DAO treasury management insights

[mixmore]

DAO treasury management insights

DAO treasury management is an important but I will talk in this topic in general
What is the best system for managing it?

There is no definitive answer to this because it varies from one organization to another

There are many points and questions we should thinking in before building any treasury management system to any DAO

In fact, building a system and policy for treasury management is completely different from one organization to another ,It does not have a fixed form, but is determined according to the different goals and circumstances of each organization

But through the following points, thinking and answering them, the correct system for treasury management can be drawn

Risks and Questions

1.The cryptocurrency market is currently down which means that the price of cryptocurrencies is not stable whether it is the native token or any other tokens that may be in the treasury

2.Inflation and depreciation of major currencies such as the dollar and the euro even stable coins are not currently secured

3.The current global economic crises that affect all markets and industries, not just the crypto industry

3.The treasury can be hacked through any security weak point

4.Losing access to the treasury is a low probability, but it can happen

5.Multiple signatures system should be used so that not only one person can control the treasury individually

6.Will DAO leave cryptocurrencies in the treasury without any investment??
or part of it will invested?

7.Will we look for a completely safe investment only, or will there be a part that can be invested in things that have higher profits and risks?

8.Is it possible to invest a part in NFT?? Or in currencies and tokens for other promising and emerging crypto projects??

9.Is there an intention to buy large quantities of a cryptocurrency for another project,
to control this project and control in decisions in it and make this project integrate or serve the original project ??

10.holding native token in the treasury is logical but should only native token be holding ?? or treasury need to diversification?

-DAO needs Stablecoins (DAI, USDC, etc) for operating expenses

-native token may drop suddenly at some times, especially during crises

-Diversifying the treasury may save the organization from decline and help it correct the situation and make native token protected

-Keeping stablecoins and cryptocurrencies such as Ethereum and Bitcoin in the treasury can be a good thing

-ETH is until now the is so important to crypto and to future of crypto industry

-BTC is Until now the most important and most famous in crypto industry, and it is also an industry indicator

-Most of the stablecoins are linked to the US dollar although there is always the possibility that it will decrease and disappear and it is not completely safe but it is a good guarantee

-Therefore, the best distribution is between native token as a basic and add to treasury Ethereum, Bitcoin and stable currencies, and adding other cryptocurrencies and another part to promising cryptocurrencies ,in my opinion, the diversification may be useful

11.Is it better to keep high liquidity?? or invest the cryptocurrencies in the treasury and keep only the necessary liquidity to meet the operational expenses??

-What is the amount of liquidity that should be maintained?

12.Is there an intention to try to raise the value to native token??
or the intention to maintain its current price?? or is there a desire to reduce it?

13.Is there a desire to increase the demand on buying the native token??

14.Is there a desire to rationalize spending so that cryptocurrencies are injected into other investments?? or develop existing products??

-Treasury management is certainly influenced by management objectives

The answers to the previous points is never the same, and policies differ from one organization to another and the answers determine the way to manage the treasury

Let’s see different models
I got the data from the following website https://openorgs.info/

we can see some models

In this models the treasury it has no diversity but contains native token only or few cryptocurrencies

Other models diversification exists and in a different way some organizations the treasury contains multiple cryptocurrencies with a good variety ,native token token with stable coins with Ethereum and other currencies

In my opinion, the second system is better, perhaps not suitable for everyone, but from my point of view, it may be safer

The topic is for discussion and I hope community members will contribute their opinions in the comments

[madeafterdeath]

beyond me all this…i think i don’t know but i dont like that you put you can lose the money in at least 2/3 of the options. option 5 where you say not 1 person should have control over wallet that sounds good but then? like i said this is beyond me.

and i think we are gonna move naturally to option 2 i think of what type of value we hold with multiple cryptos holding it up.

[mixmore]

@madeafterdeath Thank you for your comment and interest It’s just for discussion I put most of the questions and risks which can be considered by someone who wants to develop a system to manage the treasury to DAO organization ,but they are not fixed options, they are just points that help bring ideas

[Bernard]

Hi @madeafterdeath, @mixmore, thanks for starting the discussion!

@mixmore, I agree 100% on the importance of having a least a minimum version of Treasury management running, esp. given current market conditions. I have started to analyze best practices in the market and think things through, also drafted a proposal for the Gro DAO.

See below my current mental model for thinking about setting up an MVP Treasury Mgmt committee. This is in continuous development, so obv appreciate feedback Would love to learn more about the current set-up in DappRadar and what of this is already in place!

1. Business Strategy: Having a clear view of the long-term viability of the DAOs business model and evaluating strategic directions. This is a key exercise as it influences a lot of the set-up decisions in Treasury Mgmt (e.g., short-term capital needs vs. flexibility to allocate long-term capital).

2. Treasury Research and Strategy: Researching yield strategies, allocating treasury into selected strategies, and managing these allocations to unlock the economic potential of the treasury holdings while ensuring operating expenses are covered with downside risk mitigated. This largely depends on risk-appetite of the DAO, and in most cases should be treated rather conservatively.

3. Financial Reporting and Tracking: Creating standards for financial reporting and delivering periodic financial reports, incl. forecasts to establish transparency for the DAO members and act as decision-making support. This is largely underdeveloped for many DAOs and holds uncanny potential for creating clarity

[vandynathan]

Treasury Management is definitely a conversation we need to have more about, especially as we get closer to releasing big changes to our product and DAO.

We currently have not activated our Treasury further than using the Airdrop rewards to be able to incentivise liquidty through our Sushiswap and ApeSwap liquidity programs and to incentivise Contributions through our Layer3.

Following from your framework:

1. Business Strategy is based on our Whitepaper
   I think that our Business Strategy is to invest as much RADAR while maximise output and returns. This requires using RADAR as a payment token whilst also holding value of the incoming revenues into the token.
   This will also be impacted by our new RADAR strategy which combines the Gamification, with the Quests, Bounties, Airdrops and other additional revenues being moved towards the DAO’s Treasury. These will help us to understand which costs can already be shifted to the DAO. A new Whitepaper 2.0 is being built to showcase this development more clearly so that the community can better connect with how the vision is being implemented and get involved.

2. Treasury Research and Strategy. I do think that this will eventually require a separate Committee or Workstream within the DAO. It obviously impacts the Treasury Management, as it will use a portion of the Treasury to invest into these yield strategies, balancing treasuring holdings, but it largely depends on the operational costs, and the revenues that the DAO would be able to produce in order to ensure that it is sustainable.
   For example, when it comes to balancing treasury holdings as mentioned by @mixmore, it is liley that we will convert some of our holdings into stablecoins when paying some contributors in order to alleviate any selling pressure of RADAR. Some of the points that he made can definitely be used as a starting point to develop an MVP treasury management policy for the DAO.
   Internally, nothing concrete is set up in this area as of yet, but we have a new Head of Finance, @bayar , who will help shape a policy around this for the DappRadar team and then also the DAO too. As you can imagine there’s been quite a few changes in our industry, and we already had quite a volitle market, so I can imagine that we would have to take quite a conversation approach to balancing our holdiaings.

3. Finaincal Reporting and Tracking: Increadibly important to look at, especially when it comes understanding transparency and accountability. I like what they do at dxDAO where each member has to explain the tasks that they do after a two-month period and then reports to the DAO after the period ends.
   Once again, internally, nothing concrete is set up in this area as of yet, but we have a new Head of Finance who we’ll be working ith to set this up so that it aligns with the current DappRadar team and the DAO.

This being said, there’s some 2.0s that we are building up which, once launched, will be a great launching point for some of these conversations.

Also, I’ve deep dvied into the work that you’re doing at Gro DAO: Finance and Risk Pod: Pod Creation Proposal - #8 by Bernard - Decentralisation - Gro DAO Forum

There’s lots of learnings to share there. I think that at DappRadar, we’re pretty privileged in that we can use our own internal data in order to showcase insights from our own dapp too.

Eager to hear your feedback on the current state too

[Bernard]

Thanks for your detailed response on this @vandynathan!

And good to hear you’re progressing on that front with the help of @bayar We just kicked off our work on the Strategy, Finance, and Risk at Gro and have been working under the hood to see how we can make it easier to set up the basics of Treasury Management and Financial Reporting. @bayar, lmk if you want to jump on a quick call to discuss status/questions! Maybe we can be helpful.

PS: Also starting to draft a short DappRadar 101 article to facilitate entry for new joiners to the DAO. Will reach out for your view on that over the coming days Got quite excited about the possibilities of using RADAR to incentivize engagement (and curation) on DappRadar and the stage that you’re at with this. Also super curious to hear where you are at with the Whitepaper 2.0 @vandynathan!

[bayar]

Hi Bernard,

Thanks for the feedback and thumbs up for the work that you’re doing on the DappRadar front and for other DAOs. I think at this moment in time in the industry, as we don’t have a great deal of best practices in the market, no concrete regulatory framework for financial reporting, alignment of tax treatments, or clear legal guidelines across jurisdictions, we can use this opportunity to develop something that other will be able to consider their benchmark or case study. At least, this is the vision that I have for the DappRadar DAO Treasury & Finance processes.

I’m working closely with @vandynathan to make sure that the treasury management processes we propose are aligned with the overall governance framework, and we’re working on multiple workstreams, like:

1. Treasury management
Here we’re looking at how to integrate the treasury committee activities within the overall governance of the DAO, as well as how will we ensure that the execution of the strategy will be performed in line with objectives set out by the DAO. So one of the key objectives has to be to effectively manage the treasury in terms of:

• treasury structure, asset diversification
• treasury committee mandate, authority and approval rights, as well as the committees roles and responsibilities
• execution of the strategy while ensuring a proper control environment is implemented without creating a burden in the process
• design of the key treasury processes inside the DAO

Our approach will be to define specific processes around the inflows and outflows of funds for each of the relevant token pools, focusing on the treasury itself, but also on the community pool, which will have completely different mechanics.

2. DAO reporting
We want to develop the reporting framework in a way that ensures transparency, supports building the trust of our community and creating confidence to attract new members in the community, as well as to inform investors about the performance of the DAO. So you can imagine that we want to build the foundations of the DAO reporting on multiple dimensions:

1. On-chain reporting: KPI related to the on-chain data - the likes you can see in other DAOs as well, mostly related to tokenomics
2. Governance reporting: number of proposals, approval rates, participation rates, community engagement etc.
3. Financial reporting: following our tokenomics 2.0, we’ll develop a reporting pack in line with the objectives of the DAO. Will share more details as more is unveiled by the DAO.
4. KPI reporting: for each token pool, we’ll have specific KPIs to monitor the performance and execution of each pool. For example, the treasury reporting could be focused on the performance of investments, projects, budget allocations etc., while the community pool reporting could be focused on the KPIs around our contribute2earn model.

All in all, we have many plans we want to implement, but we need to put in on the roadmap to be aligned with the general DAO roadmap. Would be cool to connect and share ideas. Walking uncharterd territory is always better in good company.