Below is a proposal to have Karpatkey DAO manage a small portion of the DXdao treasury (which is currently idle) to take advantage of a number of investment opportunities that will result in the growth of DXdao’s treasury, to fund its operations, development and growth.
Karpatkey DAO’s AUM are $550M+. They manage treasuries without holding custody of funds, using the Gnosis Safe multisignature wallet. Therefore, even though Karpatkey initiates transactions, every single one of them would need to be approved by a trusted DXdao signer for the funds to be actually transferred or deposited in a smart contract. Therefore, it is not technically possible for Karpatkey DAO to transfer DXdao’s funds, unless the transaction is authorized by DXdao. Nonetheless, DXdao will always be able to transfer its funds without Karpatkey DAO’s intervention.
Currently, the minimum treasury size Karpatkey DAO handles is of $100M, but a 6-month pilot test would be conducted exclusively for DXdao, handling $10M.
After the successful execution of the Treasury Diversification Authorization Program and the Treasury Diversification Authorization Proposal executed Jan 23, 2021, DXdao’s treasury currently has a significant level of diversification.
However, the vast majority of its funds are liquid and therefore not obtaining any yield. This results in a considerable cost of opportunity, since adequate treasury management could obtain a significant APY, achieving a sustainable treasury growth that would increase DXdao’s reach and breadth.
This proposal is aligned with the already executed Signal Proposal: Treasury Diversification Authorization Program - v2, and suggests that the management of a portion of DXdao’s treasury be delegated to Karpatkey DAO.
Karpatkey DAO specializes in professional treasury management, and has had a remarkable performance managing Gnosis DAO’s $550M+ treasury portfolio, sustainably increasing its size, profitability and diversification week after week since its inception in May 2021.
The benefit of such delegation would allow DXdao to focus on its core business while its treasury size increases steadily, increasing the DAO’s potential and capability.
The treasury goals are to fund the development of DXdao products, new ventures and boost DXD’s value proposition.
Karpatkey DAO will support the efficient achievement of these objectives by providing DXdao with a selection of market opportunities, and actively engaging with other protocols to achieve strategic partnerships through token swaps.
Karpatkey DAO’s goals are the following:
- Design and implement an efficient and robust treasury management system
- Identify the best economic opportunities for the treasury tokens
- Facilitate DXD liquidity
- Grow activity on Swapr
To align with DXdao’s vision and ethos, and increase transparency with DXD token holders, we propose that information about how investments are managed is made available to the DXdao community. Treasury management would be handled in a completely transparent way, positively impacting DXdao’s reputation and trustworthiness.
The inception of Karpatkey DAO as Gnosis’ treasury management consultant has resulted in a consistent revenue stream for Gnosis, increasing its treasury size by circa $1.5 M a week (YTD tracked since May 2021 includes but is not limited to: 71K GNO, 350K BAL & 20K FLX).
Karpatkey DAO has continuously increased the treasury holdings and the amount and complexity of positions while significantly reducing their size and associated risk.
This is illustrated in the chart below:
The number of positions was increased more than 3X, significantly reducing their size and associated risk. The improvement in capital management efficiency has entailed a substantial workload increase.
History of transactions for the main DEFI multisig wallet for the last year where a substantial increase in transaction volume can be seen as of May 2021.
As part of an initial 6 month pilot test, DXdao would Transfer to a Gnosis Safe multisignature wallet a total of $10M by sending equal parts (calculated in USD) of the following tokens: DAI, USDT, USDC, ETH and DXD.
The Gnosis Safe multisignature wallet will have a 3 out of X setup, so that Karpatkey will never hold custody of DXdao’s funds. Transactions will only be executed if DXdao’s trusted signer signs them. Also, the funds will be accessible to DXdao at all times, without any need of Karpatkey DAO’s intervention.
Karpatkey DAO’s professional treasury management carries out tailored strategies that vary twice a week, adjusting to the constantly changing DeFi market in a way that other investment alternatives such as Compound, Aave and Yearn can’t keep up with.
Karpatkey DAO’s success in handling DXdao’s treasury will be assessed 6 months after the beginning of their treasury management. If DXdao wishes to discontinue using Karpatkey DAO’s services, it will do so through its governance mechanism. If not, Karpatkey DAO will manage the rest of DXdao’s treasury, maximizing its growth.
Swapr: Karpatkey commits to making Swapr a core part of its treasury management strategy for DXdao across Gnosis Chain and Ethereum Mainnet Karpatkey will manage, among others, the following assets (DAI, USDT, USDC, ETH and DXD) and deploy them to the following pools, among others:
- Uniswap v3
Karpatkey DAO will charge the following fees:
A yearly management fee (in monthly installments) of 0.5% of the AUM would be charged to finance the services detailed above.
A monthly performance fee of 15% of the yield obtained during the last month.
DXdao may terminate Karpatkey DAO’s engagement under this agreement for any reason by way of Governance Mechanism. Kapatkey DAO may terminate this agreement upon four week’s’ notice posted as a new discussion thread in the DXdao forum. In case the termination is requested by DXdao, Karpatkey DAO will be granted an exit fee equal to the fees collected during the last 2 months, which will be paid in DAI. Regular fees will be collected until the day of termination.
Karpatkey DAO will provide a weekly treasury management report and support in identifying data elements upon request from the DXdao’s community. Also, Karpatkey DAO would review data reported and assist in performing analytics and quality reviews to confirm the accuracy of the data.
Karpatkey DAO is not a custodian of funds. The funds will be in possession of authorized REP holders of DXdao at all times.
Karpatkey DAO will sign transactions using two addresses TBD.
Likewise, Karpatkey DAO is not responsible for loss of funds caused by the existence, identification and/or exploitation of vulnerabilities through hacks, mining attacks (including double-spend attacks, majority mining power attacks and “selfish-mining” attacks), sophisticated cyber-attacks, distributed denials of service or other security breaches, attacks or deficiencies with smart contracts or protocols which are not owned by DXdao or Karpatkey DAO.
The plans outlined in this proposal are subject to discussion by DXdao and may need to be (re)structured to take account of legal, regulatory, or technical developments as well as governance considerations. This document should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in any transactions.
While the initial setup will rely heavily on a trusted multisig, Karpatkey and DXdao agree to work towards building a long-term treasury management solution that would maintain DAO sovereignty over the treasury. This may look similar to the set of relayers that DXdao already uses for Swapr liquidity provisioning. With these relayers, treasury movements occur through on-chain proposals and the normal governance process.
Karpatkey and DXdao will build or partner with others to create similar smart contracts that can facilitate treasury movements. These ‘vaults’ would allow Karpatkey to manage treasury assets in pre-defined strategies, while maintaining DXdao governance’s control of the assets. DXdao will rely on its prior experience to aid Karpatkey in devising the most permissionless and trust-minimized system.
With a trust-minimized system that maintains DXdao’s sovereignty over treasury, DXdao could allocate more of its treasury to the management of Karpatkey.