The TDP diversification effort was driven forward throughout the year, with DXdao now in a strong position in case of strong negative market movements. Even with $12.5M in stables, at the time of writing this post, that only represents roughly 13.8% of the overall DAO treasury. Current stablecoin holdings provide roughly 5 years of runway (at 200k/monthly burn rate).
The majority of TDP swaps have been executed by the DXdao MS. While the DXdao MS wallet typically does not hold funds in it, I would like to suggest the DAO deposit an amount of funds in the MS to be able to act swiftly in case of large positive market movements of Ether. I believe the MS has been battle-tested through it’s numerous trades done as part of previous TDP proposals as well as bridging funds across bases.
Such a system could look as follows:
An amount of ETH (tbd) is deposited in the DXdao MS wallet
We set price points at which we would be comfortable selling ETH
The MS holders execute trades at the given price-triggers
Such a setup could look as follows (amounts used are for illustrative purposes):
DXdao passes a mainnet proposal to sell 1500 ETH at given price-triggers with a maximum amount of funds of 500 ETH held by the MS wallet. Price triggers could be set as:
ETH Price (in USD)
Once a trade is placed, a new proposal would send funds to the MS to always have 500 ETH available, up to the 1500 ETH trade limit.
If such a system is seen favourably, the following variables would have to be decided on:
Amount of ETH to be sold
Price triggers and amounts
Maximum amount of ETH to be held in the MS
Please share your thoughts and/or any other suggestions about the above. This thread is intended to gauge sentiment from the community and start a discussion about the future of TDPs. And feel free to vote here:
I’d be in favor of exploring this and after gathering more feedback, if it gains wider approval, support opening a discussion to detail possible varying implementations. There would certainly be more questions that would arise:
if and how we best apply a strategy to break those chunks in smaller orders of say 50Eth at a time and use twap, as we don’t want to sell a huge amount at once if price keeps going up
would there be quotas for those tiers, e.g. max amount to sell at $5k, or if it trades sideways keep selling
would we still sell at the lower tiers once we’ve been selling at a hier one, i.e. we should probably cancel selling on the way down
which stables we initially sell into, and how we diversify/exchange those
if the community wishes to move forward, we should think of devising a utilization plan and maybe gauge risk appetite for putting a small portion of the stables to earn yield
I don’t think the DAO should be selling any more ETH for stables at all. 5 years of expenses at current burn rate (likely boosted to 7-10 years when accounting for projected yield earned on current stablecoins) is plenty for offering job security to contributors, as well as ample planning time should any circumstances change.
Does anybody see a world in which ETH/USD is lower in 7-10 years? If not, then why are we selling any ETH for USD here?
Even if we account for generous assumptions about yield: Let’s say ETH is 0% yield-bearing (it’s obviously higher), and that stablecoins will average 10% (generous), do we really think ETH is going to be any lower than $9k in 7 years time? The only logical answer I can think of would be that the DAO expects a significant correction and to be able to buy more ETH later? If so, does this make the DAO an investment fund wanting to participate in macroeconomic investment predictions as well as/as priority to development of revenue-generating products?
I’m not sure if it’s because the treasury diversification program is in full swing that it’s proceeding without pause to think about these questions, but I’m really struggling to see the logic behind selling any more ETH at anywhere close to these levels. I appreciate that the majority of the proposed selling is at $6k+, but some calculations behind why these levels have been chosen would be great to ensure we are choosing them for an analytical reason as opposed to just randomly.
My bad, honestly it wasn’t an implication that the figures above were indeed random (but does come across that I was implying that admittedly reading it back), just that I think it’s important that they aren’t random.
Also, a thought: I haven’t looked at data, but I imagine ETH would more closely follow the salary expenditure of a crypto project than USD? i.e. in a bear market while ETH is down, developer salaries are also down, and vice versa. Not diminishing importance of holding USD, I think it is important, but think holding sufficient ETH is significantly more important. Anyway, that’s my lot.
The DXdao community holds immense potential. A global distributed collective gathered around the shared interest in development and governance of DeFi protocols and products needs stability in order to act on its ambitions. It needs to attract talent. It’s not only been a real struggle in this bull market with demand outstripping supply, but the community has even already lost contributors. This can’t happen. The DXdao community is conservative. Pay isn’t competitive and hasn’t budged to follow the meteoric rise of ETH. If pay scales down, as suggested, to follow ETH in a bear market, nobody would want to contribute.
So, with the need to become more competitive to attract quality talent and grow on one hand, and with a hedge against a downturn avoiding a need to sell ETH when it has lost value, a good runway is not a bad idea. Meanwhile, it can earn yield.
Many organisations are newly formed pseudo DAOs around a single app, with treasuries comprised of a single product token. Those can’t afford to dump their tokens in order to buy ETH, so they buy stables just to cover immediate operational expenses. In a bear, many will have to scale down, lose contributors or even close shops. DXdao won’t. How bullish does that sound? Of course, the parameters are for the community to decide on. The discussion just needs to start somewhere. I’d rather we play with the numbers than scratch it outright.
Hence my comment that USD exposure is still important, but my point is that we already have huge USD reserves. I still maintain that developer pay likely tracks ETH more than USD. Put it another way: in a bull market, ETH has tracked compensation upwards much better than USD. I’m not saying it tracks 1:1, but as ETH rises, dev pay also rises & vice versa. I don’t think proportionally, but there’s a directional relationship.
Yeah, I haven’t argued to the contrary. Just that 5 years’ worth is more than enough IMO, so no need to limit ETH upside.
Again, I agree. But we are not in that position. We already have a huge amount of stables relative to expenditures. So why do we need more?
I am not saying we should rebuy ETH and have no stablecoins. I want to make that point really clear and emphasise.
I don’t think there’s any disagreement to the merit of a stablecoin position for stability and security; but I am missing an answer to the question: given the DAO’s current position, what is the need for more stables? What is the target ratio of ETH:stables, or more logically stables:expenses, and why?
As Arhat already mentioned, the whole point of this thread is to discuss and explore next steps in regards to TDP. Which I’m happy to see is happening
I believe the DAO is very bullish on ETH and DXD, with the treasury holding over 80% of total holdings in them. However, crypto markets are also volatile, and while I personally believe ETH will increase in value over the next 10 years - I don’t know and believe that no one knows what will happen in the short-term. In fact, if we were to see a crash - we could even purchase back more ETH with our stables.
The 5 year runway is calculated on past expenses, which therefore is based on the number of current contributors and current compensation guidelines. There is already an initiative for new compensation guidelines, and I believe the DAO wants to hire as many talented devs as we can. Nevertheless, I also agree that we are in a very good situation compared to other DAOs - sure other DAOs are looking to acquire Ether – but their treasuries are 99% native token. That’s a whole different story in my eyes.
The proposal to have price-triggers was exactly due to the fact that we don’t imminently need more stables and have the luxury of saying that we’ll only sell at whatever price we decide to.