Treasury Thoughts

DXdao’s treasury has grown considerably in dollar terms thanks to the appreciation of ETH. It’s current breakdown is:

Asset Amount $$$ Amount % of Treasury
ETH 21,280.81 $21,578,532.66 80.42%
DXD 20,283.06 $3,846,729.19 14.34%
DMG 3,750,000 $1,312,908.35 4.89%
PNK 500,000 $62,665.00 0.23%
GEN 121,456.49 $16,781.89 0.06%
OWL 10,000 $10,565.43 0.04%
PAN 50,000 $4,111.95 0.02%
Total $26,832,294.47

The ETH was raised from the bonding curve and is supposed to fund development of DXdao products. Revenue from these products is to be sent to the bonding curve to support the price of DXD. While a proposal passed to halt the bonding curve, DXD will remain the liquid value of DXdao. Ultimately, DXdao’s treasury should be used to drive DXD price.

There have been discussion on calls and in the #Treasury keybase channel on treasury diversification, and now that the the Multi-call scheme is done, we are now able to execute on changes to the Treasury make up.

In general, I see four goals:

  • Support DXdao products
  • Stablecoins to pay contributors
  • Diversification away from ETH
  • Earn yield on idle assets

For DXdao products, the immediate focus is on Swapr, but we should consider treasury use in Omen. For Swapr, the latest community discussions have an initial $1m in liquidity across ETH/Dai($250k), ETH/USDT ($250k), ETH/USDC ($250k), ETH/DMG ($200k), and ETH/PNK ($50k). I think this is a good first step for Swapr’s initial liquidity stage. Given ETH’s appreciation, a goal of $2m in Swapr liquidity by the end of Q1 seems about right.

Several contributors have voiced concerns about receiving payment for work in ETH. It causes unnecessary stress and also creates confusion on how to price ETH compensation. I think it makes sense to put 18 months of runway (at current monthly burn ~$120k) in stablecoins. This ~$2m would ensure development funding without worrying about the price of ETH. Most of this could be placed into a lending protocol to earn yield, with workers potentially being paid in the yield-bearing asset itself.

Diversification away from ETH. I love ETH and Ethereum is DXdao’s home, but the treasury could diversify into other assets. I see three possibilities 1. Tokenized BTC on Ethereum 2. Crypto Indices 3. Synthetic Assets.

In the short-term, #1 seems the most logical. Bitcoin is the OG and its currency properties are different than ETH’s and a good compliment. #2 & #3 seem interesting but perhaps a little early. It could be interesting to purchase the DeFi Pulse Index token or something else. IMO, if the treasury allocated to Crypto Indices or Synthetic Assets, it would be to support a trading market on Swapr. I also think it’s an opportunity to explore UMA’s developer mining or what YAM is doing with the uGAS token and ‘Degen Finance’.

In terms of BTC exposure, the community is leaning towards tBTC, which is the only trust-minimized, non-custodial BTC token on Ethereum. I think we should allocate $2m to tBTC, which would be a little less than 10% of the treasury. And I think half of this ($1m) should be put into a 50/50 ETH/tBTC Swapr pool.

Earning an idle yield on assets” is also called ‘yield farming’ by the cool kids these days, but it also includes the greatest yield generating opportunity of them all: ETH2.0 staking. Even with diversification and investment in DXdao products, the treasury still could hold ~$10-15m in ETH. This is important to the long-term health of DXdao as it seeks to expand into new product areas and potentially new blockchains/L2’s, but it can grow in size until it’s deployed.

There will need to be more discussion in the community and potentially more risk assessment if DXdao puts its precious ETH into another smart contract. Are there opportunities we could be taking advantage of that are safe and secure? Should we partner with anyone?

Implementing the above allocations, we would get something like this:

Diversification moves away from ETH
Stablecoins for worker payment $2,160,000
tBTC allocation $2,000,000
Swapr stablecoins $375,000
Treasury makeup (potential)
Location Asset Amount Notes
Treasury DXD $3,846,729.19 100k vesting over 3 years
Treasury DMG $1,212,908.35 minus allocation to Swapr liquidity
Treasury ETH $15,543,532.66 could earn yield?
Treasury tBTC $1,000,000 could earn yield?
Treasury Stablecoin $540,000
Interest earning account Stablecoin $1,620,000 yearn, compound or aave?
Swapr ETH $1,500,000 50/50 with Dai, USDC, USDT, PNK & DMG,+tBTC
Swapr Stablecoin $375,000 Dai, USDC & USDT
Swapr tBTC $1,000,000
Swapr DMG $100,000
Swapr PNK $25,000
Treasury Others $69,124.27 PNK,GEN,OWL, PAN
Total $26,832,294.47
Asset Allocation
Asset Amount %
ETH $17,043,532.66 63.5%
DXD $3,846,729.19 14.3%
tBTC $2,000,000 7.5%
Stablecoin $2,535,000 9.4%
DMG $1,312,908 4.9%
Others $94,124 0.4%
Total $26,832,294.47

These are just initial thoughts. Feedback & suggestions needed. These would just be the first steps to strategic use of the treasury and excited to see what else (particularly for Omen and Layer 2 liquidity).

You can play around with the spreadsheet here:

6 Likes

This looks good to me. The only things I might suggest are increasing the amount of runway put into stablecoins and increasing the amount of stablecoins put into Swapr.

2 Likes

All very sensible thoughts. Swapr Liquidity makes sense, but still not sure why stablecoins are the bomb, with that liquidity we will be nowehere near competitive anyway. Or we can still do stablecoins (which will also diversify the treasury) and still target some pools. I firmly believe we should buy up DXD and pool with ETH on Swapr to make a 300-500k and be the deepest pool on at least our own token. We need to inspire projects to do this, right? As discussed before not a fan of using the treasury DXD for this purpose, but would even accept that if it means we go for owning the pool by now. We need to move and get places. BTC pool is great too, but I am now knowledgeable enough to argue if tBTC is the best choice. We need one that will get traded, but maybe we can be a good arbitrage play.

How much would we need to yield per year in APY for Swapr fees at x% return to pay for x% of our development runway (say $5m in pools at 20% annual APY = $1m)

Priority is then to get hooked into 1INCH, Balancer, MM etc. so we can draw trades. Lets GOOOO!

5 Likes

For every 1 billion dollars in trading volume on Swapr at the standard set fees (.25% swap fees and 10% of that to the protocol fee) DXdao earns $250K. If we do that 6 times it covers our ETH based burn rate (not counting vesting DXD incentives).

I think the primary goal with the stablecoins should be to diversify the treasury and secure a decent amount of runway, but once DXdao has them, then I think it makes to put most of it to work in Swapr. With lower fees on the pairs, it can be competitive for small trades, though at current gas prices that might be moot. If the stablecoins really are useless in Swapr, then maybe it makes sense to focus them on generating yield. Another thing to consider. . . a 10% yield on the treasury would also cover DXdao’s burn rate.

Also agree we need to make Swapr the best place to buy DXD. To avoid using treasury DXD below bonding curve mint price (or maybe we should be referencing all time high in USD??), I agree doing a buyback is the way to go here. Buy back 500 ETH worth of DXD and deposit that into Swapr.

Treasury liquidity will be a great way to jumpstart Swapr, but I think where Swapr will prove an invaluable asset in the DXdao portfolio is the connections to Mesa and Omen. IDOs, prediction markets, and pretty much any DeFi product, generates and relies upon trading and I think leveraging that to drive volume to Swapr will be a great way to generate revenue. One only needs to look as far as the Etherscan gas tracker to see the significance of AMM based exchange on Ethereum.

I have a couple related posts on my todo list . . will follow up soon.

1 Like
  1. :white_check_mark: Securing ~2 years of runway with stablecoins makes total sense to me
  2. :white_check_mark: Using those same stablecoins to add liquidity on Swapr sounds great too
  3. :thinking: I don’t get the point of allocating funds to tBTC. Not worth the risk. I’d rather stay exposed to ETH or, maybe even better, deposit some ETH as collateral to generate $2M DAI and lend those. The lending rate of DAI is usually high (just checked: 23% on AAVE now). That alone could contribute $250K~$500K annual revenues.
  4. :thinking: Not sure I have a strong opinion on staking some ETH on ETH2. Given the timeframe of ETH2, I guess that could make sense to stake some ETH but, unless I misunderstood something, I missed where/who would run the validator?
1 Like