# MIP115: Use gDAI for Yield Appetite

## Preamble
```
MIP#: 115
Title: Use gDAI for Yield Appetite
Author(s): @aburban90
Contributors:
Tags:
Type: General
Status: Obsolete
Date Proposed: 2023-02-08
Date Ratified: N/A
Dependencies:
Replaces:
Forum URL: https://forum.makerdao.com/t/mip115-use-gdai-for-yield-appetite/19744
Ratification Poll URL:
Extra: This MIP has been made obsolete by the passage of [MIP102c2-SP1](https://mips.makerdao.com/mips/details/MIP102c2SP1)
```
## References

https://forum.makerdao.com/t/mip65-monetalis-clydesdale-liquid-bond-strategy-execution/13148

## Sentence Summary

A proposal to diversify Maker's yield appetite using Gains Network for revenue generation.

## Paragraph Summary

This MIP proposes implementing a D3M-like strategy for gDAI via the Maker Governance Process. Gains Network has been a proven champion of DAI and a reliable source of revenue through their trading platform. If approved this MIP would instruct the DAO to deploy capital in gDAI tokens to take advantage of the Gains profits.

## Component Summary

**MIP115c1: Proposed Allocation**
TBD

**MIP115c2: Legal and Risk Reviews**
TBD

**MIP115c3: Additional Stipulations**
TBD

## Motivation

Maker currently has 500M DAI out with Monetalis to seek return on idle capital. While this demonstrated MKR holder's desire for generating yield, it does not come without risks due to the concentration of funds in a single yield provider. In regaurds to MIP65 this proposal sees the following positive and negative aspects:


### Pros

- Nice guys
- Not stupid
- Qualified and experienced
- High integrity
- Maker earns an impressive yield on otherwise idle capital
    - 1%? 2%? 5%? 10%?
    - Who knows... it's better than zero!

### Cons

- Giga extreme concentration of finite capital reserves.
    - $500m is...
        - 650% of our treasury
            - The surplus buffer is currently $75m
        - 15% of our USDC reserve
- The Monetalis team is mortal
    - Regrettably, that fact carries a risk
    - Generally, it's not a factor worth considering, but with such a large amount of capital, it's worth taking into account.
- Despite their integrity to date:
    - The team could rug all funds (in blatant disregard of any legal consequences)
    - Team may be forced by anyone with enough weapons to turn over capital.
    - Team may get drunk or high and push the wrong buttons in exactly the wrong sequence to turn $500m into $0.

### Sanity

As much respect as I have for the guys, we had dinner together in Spain, in my opinion, allocating so much capital to a single entity or team is insane. When it's a personal financial decision, go ahead... lever up! But Maker has a duty to DAI holders to remain solvent. If there's a black swan and something happens to Montetalis... I guess we'll just mint some MKR in an infinite loop to make up the shortfall?

We used to start off new debt ceilings with $5m, slowly raise to $10m or $15m... and go up from there. Look at the 6S debt ceiling... $15m. In my opinion the expected yield does not justify the concentration risk.

### Proposed Solutions

- Don't reduce allocation, but compensate for the high risk low return by allocating capital to high yield, higher risk investments.
    - Some call this the "Barbell Strategy"
    - Allocate 1% to a something that earns at 10-20x the rate.
        - If the money vanishes... whelp, thats the risk a lender takes.
        - If not, the protocol earns the same returns for just a fraction of the capital at risk.

## Specification / Proposal Details

**MIP115c1: Proposed Allocation**
TBD

**MIP115c2: Legal and Risk Reviews**
TBD

**MIP115c3: Additional Stipulations**
TBD

---

**Disclaimer:** This post is not meant to denounce or discredit Monetalis in any way, shape, or form. Monetalis is purely named to illustrate Maker's current appetite for risk and yield. In keeping with that same spirit, this post introduces gDAI, a sensible addition to Maker's portfolio to satiate that appetite.