TIP-5 - A Proposal To Sell Treasury-Owned ESD to Help Stabilize Price


Ben Simon, Andrew Kang


We propose that the Empty Set Treasury sell its ESD into USDC as a temporary, price-stabilizing measure. This sale need not serve as binding precedent. Later on, If it so chooses, the DAO can vote to re-buy ESD at the target price. Alternatively, the DAO can vote to keep some/all of these non-ESD assets as reserves, in line with the proposed fractional reserve system for ESD v2.

Background and Rationale:

Until now, the ESD Treasury has functioned as the primary source of funding for protocol research and development. Recently, however, a few of ESD’s lay leaders have proposed a new vision for the protocol (ESD v2) in which the ESD Treasury will play an active role in price stabilization through a fractional reserves system.

ESD v2 is still being researched and debated. But at the moment, a provisional version of ESD v2’s proposed price-stabilizing mechanism could prove quite beneficial to the health of the ESD network. ESD has been trading well above $1.03 (TWAP of the supply expansion ceiling) for more than three consecutive days. Like many other community members, we are thrilled with ESD’s traction but wary of the negative effects of sustained overheating.

If passed, this proposal would facilitate a market sale of the Treasury’s ESD into USDC by the protocol’s multi-sig signers. It would enable the multi-sig signers to sell all of the 3+ million ESD that the Treasury currently holds, as well as future inflationary rewards while the price remains above the peg (if the Treasury does not sell future rewards, it will hold diversified reserves). As Will Price noted in the Discord, other ESD holders might front-run the treasury, but this would help to achieve the desired effect of the treasury sale in the first place.

It is important to emphasize that this ad hoc measure need not constitute rigid precedent. This is by no means a Trojan Horse attempt to rush through significant changes to the protocol. The debate over the details of ESD v2 will continue, and it is entirely plausible that ESD stakeholders will vote against a new design in which the Treasury plays an active, Central-Bank-esque role in stabilizing the ESD price. As such, in the future, the DAO could always vote to re-purchase ESD with its newly-acquired assets either closer to the target price or during a future contractionary phase. Alternatively, the DAO could choose to keep some or all of the purchased assets in the treasury for the foreseeable future, in line with the fractional reserve system proposed for v2.

Specifics: (edited in accordance with Lewi’s suggestions)

  • The multi-sig signers will execute batched sales of 500k ESD to USDC at each epoch
  • These sales will continue until either the Treasury supply is exhausted or the price drops below 1.10 USDC
  • Once the price of ESD drops below 1.10 USDC, the signers will stop selling and have to create a new TIP to sell more ESD.

Snapshot vote (click here)


I like the idea of cooling off the current price increase by selling off some of the treasury. However I would prefer the removal of the discretionary powers for something a little more structured.

I’d propose something that follows this:

  • Multisig signers would prepare & sign transactions selling 500,000 ESD to USDC at each epoch
  • The signers would stop selling once the price drops below 1.10 USDC or the ESD supply is exhausted in the treasury
  • Once the price drops below the 1.10 USDC mark the signers will stop selling and have to create a new TIP to sell off again.

Sounds like a good set of rules to me! We can amend the current proposal based on this

Done. Thanks for the suggestion @lewi :slight_smile:

I am AGAINST this proposal. Treasury should not be involved in selling off ESD to control the price at this stage:

The market should dictate this as it has done so in the past and done it well in my view. ESD holders large and small as well as outside speculators can freely sell ESD if they feel ESD is “overheating” - there is enough documentation and information clearly explaining the mechanics of ESD and that it is meant to act as a stable coin; this current action is after all by design is it not? Treasury taking such action demonstrates a lack of faith in the system as well as in ESD “currency” by moving funds into USDC.

Furthermore, there are current external market factors that are putting pressure on the ESD price notably BSD farming as well as SFI incentives. This demand at best will be temporary and there will be a natural correction in the price when these initiatives slow down and folks move onto the next farming opportunity. I would therefore suggest we wait to see the results of these scenarios as well as the wider market which at the moment seems very bullish meaning no matter what action was taken, we may not see an effect on price anyway. Up until now ESD has not been used outside its own ecosystem so these scenarios do give us as holders further insight into future expectations possibly. ESD though, continues to surprise and baffle, hence I have stuck around since day dot as have many.

Those who have been here from the early days know what is happening is not something new, ESD has been here before and will no doubt again face similar scenarios in this “discovery phase” – both upwards and downwards price action (Will Treasury prop up the price then when that happens? I don’t like that idea at all at this stage, V2 has better proposals and props to Scott and others for the work being done there) …. Yes, the price action is somewhat surprising, even I will admit that as probably would others. Do I think it will last forever? No. Do I think we need to take action by involving Treasury selling off ESD to “push back against the tide” so to speak? No. I will vote accordingly.

Thank you and Happy Holidays to my fellow ESD holders and supporters.


I think we need to take a step back and have a look at the larger picture in this case - the main goal at the end of the day is to create a stablecoin that pegs to $1 and has a large adoption outside of just the ESD ecosystem. The keyword here is adoption - to get this adoption we need to perform better than DAI and closer to USDC/USDT from a peg perspective.

This means that we should be doing whatever is necessary to maintain this peg at $1, even if it is selling treasury. There are always going to be things outside of our control and as you’ve rightly pointed out there are current external market factors that are pushing price up. But this doesn’t stop us from having to achieve our main goal of a peg. People won’t use ESD if the thought process is “oh don’t worry about 1.5 price, it’ll come back down to $1” - it defeats the whole purpose of the project.

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Isn’t this what the coupon system is for?

In my opinion, the Treasury selling ESD when it’s above $1.10 (and buy them back at exactly $1.00) doesn’t signify inconfidence, but confidence that ESD will return to $1.00. Since the Treasury would be acting on the information that the future value of ESD is lower than $1.10, making it a rational actor (and not some centralized inefficiency).

This also has the added effect of improving circulating supply. It’s a win-win in my book.

Edit: I’m actually wondering why we’re talking about $1.10 and not $1.03. $1.03 seems like a better choice to match the maximum emission rate.

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Sure. But we need ESD to expand its supply and to do that the price needs to be above peg to allow for expansion. ESD will be noticed and accepted more widely as said “stable coin” when its a 500-$1bn market cap not at current levels in my humble opinion.

Hypothetical: Say Treasury starts offloading ESD as suggested and the price continues to climb, what then? My point is there WILL be a correction regardless if Treasury steps in or not if you base this assumption on historical performance so far. Lets see this play out shall we not?

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I guess we have different views of what Treasury should be doing right now?

I dont believe it should be doing this sort of thing right now. Its focus should be as per the intention when setting up to expand and grow ESD into the stable coin of choice not trying to dictate or push the market in any direction right now. Maybe I read it wrong when voting but I dont remember this sort of action being involved in the initial setup idea (happy to be corrected, I have been busier than I like lately).

Edit Reply: Yes, I do find that odd too. Why $1.10? It seems an odd choice given expansion will still continue and the incentive to buy to “farm ESD” will be there for yield chasers… I could perhaps take this more seriously if the intention was to push peg down to $1, maybe the original posters can further expand, perhaps it is felt then the market will push it further and Treasury just provides that “boost”?


There are many points worth addressing, but with respect to this one (i.e. why $1.10 and not $1), I wouldn’t read too deeply into it. The point of this proposal is to find a way for the Treasury to help stabilize price in the most non-controversial way possible—more specifically, the DAO could vote to sell more ESD after $1.10 has been hit, but if doing so would be controversial, there’s no reason not to maximize consensus around a more conservative plan first.

I’m not a fan of this approach. I really think that achieving stability and keeping the peg should be done through more “mechanical” mechanism design, and not ad hoc treasury moves.

It is also not clear to me that the current price is indicative of an emergency situation. IIUC this behavior is to be expected during a time of rapid adoption.

That being said, I would support a proposal in which a smart contract was created that:

  1. Accepted funds from the treasury (ideally in a small amount to start).
  2. Allowed anyone to call a function that would sell ESD (via the ESD/USDC pool) whenever the price was above some hardcoded price X (with restrictions on max slippage and min final Uniswap price).
  3. Allowed anyone to call a function that would use USDC to buy ESD (via the ESD/USDC pool) whenever the price was below some hardcoded price X (with restrictions on max slippage and max final Uniswap price).

(That :point_up_2: was someone else’s idea, I don’t remember whose so I can’t give proper credit).

IMO That would be more in line with the spirit of this project (to create something that achieves stability algorithmically rather than via regular meatspace governance). It would be more predictable – players would know exactly what rules were being followed, and wouldn’t have to start factoring in unpredictable treasury moves into their investment decisions.


True, this is a new idea that’s come up recently. However, I would argue this doesn’t impede much on the original purpose of the treasury. If we’re assuming 1 ESD = $1, there wouldn’t be a decrease in the Treasury’s capacity to fund ESD operations even if we convert them to some other stablecoin.

A counterpoint to that would be we’re putting the treasury at risk due to the different stablecoins we’ll be holding (e.g. what happens if those stablecoins fail).

I agree a more mechanical approach is good.

Would a bounding curve suit these needs? This would create a guaranteed price that people can trade at based on demand.

I applaud the sentiment in this response: the mechanism could be improved, for example the limit to 3% expansions, rather than using the Treasury in a discretionary manner. Albeit I am new to the community, I have been digesting the information on previous proposals as far as I could read it. I do think playing at market operations with $ESD in exchange for $USDC gives off the wrong vibe. However, it does seem to me like the Treasury is excessively “hoardy” considering how much it rakes in. Given this was designed as a reserveless stablecoin and governance token, the Treasury keeping a lot of assets implies a premium over the mechanics that already give you a value of $1 – changing those reserved $ESD for $USDC keeps that implied premium as the $USDC belongs to the $ESD holders, by virtue of the DAO. Under the current mechanics, the Treasury should put the cash it generates quickly to productive use. Spending that money on growth will have the best returns long-term for the protocol. For example:

  • you have lots of community members willing to contribute
    • you could full-time those that join the multi-sig.
    • you could hire additional developers, particularly on the front-end and on security.
    • you could have community contests for marketing collateral (diagrams, memes, explainers, podcasts, videos).
  • you could seek out partnerships, incentivize, for example, the creation of insurance markets for DAO and LP participants
  • you could put auditors on retainer or implement a bug bounty program and appoint a code review board, mission-critical processes. (cannot stress how many hacks result in complete drainage of funds, which would instantly kill the protocol).
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Edit: Image updated below, cannot post more than one as a new user.

Looks like a healthy “re-balancing” without the need of Treasury to me here.

We are hardly at emergency levels where the kind of action being asked for is needed as was stated before.

Let the system do what it was designed to do.

Edit: Further confirmation ESD “has got this” :ok_hand:


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There you have it. Thanks again for the discussion folks.

Happy Holidays.