Scope
The scope of this proposal is to establish a treasury allocation policy as a guide for elected officials to work within DAO approved guidelines.
Link to previous [DAO Discussion]:
[RFC] - Treasury Allocation Proposal (TAP)
[DAO Discussion] - Treasury Allocation Proposal (TAP)
Snapshot
[WIP #26] - Treasury Allocation Proposal (TAP)
Objective
The purpose of this proposal is not to specify how treasury funds should be allocated or deployed at all times. Rather, it acknowledges conditions that are predetermined to be generally accepted by holders in the current market environment. Therefore, management will have more discretion and the community’s expectations will be aligned.
Due to the current market’s condition, it is believed the treasury allocation parameters should maintain moderately risky positions with a majority of stable coins.
High Level Overview:
Guidelines will be provided on the following components:
- Stable coins
- Directional
- Seed Investments
- Treasury - Farm split
- TAP and adjustment procedures.
Provide Low Level Details:
The allocations below are based on the current treasury value:
Treasury value for current allocations
$129,519,680 ($108,652,438 liquid)*
Stable Coin Assets
A range between 45% -75% of liquid assets. A list of Stable Coins for reference include, but are not limited to, USDC, USDT, DAI, MIM, BUSD. Community strategy % goal: eg: 10 - 15% APR
- Between 50% and 80% of Stable Coin Assets should be deployed in yield-generating positions, whether possible.
Directional Assets
A range between 10% - 40% of liquid assets in Blue Chip positions.
- No more than 20% of liquid assets should be allocated to any one directional asset at any time.
- No more than 10% of liquid assets should be allocated to shorting strategies at any time without further DAO approval.
- 80% to 90% of Directional Assets should be deployed in yield-generating positions.
Seed Investments
A budget of 15% of liquid assets should not be exceeded per quarter. Capital investments in the early stages of development of a protocol or product are known as seed investments.
Seed assets are also subject to redemption restrictions as per WIP 9 & 18.
To fall under “seed assets”, the investment does not require equity as a result. A Simple Agreement For Future Tokens (SAFT) investment would also qualify.
Exposure
Without explicit approval from the DAO:
- No more than 10% of total treasury assets should be exposed to a single protocol.
- No more than 10% of liquid assets should be deployed at one time when initiating a new strategy
- No more than 5% at one time if the new strategy involves protocol exposure.
e.g. Stake 20mm in AVAX on a liquid staking platform.
Procedure for Treasury Profit vs Wonderland Farm Split
There is currently no formal procedure in place to determine which funds should go to the treasury and which should go to the Wonderland farm. Currently, all funds are directed to the Treasury and the council votes on the farm allocation. The following default percentages for future revenue and token allocations are proposed:
Upon the realizing of profits, including seed investments
- 75% of the profit that is generated through the use of strategies shall go to the Treasury.
- 25% of the profit that is generated through the use of strategies shall go to the Wonderland farm.
- Proposer shall receive their percentage reward before allocating, when applicable.
Farm allocations are also subject to redemption restrictions as per WIP 9 & 18.
Note that profits are to be calculated on a quarterly basis and the relevant elected officials will decide the rate at which the amount allocated to the farm will be distributed to ensure more stable and sustainable returns.
Implementation of TAP
At a minimum, the team should deploy an updated TAP once every quarter, whether market conditions have changed or not, in order to maintain a stable record and establish a regular pattern of communication in this area.
It is recommended to have the new TAP done following quarterly redemptions given how the treasury could be affected by it. However, regardless of the proximity to the previous or next quarterly TAP review, a new TAP can be deployed whenever the management team believes there is a need to change the current allocations (e.g. market conditions, potential investments, etc).
Council Adjustments
In order to improve the farm’s balance or health, the treasury council may adjust the split internally by vote. Following the council vote, the Risk officer will make a final determination. The available governance processes may also be used if desired.
Before being put to a vote, the team should engage the community to gather feedback on the potential changes. If a vote is passed, the team should notify the DAO members as soon as practicable.
If an asset outside of cryptocurrency or digital assets is acquired the treasury-farm split will be determined on a case-by-case basis.
Business requirements of the implementation of the proposal:
No special requirements are required to implement this proposal.