Author | Ryan sean adams
In the past year, the total amount of DAO Treasury has grown significantly. The largest DAO agreement has more than 14 billion US dollars in digital assets. So, what to do with these assets? To answer this question, we need to understand the purpose of Treasury.
Anything that can be automated in a DAO should be automated.Anything that cannot be automated should be funded by the Treasury.The Treasury helps DAOs fund critical development, attract contributors, and grow their networks. text text hold for an infinite time spantext Make sure inflows exceed outflowsDiversification Diversification: Even with a significant drawdown of protocol tokens, Treasury allocations should ensure that critical expenditures can be funded. In view of the fact that most of the Treasury is held by its users of this agreement,Therefore, diversification is an important area that needs to be focused on at present. If the price of UNI falls by 40%, its balance sheet will also decrease by 40%. If the price drop occurs at a time when the protocol may need to increase spending (be it LP subsidies, token buybacks, core development, or M&A), thenThis could lead to a further downward spiral for the coin. Protocol Tresury should help expand the network. If managed properly, Treasury can be used as a strategic asset to enhance the protocol's market position.If Treasury becomes important enough, it can finance important public goods, including things in the physical world. There are four functions that help manage DAO funds: expenditure borrow money borrow money report I'll explain how each of these features will evolve over time. II. Asset Allocation The purpose of the asset allocation is to ensure that the Treasury can continue to fund key developments regardless of market conditions. Diversified Collateralized Stablecoins The first task of many large protocol treasuries is to decentralize a portion of assets into stablecoins. Stablecoin distributions should cover the Treasury's operating expenses for at least a few years. Diversification into stablecoins provides Protocol DAO with the following benefits: Maintain or increase spending in a sharply shrinking market
Allows full or partial payment of governance contributors, grant recipients and security bounty recipients in stablecoins
Enable yield generation on Yearn, Aave and Compound
Provide liquidity in the stablecoin pool
One of the problems with diversifying into stablecoins is that it requires selling native protocol tokens. There may be a negative perception of this and the impact of price on sales. However, this adverse effect can be mitigated by:
1. Diversify a small portion of the total inventory. For example, Uniswap can decentralize <0.5% of its fully vested Treasury. For comparison, here are the cash stats for the FAANG+M companies.
2. Execute trades in a manner that facilitates getting the best price and minimizing front-running. Gnosis batch auctions are an efficient way to decentralize inventory funds on-chain and trustless without head-starting.
3. Diversify funds without selling native tokens:
Earn Income with Stablecoins
Aave’s Reserve Factor increases protocol revenue in stablecoins with interest-bearing assets such as USDC and DAI, as well as aTokens.
Token swaps with other protocols
Few examples of this include FWB's token swap with WHALE and Yam's proposal to do a DAO ecosystem-wide token swap.
Eventually, we will see on-chain money market fund products that help allocate treasuries to stablecoins and optimize returns. For example, the Stable Yield Index proposed by Index Coop is a product designed to generate the highest risk-adjusted returns for stablecoins.
Token buyback, rewards, liquidity preparation
Treasury should buy back tokens when trading at a deep discount. Yearn has adopted a policy for YIP-56 of periodically repurchasing a portion of the protocol’s revenue in YFI. They recently executed a buy of 28 YFI for $1.2 million, at an average price of $41,621 per YFI.
Currently, Treasury provides incentives for liquidity mining; more such incentive programs can be launched through Treasury. Treasury can also be a liquidity provider across multiple protocols and earn fees for doing so.
M&A, Investment, Insurance
Mergers and acquisitions can improve the competitive position of protocol DAOs. Decentralized exchanges may want to take out loans,And found that mergers and acquisitions are more effective than internal development.Since NFTs can hold other assets, NFTs can own the DAO's multi-signature treasury and its assets.DAOs can bid on specific NFTs that represent DAO assets.
A dedicated M&A advisory DAO can help:
Valuation of DAO assets and intangible assets
The best way to finance an acquisition, an ideal mix of debt, tokens and stablecoins
Negotiate terms with governance and large stakeholders
Protocol-level enforcement merges when token holders from both communities approve the merger
Treasury can make early investments in promising projects that emerge from incentive programs.What if Uniswap treasury funds are invested in the next Uniswap?
Treasury can start to diversify into blue chip crypto assets like BTC and ETH. Currently, most crypto assets are correlated. Uncorrelated assets are stablecoins, fixed income products, and on-chain gold proxies. Creating on-chain risk-parity portfolios will be useful as more and more uncorrelated assets gain liquidity.
The Treasury could also consider purchasing insurance or short-term put options that can help the agreement during black swan events such as stolen contracts, economic exploitation, and market drawdowns.
III. Borrowing
The liability side of Treasury's balance sheet is largely unutilized.
As the expenditure and asset allocation of the agreement Treasury vouchers become clearer,The next area of focus will be Treasury liabilities.This includes fixed-rate mortgages, unsecured loans for high-grade Treasury bonds, bond issuances, and negotiated credit line agreements. Treasury vouchers should be borrowed when conditions are right.
Does Treasury need to sell or distribute protocol tokens in order to spend them? Treasury can consider depositing its collateral in Yield, Alchemix, or Maker and lending against it.
Here are some use cases for protocol borrowing (h/t Allan of Yield Protocol):
Fund development and operation
Acquisitions by fund agreement (e.g. advising Inverse Finance on the acquisition of Tonic)
Fund income through debt rather than tokens.
Governance
Governance: prevent the distribution of ownership and voting rights to stakeholders that will not benefit the protocol in the long run
cheap financing costs: Expenditures of funds raised through debt at a specific interest rate may be less costly than through tokens
Contributor Payments: Mostly paid by contributors, while long-term contributors are partially paid with existing protocol tokens
compound interestsecondary title
IV Summary
DAO Treasury is generally considered transparent. But is transparency useful if you need to spend hours browsing Etherscan, Discourse forums, and voting tools to summarize financial activity?
Yearn's Q1 2021 report is a good example of Treasury's disclosure. It contains the income statement, balance sheet, key revenue drivers, operating expenses and salaries, and prioritization of agreements.
recruitment recruitment The process for recruiting people to perform various Treasury functions in a DAO is not well defined. You either do a lot of upfront work, share your hobbies on forums, or contact specific DAO leaders.To attract top talent, the hiring process should be simplified. For example, at Llama, we onboard and train the best people working as DAO treasurers and curate the best opportunities for those people. These opportunities include treasurers, asset managers, developers, analysts, accountants, grant examiners, operations staff and index methodologists. Creator and Curator DAO Much of what has been outlined so far applies to protocol DAOs, although there are of course similarities to other DAOs. Creator and Curator DAOs are particularly interesting because they are cultural organizations. Their Treasury will hold NFTs and social tokens in addition to their native tokens and stablecoins. Cryptocurrencies financialize (almost) everything, including digital art, memos, and stories.Culture will be at the center of the investment. Some of the best investors will deeply understand and influence culture for decades to come. These will be creator and curator DAOs such as FWB and WHALE. Here are a few things creators and curators DAO libraries can do: Distribution of tokens to selected founders, e.g. holders of crypto people Curate/recruit new creators to join their community by purchasing their NFTs Swap tokens with similar communities and provide opportunities for mutual benefits such as gated content or tokenized group chats. Airdrop tokens to the most active community members on Discord in conclusion in conclusion Treasury funds DAO development, expands the network, unlocks its value and extends its lifespan. It would be a great time for Treasury management, but the project is still in its infancy. Still in the process of how to create and use Treasury templates. The future is open for those who want to get involved.
