receive airdrops.
Flow of Funds
If passed on snapshot, the Allocation Committee will be whitelisted to borrow from the DAO Pools and will apply for loans using the same process as existing lenders. As described in this proposal, the DAC will post to the forum explaining which portfolio they want to seed, then apply for a loan to be approved by TRU stakers.
- YES - I support this proposal
- NO - This proposal needs to be re-worked