Integral Insights March ‘24
We achieved several important milestones, including a new all-time-high daily volume for Arbitrum and the addition of four new pools on the Ethereum mainnet.
One of the many casualties of the bear market has been Tribe DAO. Tribe was responsible for the FEI stablecoin and owner of Rari capital markets after merger last year. A recent shutdown proposal by the Tribe team cited a combination of macro environment difficulties, regulatory concerns, and difficulties finding product-market fit as the reasons to shutdown.
The FEI protocol controlled over $100m in crypto assets including ETH and DAI. The plan then was to sell these assets back to DAI, allow FEI holders to redeem 1:1 from the protocol and then pass any residual value back to TRIBE holders on a pro-rata basis. As a first-of-its-kind shutdown for such a large DeFi protocol, it’s no surprise that it would lead to lots of drama. What drama? Let’s dive in…
To Repay or to Not Repay?
First, there was drama around the original proposal. After a first read, a few interested parties called out a startling detail: most of the redemption money would not go to repaying victims of the Rari hack. Instead, the plan was to give minimal reimbursement and keep this money for the team.
The most vocal opponent of this path was the FRAX founder Sam Kazemian who had this to say:
Sam made the case that DAOs like Olympus and FRAX had supported the Rari markets early with liquidity. The reimbursement for the hack had already gone through numerous rounds of drama-filled governance votes. Now as the protocol was winding down, it was only right to make the hack victims whole with the protocol-controlled value that far exceeded the necessary amount. Any attempt to not repay the victims amounted to lining the pockets of TRIBE holders at the expense of those who had been hacked.
After much back and forth with passionate arguments from both sides, the community eventually voted to repay the hack in full.
Treasury Sell-Off
Next came the difficult step of converting protocol assets back to DAI for eventual redemption. At its peak, Tribe DAO controlled millions of dollars of volatile crypto assets. This included over 50k in stETH, various governance tokens, and other blue chip tokens. Selling all of these tokens on-chain would be a difficult task, likely leading to substantial price impact across the assets and subsequently lower redemption value for TRIBE holders.
It was a monumental task. The protocol had over $100m in protocol-controlled value that it had to sell. To make things more difficult, many of the assets were locked tokens, illiquid tokens or other special cases like veBAL that was hard to value.
The wind-down started on the project forum and a message went out to interested parties: The Tribe DAO would be selling their assets in an on-chain fire sale.
Seeing opportunity, a number of players in the crypto space stepped up to offer their bids. In various forum posts, protocols, market makers and others made their cases. Almost all of the volatile token assets were offloaded in OTC deals to the highest bidder.
Some tokens went to Wintermute through a legal representative of the DAO. Other DAOs and groups came in to make offers for the other tokens in the treasury.
In the end, most of these proposals passed, and the sales were executed in a variety of ways. Some assets were sold straight into liquidity pools, and the slippage was deemed a cost of doing business.
Some assets are still sitting on the Tribe DAO balance sheet, waiting for a suitable offer to go through a governance vote or for the OTC infrastructure and terms to be finalized.
The Olympus team made an offer on Tribe’s veBAL, looking to leverage it for voting purposes for OHM pairs. However, a counter offer from the Aave team still leaves the final owner of these tokens to further governance votes.
The urgency of the wind-down sales meant that most of these assets didn’t go through a long auction or OTC process. Instead the logistics were conducted through the Tribe forum, with the assets going to the most active and aggressive bidders.
Once enough money was raised to cover the entire redemption of FEI supply into DAI, Tribe decided to keep some assets like stETH available for redemptions for TRIBE holders. Now the redemption process could commence in earnest.
Winding Down TribeDAO
Now, most of the protocol-controlled value is sold back into DAI. The rest of the treasury has a clear path to OTC sales. Tribe has turned to winding down the protocol. Redeem contracts for both FEI and TRIBE tokens are currently running on mainnet.
Until the final token sales have gone through, TRIBE holders won’t be able to realize the full value of their tokens. But it is a small enough amount that some have already started to redeem. TRIBE holders will also get back some tokens like stETH, instead of DAI.
This is how the Tribe DAO story is coming to an end. The Fei Protocol and Tribe DAO were had big dreams that pushed forward tons of innovative concepts in the DeFi. Tribe was a pioneer in protocol-controlled value, governance mechanisms, and crypto M&A. Now they’re pioneering once again with the largest ever wind-down of a DAO.
Lessons Learned
Despite the difficult situation and early drama, the Tribe DAO wind-down proceeded rapidly. However, it’s clear a lot of design space still exist when it comes to most efficiently handling DAO wind-downs and OTC fire sales for crypto assets. The fact that most of these crypto-native deals were hashed out in a project forum shows how early we are in this area.
Protocols that allow for custom OTC deals or one-sided sales from a pool at market prices would be a clear benefit in cases like the wind-down of Tribe DAO.
The TribeDAO shutdown and drama regarding protocol assets highlights the need for a DEX built for OTC swaps and OTC trading tools in DeFi. For additional insights on this topic read: How to Imagine OTC on DeFi and How to OTC Trade for a DAO? A Story from Tribe and Lido.
If you would like to discuss the above topic more in depth or want to suggest a new topic, please connect with the Integral team and community in Discord.