The Ethereum Name Service (ENS) DAO, the decentralized community that oversees the Ethereum domain project ENS, has sold 10,000 ethereum (ETH) for $16.2 million in USDC stablecoins.
The sale is the latest effort by a DAO to limit its exposure to volatile cryptocurrencies by diversifying its cash reserves into stablecoins.
Ethereum Name Service DAO sells ETH for USDC
ENS DAO exchanged 10,000 ETH for USDC on Thursday, February 9, 2023. The sale occurred on CoWSwap at 10:26 am UTC. ENS DAO netted $16.2 million from the exchange, according to on-chain transaction data.
Today’s trade comes after the DAO previously voted to sell 10,000 ETH. ETH sold came from DAO’s spendable treasury and amounted to 25% of its ETH reserves.
During the vote, the ENS DAO delegates agreed to sell coins on CoWSwap. Gnosis co-founder Martin Köppelmann revealed that the sale incurred a minimal slippage of 0.5%. Slippage refers to the loss incurred when exchanging assets, the difference between the quoted price and the settlement price of a token swap.
Köppelmann argued that the sale would have fallen victim to $80,000 worth of maximum withdrawable value (MEV) mining if it had been done on a normal decentralized exchange like Uniswap.
ENS DAO will use the funds obtained to support the project for the next 18 to 24 months. More than half of the money will go to ENS Labs, the developer behind the project. ENS Labs reportedly requires around $11,500 a day to fund operations, which comes out to $8.4 million over two years.
Another massive spend of the funds will go to the working groups of ENS DAO. The DAO has three central working groups tasked with handling specific functions for the community.
Treasury diversification for DAO
Selling reduces ENS DAO’s exposure to ether. It is also another way of diversifying the treasury taken by the community. The DAO is currently looking to fund an endowment fund that will be used to try to earn a return on its reserve assets.
DAOs faced their first bear market in 2022 and saw firsthand how their reserves could devalue during sustained price declines. It’s because many DAOs keep most of their assets in their native tokens.
Communities are currently advocating for significant treasury diversification. This can come in the form of holding stablecoins or investing in real world assets as in the case of MakerDAO.
