TLDR: ENS is currently searching for an asset manager to help steward the DAOs forthcoming endowment. The DAO hopes its endowment fund and its subsequent management will lead to a more robust and stable ENS going forward. Their proposed plans showcase how an endowment may benefit DAOs and the unique challenges they face to implement such an initiative.
ENS DAO, a key web3 protocol, has passed a proposal requesting applications for an endowment fund manager. The popular web3 naming service had been actively discussing creating an endowment fund for over six months. The new fund aims to ensure the long-term stability for the protocol.
The idea for an ENS endowment was first conceptualized and brought forward by ENS core developer Nick Johnson. In his March forum post, Nick argues the need to ensure the long-term sustainability of ENS by leveraging an endowment structure. The original post received mostly positive sentiment from the broader ENS community.
In the traditional world, an endowment is an investment vehicle generating a targeted yield in perpetuity. These vehicles are often implemented with a strict strategy focused on ‘stable’ asset types to mitigate risk. In this case, ENS looks to mirror the TradFi model on-chain and apportion a set of their treasury alongside incoming revenue to insulate the DAO.
ENS will likely utilize onchain DeFi products in the fund’s strategy, notoriously unstable assets. However, what the DAO is granted through this approach is transparency, accountability, and governance from top to bottom. The protocol is unique in its place in the ecosystem and this proposed endowment hopes to fund ENS operations for years to come.
In August, after incorporating community feedback, Nick Johnson formally introduced EP2.2.4. The proposal was created as a call to action to source an adequate fund manager to steward the protocol’s planned endowment.
On September 13th, EP2.2.4 passed a community-wide vote with 2.6M votes cast and a 99.9% ‘For’ approval. This proposal is considered an RFP or ‘Request for Proposal’ type, an open call for any persons within the community to submit a proposal to fix a current DAO issue. In this case, ENS is actively looking to source a manager for its future endowment. This was the first time ENS pushed an RFP up for a community vote.
According to the proposal, the ENS Meta-Governance working group is to be granted oversight on the fund manager applicant selection. Members (AKA Stewards) within this group include Simona Pop, Nick Johnson, and Coltron.eth.
Immediately following the passing of the proposal, a submission period began that lasted from September 12th through October 10th. During this period, applicants were asked to submit their platform and arguments. Applications from various service providers began to pour in.
A total of 8 fund manager applications were submitted before the deadline. Seven of them were publicly disclosed on the forum while one was withheld. The applications vary but generally stick to the same framework, applicants explain their investment approach & strategies, their qualifications, their fee, and how they intend to be held accountable by the DAO.
Metix: Undisclosed application by Metix
According to ENS’s governance process, proposals fall under one of three categories: Executable Proposal, Social Proposal, or Constitutional Amendment. EP2.2.4 is considered a social proposal as it “asks for the agreement of the DAO on something that cannot be enforced onchain.” In order for a Social Proposal to pass they require a minimum 1% quorum and minimum approval of 50%.
An approval period is now underway that runs from October 10th through November 18th (extended from the 7th). The Meta-Gov stewards are tasked with presenting a shortlist of finalists to be voted upon by the DAO. On November 2nd, the Meta-Gov stewards narrowed their potential shortlist to Avantgarde, Karpartkey, and AdamDAO.
DAOs continue to show a willingness to experiment with their treasury if it offers them sustainability and growth in current market conditions. ENS’s endowment fund is another experiment that hopes to prove its utility for DAOs.
ENS is one of a handful of protocols with a public goods mission. This means their revenue approach is slightly different than most. The DAO has opted to slowly grow with a long-term mindset. An endowment seems a natural fit for ENS, but first, they must prove the idea works onchain. Endowments generally work in the traditional world because of low-risk assets, something that doesn’t exist in DeFi. An onchain endowment for a key web3 protocol will ultimately attract copycats if successful, a competent manager in this case is even more important.
The ENS community has signaled a desire to approach the endowment fund idea with as much caution as possible. They are aptly suited to experiment with such a novel idea as their community and governance process is relatively mature offering safeguards. It is important to note that the DAO will likely continue to have full custody of their assets during the entire process, lowering risk. ENS can always utilize other strategies outside of this fund to grow much faster. A key benefit to the DAO structure is that its community is empowered to decide on the direction and focus in real-time.
Now that EP2.2.4 has passed, the community awaits the finalists to elect a fund manager. ENS is poised to launch a first-of-its-kind ‘enDAOment’ fund in the coming months.