| **Status** | Draft |
| --------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- |

# Abstract
Convert the DAO's unearned income - 19,853 ETH at time of writing - to USD-denominated stablecoins. At the same time, change the accounting basis for unearned income going forward to USD.

# Justification
The DAO presently divides its treasury into 'earned' and 'unearned' income. Unearned income consists of registration and renewal fees paid for periods that have not yet elapsed. For example, if a user pays 1 ETH to register a name for 10 years, after a year 0.1 ETH will be considered 'earned' and the remainder 'unearned', as it corresponds to a future-dated registration period.

Unearned income is an accounting concept, and since registrations cannot be cancelled or refunded, does not create a direct financial obligation for the DAO. Nevertheless, it provides an important metric for the DAO, ensuring it doesn't spend beyond its means by spending funds that were paid for services not yet rendered.

Presently, unearned income accounts for approximately half of the DAO's treasury, and constitutes a large exposure to ETH for the DAO. Because unearned income is recorded in ETH, if the DAO trades the unearned income for another currency, it is exposed to fluctuations in its unearned income balance.

This proposal would change the accounting basis for unearned income going forward to USD, and at the same time convert an equivalent amount of ETH into USD-denominated stablecoins. In doing so, the DAO removes a large source of its exposure to volatile ETH prices, which helps guarantee its long-term viability.

The ENS DAO's job is not to speculate on the value of ether, and having a large proportion of its treasury locked up in ETH runs counter to prudent financial planning and the ability for the DAO to guarantee its own and ENS's long-term viability.

By reducing its ETH exposure, the DAO gives up some potential upside in return for a firm guarantee on its future runway. At present, a long term drop in the price of ETH, coupled with a decrease in protocol revenue, could result in a situation where the DAO runs short of operating funds. Given that we can reasonably expect protocol revenue and ETH price to both be correlated to macroeconomic conditions, this is not an unreasonable scenario. By reducing the DAO's exposure to ETH, we can ensure this scenario will not come to pass.

Further, name registrations are charged in ETH based on current USD prices (eg, $5 in ETH per year of registration for a 5+ character name), so a change in accounting basis brings things more closely in line with ENS's source of income.

If the DAO still wishes to retain exposure to ETH, it can do so by retaining some of its earned income (~18,500 ETH at time of writing) in ETH.

With the appointment of Karpatkey as endowment fund manager in EP 2.2.5, it is expected that the unearned income - or at least the majority of it - will be invested in the endowment. As a result, the easiest way to enact this proposal will be to instruct Karpatkey to sell the ETH for stablecoins and invest them as agreed upon between them and the DAO. Karpatkey will need to consult with the DAO as to how much ETH exposure - if any - it wishes to retain via the earned income part of the endowment.

# Specification

1. The DAO instructs Karpatkey to convert the DAO's unearned ETH to a mix of stablecoins over a reasonable time period so as to minimise slippage.
2. The DAO instructs the Meta-Governance working group to change the formula used to calculate unearned income. Presently this entails totaling up ETH paid for all registration periods in the future; this would be modified to convert this value to USD. For transactions made before the cutoff, the price of ETH for the trade in step 1. would be used, while for any subsequent transactions the spot price of ETH at the time of the transaction would be used.