TL;DR:

I am Peter from the Origin Protocol core team. This is a proposal for a (very) low-risk test to earn yield for the Nouns treasury by utilizing Origin Ether (OETH). Converting 1 ETH into 1 OETH (they are 1:1) for 30 days would act as a case study to test that Nouns can safely earn high risk-adjusted yields for the treasury by utilizing OETH.

Origin Protocol is an OG team that launched in 2017. We launched OETH about 4 months ago, with the goal of making it possible for retail users to earn the same kind of yields that institutional traders earn, without needing millions of dollars and a full-fledged trading team. OETH deploys collateral to blue-chip protocols, distributing the yield back to holders daily via positive rebase. Current OETH yield is 8.01% APY on ETH, or about 2x that of the largest LSTs.

We have seen much larger test case props to Nouns (Prop 320 for example); in our opinion this is much too large of an amount to test a new technology with, which is why we are proposing to begin with a 1 OETH test, and can submit an additional proposal in the future for an increased amount as the Nouns community becomes more familiar with OETH.

This proposal will include two transactions: the first to convert 1 ETH into 1 OETH, and the second to opt the Nouns wallet in for yield generation.

A more detailed overview on the proposal and on how OETH works can be found below.

Stacking Treasury Yield With OETH

Previous Relevant Proposals: 18 - Stake 1 eth in Lido 22 - Stake 10% of treasury in Lido 30 - Stake additional 10% of treasury in Lido 52 - Increase Treasury stETH Position to ~20% 217 - Stake additional 5000 ETH in Lido 227 - Stake additional 5000 ETH in Lido 313 - stETH peg protection 320 - Treasury Diversification

Summary:

This is a proposal to convert 1 ETH into 1 Origin Ether (OETH) to test OETH yield generation for the Nouns treasury.

Abstract:

This is a low-risk test to increase the yield of the Nouns treasury ETH/stETH from 0-4% to 8-10% utilizing Origin Ether (OETH). Converting 1 ETH into 1 OETH for 30 days would form a similar hypothesis as proposal 18 - in this case, that Nouns can safely stack yields utilizing OETH.

Motivation:

From proposals 18, 22, 30, 52, 217, and 227, it is clear that the Nouns DAO was interested in earning yield on the treasury and extending the project runway. Proposal 313 signals that the community would prefer to continue earning yield with stETH, instead of eliminating risk completely and converting entirely back to ETH. Proposal 320 signals that other mainnet LSTs can be useful for treasury diversification.

The OETH TVL has been trending upwards at a rate of about $1m per day since launch and has been crushing it in comparison to direct competitors with the yield we are generating. OETH yield is currently at 8.01% APY, whereas icETH APY is down to 2.94% and Cian stETH strategy is down to 4.02% despite taking leverage.

We are proposing to begin with 1 OETH, and can submit an additional proposal in the future to increase the amount as the community becomes more familiar with OETH. OETH provides significantly increased yields while also protecting against centralization and slashing events.

OETH Overview

Origin Ether was launched in May 2023 and is an ERC20 LST aggregator that generates blue chip yield while sitting in your wallet. OETH is backed 1:1 by stETH, rETH, frxETH, ETH, and WETH at all times; holders can go in and out of OETH as they please. Similar to stETH, OETH yield is paid out daily and automatically (sometimes multiple times per day) through a positive rebase in the form of additional OETH, proportional to the amount of OETH held.

OETH yield, currently ~8.00% APY, comes from a combination of:

1. Deploying ETH/WETH on Curve, Convex, and Morpho
2. LST validator rewards
3. A 50bip exit fee is charged to those who choose to exit OETH via the dapp (completely avoidable if using a DEX), this fee goes back to OETH holders
4. OETH sitting in non-upgradable smart contracts does not rebase, instead the interest generated from those tokens is provided to those that can rebase

These 4 yield generating functions combined enable OETH to generate higher yields than holding or farming any single LST manually. The current collateral allocation and yield strategies can be seen on-chain at all times via the OETH analytics page. Future OETH collateral and yield strategies are governed by OGV stakers.

Obtaining OETH is seamless, anyone can convert from ETH, stETH, rETH, or frxETH into OETH via any of the following methods:

• Minting on OETH.com
• Swapping on Curve
• Swapping on Uniswap
• Swapping on Maverick
• Swapping on Sushiswap

For this proposal, Nouns will be using The Zapper to convert the 1 ETH into 1 OETH. A second transaction will also be included to ensure the Nouns wallet is opted-in for yield generation.

Benefits of Using OETH

There are a few reasons for why Nouns would choose to use OETH over of attempting to use the same yield strategies:

• The yield will always be higher with OETH than if you were to use any of the same yield strategies, since not all OETH is opted-in for yield, and because of the exit fee. At the moment 23,731 OETH is collecting yield and 21,280 is not, so Nouns would receive this boost in yield from the OETH opted-out. With the exit fee Nouns would get paid each time there's an exit - occasionally this puts the combined yield into the 100s!

• The Curve/Convex strategy would be very difficult (if not impossible) to replicate without having a Curve pool with a gauge + millions in TVL - Nouns would essentially need its own token and voting power and would be competing for yield with the other large flywheel token holders.

• If Nouns were to do the same strategies, someone would need to manage the position. The OETH protocol would be that manager, with collateral reallocated among the whitelisted yield strategies each week.

• The OETH protocol chases not just the highest yields but also the safest. During the weekend of March 10 when USDC and DAI depegged, it took the OUSD strategists/Origin engineers about 4 minutes to notice the depeg, and 16 minutes to start the process of moving the funds to a safer strategy. $0 were lost!

• The OETH protocol covers all gas costs for moving funds between yield strategies, which is happening weekly but eventually will happen daily. With the price of gas on Ethereum, this could get costly for Nouns if Nouns were to follow the same reallocation schedule.

• The cost for security - Origin has OpenZeppelin on retainer! Every new OETH contract is audited before going live. OETH security is prioritized over new feature development. The same level of security would cost Nouns millions of dollars in audit and development costs.

• Top-notch development team - OETH shares 95% of the same code as OUSD, which has been live on mainnet for more than 3 years - longer than the Nouns DAO! The battle-tested code that has seen almost $400m combined has been and continues to be developed by a team of 10 full-time engineers. This level of talent required to maintain the smart contracts would be extremely expensive for Nouns, if Nouns were to try and replicate the OETH strategies.

Usage of Funds Generated

Since launch, OETH has earned a yield of about 2x that of stETH yield. With the extra yield generated for the Nouns treasury, there are several avenues for using the additional funds:

• Subsidizing public goods spend - Nouns traditionally spends ~800 ETH per month on public goods
• Subsidizing Nouns marketing - this would offset the cost for future Nouns movies, paid promotions, conference expenses, swag, and Noggles
• Subsidizing Nouns infrastructure and auction expenses
• Subsidizing cost for collaboration with other projects - Pudgy Penguins is just the beginning!
• Funding large team efforts for less - it would take 50% of the stETH yield to fund another Nounish or Agora sized team effort
• Extended DAO runway - Nouns would extend the project runway twice as long

Community Cases for Increased Yield

I also don't think getting to our eth position to 100% staked eth limits our spending in any way… the ~500 ETH additional yield we'll get from staking the 10k ETH is not nothing. It's being able to fund another ~$1M / year sized team. That's like being able to fund another nounish or agora sized team effort, which is meaningful! - Noun40

I think the DAO should maintain around ~6mo of operating spend as ETH… diversify into other staking providers to reduce concentration risk. Overall in agreement with staking more ETH to increase runway. - cfeng.eth

The income generated from holding stETH also amounts to ~500 ETH / yr, which is more than 2 weeks of auctions. - noun12.eth

stETH is a better way of holding eth - fugazi.eth

I believe there is already too much of the treasury being staked in Lido. I am not interested in staking more, and if I were, I would want to use some other protocol that isn't Lido since we already have a lot in Lido. - onnnnnnnion.eth

Potential Risks and Mitigation

There are six possible risks when using OETH, and Origin is making sure to reduce each risk as much as possible:

New token risk - Given OETH is a relatively new token, some may be worried that OETH is prone to new attack surfaces. While this may be true for other new tokens, OETH was built reusing 95% of the OUSD code, of which 10+ audits have been done since 2020. Not that long ago, OUSD reached a market cap of $300m without breaking, and without diminishing the APY it was capable of generating. Origin continues to work on OUSD, despite the lower market cap.

Counterparty risk - OETH is governed by OGV stakeholders around the world. Everything from yield generation to fee collection and distribution is managed by a set of smart contracts on the Ethereum blockchain. These contracts are upgradeable with a timelock and are controlled by hundreds of governance token holders. While the initial contracts and yield-earning strategies were developed by the Origin team, anyone can shape the future of OETH by creating or voting on proposals, submitting new strategies, or contributing code improvements. We intend for all important decisions to be made through community governance and limited powers to be delegated to trusted contributors who are more actively involved in the day-to-day management of the protocol.

Smart contract risk of the yield strategies - Origin is only using platforms for yield generation that have a proven track record, have been audited, have billions in TVL, maintain a bug bounty program, and provide over-collateralized loans. Over-collateralization in itself, combined with liquidations, provides a reasonable level of security for lenders.

Collateral risk - Origin has chosen 3 of the largest LSTs to ever exist to back OETH, and they have maintained their peg quite well since launch. They have also demonstrated significant growth in circulating supply, so the Origin team is confident that the 3 LSTs will maintain their peg and that OETH will remain stable to ETH. To ensure accurate pricing at all times, OETH is using Chainlink oracles for pricing data for rETH and stETH, and a dual oracle for frxETH that combines two sources: the Curve frxETH/ETH EMA oracle and the Uniswap frxETH/FRAX TWAP oracle. In situations where any OETH collateral falls below peg, OIP-4 disables minting of additional OETH tokens using the de-pegged asset.

Slashing risk - Since OETH is collateralized by multiple LSTs at the same time, OETH is protected from slashing from any individual collateral LST. If there is a small slash, the OETH yield will simply decrease, as income will likely exceed the size of the slash. During a major slashing event, both the slashed LST and OETH will experience a drop in value relative to ETH, but OETH should not fall as low and for as long as the slashed LST, as the remaining un-slashed OETH LSTs will soften the blow. There will never be a negative OETH rebase.

Smart contract risk of OETH - Origin is taking every step possible to be proactive and lessen the chance of losing funds. Security reviews are prioritized over new feature development, with regular audits being done, and multiple engineers are required to review each code change with a detailed checklist. There are timelocks before protocol upgrades are launched, and deep dives into the exploits of other protocols are constantly being done to make sure the same exploits don’t exist on Origin contracts. Security is extremely important to the Origin team. OETH was built reusing 95% of the OUSD code, of which 10+ audits have been done since 2020. All audits can be seen on Audits - OETH , and OpenZeppelin is now on retainer. On-chain insurance protocol InsurAce awarded OETH and OUSD the highest possible security rating of AAA, of which only 3 other projects on the InsurAce platform have received. Optional OETH cover is currently available for both OETH and OUSD on InsurAce. Origin Defi also maintains a $1m bug bounty through Immunefi, with a resolution time of 7 hours.

External OETH analysis:

Llama Risk - Asset Risk Assessment: Origin Ether (OETH) Auxo - OETH - Protocol Analysis

OETH in the news:

Coindesk - Origin Protocol Enters Competitive Ether Yield Market With OETH Offering TokenInsight - Origin Protocol Launches Yield Aggregating $ETH Derivative Called $OETH Blockster - Maximize ETH Staking Yields with OETH: A Yield-Bearing, Ether-Pegged Token by Origin Protocol

Closing Thoughts

Peter is a core member of Origin Protocol and is joined by the fully doxxed Origin team and community, which includes hundreds of thousands of members and open-source contributors. Many members of the Origin team, including both founders, are holding a significant portion of their personal wealth in OETH. Origin Protocol’s corporate treasury is also holding millions of dollars in OETH. We have skin in the game and are willing to put our own money at risk with the code we have written.

There are no lockups with this proposal, Nouns can move in and out of OETH as the Nouncil, core team, DAO, and community desires. OETH remains completely liquid at all times, and can be spent in the same way as its backing collateral, if unexpected expenses were to arise.