Summary
The EulerDAO’s share of protocol fees are currently auctioned off using the FeeFlow system. This functions as a continuous buyback of EUL tokens and has been effective at efficiently repurchasing EUL for over a year since the protocol was deployed.
However, recent market conditions are preventing the auctions from proceeding optimally, threatening to cost the DAO and inconvenience auction participants. This proposal is to temporarily disable the FeeFlow auctions, and have the underlying vault shares accrue directly to the DAO treasury.
Problem
Although not directly impacting EulerDAO governed markets such as Euler Prime/Yield, the revelations about losses by the Stream protocol, and counter-parties to Stream, have created a liquidity crunch across much of DeFi. Because markets are utilised, auction participants in several cases cannot immediately withdraw underlying assets in order to purchase EUL tokens. This means that they will likely wait until the auction is low enough to be purchased by entirely liquid tokens, reducing the efficiency of the auction.
Additionally, some of the shares earned by users in the auction represent claims on vaults that contain toxic assets affected by Stream. These likely will not be convertible into underlying at all.
Proposal
We propose invoking the setFeeReceiver() function of the ProtocolConfig contract on each network, with the corresponding DAO Treasury addresses as the fee receiver parameter. Subsequently, when fees are converted, the shares will directly accrue to the DAO treasury where they can be allocated at the discretion of the DAO.
Once the DAO judges that market conditions return to normal, either FeeFlow will be restored to its previous state, or a new proposal will be made going forward.
Finally, we propose that any users who purchased shares in vaults with exposure to toxic assets via FeeFlow prior to November 5th (when a clear advisory was added to the website) be refunded an equivalent dollar value of EUL token as per the day of their purchase.