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Solidity Mutual Fund

This project implements an Ethereum smart contract and a user interface for the zero-trust mutual fund DAO.

The fund contract holds a treasury and a list of members who can deposit funds to the contract, submit proposals on managing the fund's treasury and membership, vote on these proposals and execute them. This way the members of the fund collectively manage the investments made by the fund.

The agreement (full or partial) between the members is achieved by means of voting.

The voting power of each member is determined by the amount of funds a member has deposited.

The smart contract guarantees each member the possibility to withdraw the deposited funds fully or partially at any time without other member's agreement.

Structure of the project

The contracts folder contains the code of the smart contract:

The frontend folder contains the implementation code for the fund's Web3 user interface.

The scripts folder contains the helper scripts.

The test folder contains the automated tests for the smart contract.

Using the fund contract

This section covers the logic of the fund's smart contract with the references to the corresponding functions.

Initialization

During the initial deployment, the fund is initialized with a Configuration object that contains the following fields:

  • proposalExpiryPeriod: time in seconds after a proposal submission, when a proposal gets expired
  • votingPeriod: time in seconds after a proposal submission during which the voting is open
  • gracePeriod: time in seconds after the end of voting on a proposal during which the proposal execution is blocked; members who have voted negatively or refrained have the possibility of a full or partial exit during that time
  • founderName: visual name of the founder of a fund

The user who performs the deployment of the fund's smart contract becomes the founder of a fund and a first member.

Proposals

All changes in the fund are made by means of proposals.

Any member can submit a proposal, which can later be executed if it gets approved by the fund members by means of voting.

Any proposal can only be executed by its author.

A proposal is submitted with the submitProposal contract function, and is executed with the executeProposal contract function.

A proposal has the following parameters:

  • proposalType: type of proposal (see below)
  • name: member name (for AddMember proposal type)
  • amount: amount of funds in WEI (for DepositFunds and Swap proposal types); number of seconds (for ChangeVotingPeriod, ChangeGracePeriod, or ChangeProposalExpiryPeriod proposal types)
  • addresses: from and to addresses (for Swap proposal type); address of an asset contract (for AddAsset proposal type)

Below are the possible proposal types:

  • DepositFunds
  • AddMember
  • AddAsset
  • Swap
  • KickMember
  • ChangeVotingPeriod
  • ChangeGracePeriod
  • ChangeProposalExpiryPeriod

These proposal types are explained in more detail in the sections below.

DepositFunds

Funds are initially deposited to the fund contract with a DepositFunds proposal.

A member submits a DepositFunds proposal, specifying how much ETH they would like to deposit in the amount parameter.

After a proposal gets approved, a proposal author executes it and pays exactly the amount that was specified in the amount parameter (in other cases a transaction gets rejected).

After the funds get deposited, a proposal author receives the amount of fund tokens equal to the amount of ETH that was deposited (which sum up with the amount of tokens a member already has). The amount of tokens a member owns defines the voting power of a member.

AddMember

New members can be added to the fund only by means of an AddMember proposal.

The address of a new member is defined by the first and the only address in the addresses parameter. The visual name of a new member is defined by the name parameter.

The execution of a proposal adds a member with the given address and visual name to the fund. The new member initially has zero tokens, but has the right to submit proposals (including DepositFunds).

AddAsset

If the fund would only hold the deposited ETH without doing anything with it, it would be useless. Instead, the fund's smart contract provides the possibility to hold various assets in the treasury and transfer the funds between these assets.

An asset is a smart contract that implements the IAsset interface and represents a token or other type of value asset in the Ethereum blockchain.

Once the asset is deployed, it can be added to the fund by means of an AddAsset proposal, where the addresses parameter contains the address of a deployed asset contract as the first and the only parameter.

Swap

Transferring funds between the assets by means of converting one token to another is how a fund actually implements its investment strategy. This transfer and conversion is performed by executing a Swap proposal.

A Swap proposal takes the amount of funds specified in the amount parameter from the asset with the first address in the addresses parameter and converts them into the token of the asset with the second address in the addresses parameter by using the Uniswap DEX smart contract.

For example, the members may decide to spend 50% of the money in the fund to buy a SushiSwap token (SUSHI). To do this, they:

  1. Deploy an asset that points to the address of SUSHI token (0x6B3595068778DD592e39A122f4f5a5cF09C90fE2 in Mainnet).
  2. Add the SUSHI asset to the fund by executing an AddAsset proposal.
  3. Execute a Swap proposal with the following parameters:
  • amount = actual value that corresponds to the 50% of the funds in ETH
  • addresses: first address = address of the fund itself; second address = address of the SUSHI asset

If the price in ETH of a purchased token grows over time, the fund gains money; if it shrinks, the fund looses. But the amount of tokens each member owns remains unchanged.

KickMember

The members may decide to remove a certain member from the fund by means of submitting a KickMember proposal, voting for this proposal, and executing it.

The funds the kicked member owns are automatically returned to this member according to the share of tokens he/she owns (the full exit is done).

A KickMember proposal expects the address of the kicked member as a first and only address in the addresses parameter.

ChangeVotingPeriod, ChangeGracePeriod, ChangeProposalExpiryPeriod

These types of proposals change the current configuration of the fund, interpreting a value in the amount parameter as a number of seconds and applying it to the respective configuration parameter.

Exits

Any member can withdraw their money from the fund at any time (this is called exit). No approval from other members is required for that.

The amount of funds that can be withdrawn with the exit is determined by the amount of tokens a member has. This is done the following way:

  1. The amount of member's tokens is divided by the total amount of tokens in the fund resulting in the fraction F.
  2. In each of the fund's assets, a member owns the fraction F of the total amount of tokens.
  3. In the fund itself, a member owns the fraction F of the total amount of ETH.

The exit may be full (take 100% of owned funds) or partial (take less than 100% of owned funds).

After a full exit, an exiting member is automatically kicked from the fund.

The exit is performed by the exit contract function.

Voting

A submitted proposal can only be executed after it successfully passes the voting procedure. For this to happen, the following condition must be reached: after a voting period, the sum of the tokens of the members who have voted positively must be greater than the sum of the tokens of the members who voted negatively.

A proposal author - a member who has submitted a proposal - is automatically recorded as a positive voter for this proposal. Other members are not required to vote and may refrain.

If all members have submitted votes for a proposal a voting period ends automatically.

If all members have submitted votes for a proposal and all votes are positive, there is no grace period for this proposal.

If some members have refrained or there is at least one negative vote, a grace period takes place after a voting period. During the grace period a proposal cannot be executed, and members have the chance to exit fully or partially.

The voting is done with the vote contract function.

Assets

To connect an asset to the fund with the AddAsset proposal, one should deploy the asset contract to the blockchain first. As mentioned in AddAsset section, the asset contract should implement the IAsset interface.

This repository provides 2 implementations of the asset contract, covered below.

Erc20TokenAsset

This is an implementation of a single ERC20 token asset.

The contract is deployed to the Ethereum blockchain with the following initialization parameters:

  • initTokenAddress: address of a token in the Ethereum blockchain
  • initFundAddress: address of a fund that will own this asset (certain operations on an asset can only be performed by an owning fund and nobody else)
  • initName: name of this asset (normally equals to the token name or symbol)

UniswapLiquidityPairAsset

This asset represents a liquidity pair in Uniswap-compatible DEX. The asset accepts ETH and automatically converts it to the tokens of the pair with Uniswap swap functions, and provides liquidity to the DEX, earning commissions from the exchange.

The contract is deployed to the Ethereum blockchain with the following initialization parameters:

  • initToken1Address: address of a fist token used in the liquidity pair, or zero address, if it is ETH
  • initToken2Address: address of a second token used in the liquidity pair, or zero address, if it is ETH
  • initFundAddress: address of a fund that will own this asset (certain operations on an asset can only be performed by an owning fund and nobody else)
  • initName: name of this asset (normally equals to the token name or symbol)

Development

To initialize the project repository for development, run the npm ci command in the root directory and in the frontend directory.

To execute the tests for the smart contract, run:

npm test

To deploy the smart contract to the Goerli Testnet:

  1. Create a .env file in the root directory of the project.
  2. Configure the API_URL=your_alchemy_api_url and PRIVATE_KEY=your_ethereum_wallet_private_key in .env file.
  3. Run npm run deploy-contracts-testnet; the address of the deployed contract will be printed to the console.

To start the Web3 UI in the development mode:

  1. Create a .env file in the frontend directory of the project.
  2. Configure the REACT_APP_CONTRACT_ADDRESS=deployed_contract_address in the .env file of the frontend directory.
  3. Run npm start in the frontend directory or in the root directory of the project.