AIP-441: Protect Treasury - Lock Up 20% as BTC for 3 years

PROPOSAL NAME:

Protect Treasury - Lock Up 20% as BTC for 3 years

TEAM DESCRIPTION:

ApeCoin Foundation will be implementing this proposal, but since this field is required: I’ve been an ape from Aug '21 to summer '23, @nftsasha on Twitter, attended all three ApeFests, and ran in a few DAO elections. Now working on Unchained game with a few folks, which we hope to bring to ApeChain :slight_smile: (self-promo, let’s gooo).

PROPOSAL DESCRIPTION:

To future-proof part of treasury against accidental or organized drainage and as a step to diversify treasury, ApeCoin DAO Foundation will create a BTC wallet and convert 20% of treasury reserves into BTC. Not only is this probably a smart move financially (historically, BTC has far, far outperformed APE), and thus potentially one of the easiest yields for the DAO, it’s also an insurance policy. Having less available treasury for 3 years (though still very substantial) will help us think more carefully about spending on a per-AIP basis.

For simplicity of calculation, 20% means 20% of USD value of all DAO reserves on the day of this proposal going up for a vote (maximum 60,000,000 APE) minus any amount already approved/earmarked for previously-passed proposals.

Example: the reserves on hand on the day this AIP goes up for a vote are 1M when converted to USD (using that day’s market price). The DAO approves proposals with total cost of 100K during the same voting period. We then calculate the 20% as 20% of 1M, not 20% of 900 thousand.

BENEFIT TO APECOIN ECOSYSTEM:

Save 20% of Treasury from potential drainage and, possibly, grow the treasury by selling BTC at a higher price 3+ years down the road. The underlying assumption is that if BTC fails, everything fails; is there really a world where APE thrives but BTC is in the gutter?

DEFINITIONS:

  • OTC - OTC Trading, is a framework of financial technology that enables trading markets outside a regular exchange. Specifically, within the crypto and bitcoin market, it is a private trading market for buying or selling crypto.

  • DEX - A decentralized exchange (or DEX) is a peer-to-peer marketplace where transactions occur directly between crypto traders. DEXs fulfill one of crypto’s core possibilities: fostering financial transactions that aren’t officiated by banks, brokers, or any other intermediary.

  • CEX - A centralized exchange (CEX) is a type of cryptocurrency exchange platform. CEX platforms maintain an order book for buy and sell orders between traders. All orders are trade requests for a certain amount of a cryptocurrency set at a specified price.

STEPS TO IMPLEMENT:

ApeCoin Foundation buys BTC with 20% of Treasury funds upon proposal approval via either:

  1. OTC, to avoid market price impact on $APE (preferred method)
    or
  2. weekly purchases spread over 3 months to minimize $APE price impact (19 to 20 total transactions); the daily volume for $APE is ~50M USD, or 350M / week, so this weekly operation would account for ~1.5% of avg daily volume.
  • I estimate OTC fee (or dex/cex fees) to convert APE to BTC to be below <$5,000, or 1/20,000th of the amount of APE to be converted by this proposal, i.e. less than 0.005%.

  • Regardless of implementation method, the 20% (maximum 60,000,000 APE) is calculated as indicated above and earmarked at the time of proposal approval.

  • The 3-year lock-up period begins on the day of the last transaction, i.e. when the full 20% are converted.

REPORTING EXPECTATIONS:

Report total cost of implementation and date of completion of implementation once the proposal is fully implemented as a reply to this thread or a central reporting thread on these forums. If the proposal is not fully implemented 4 months after this AIP is passed, report why, % completion, and steps being taken to mitigate.

RISKS:

It’s possible that ApeCoin price will increase faster than BTC price. This risk if for you, the DAO, to decide on. Historically, quite the opposite has been the case. Please keep in mind that ~80% of Treasury will remain unlocked, so the real question is - should we risk everything we have on $APE price fluctuations, or hedge our bets by locking up some of it in BTC?

OVERALL COST:

Total amount requested from the ApeCoin Ecosystem Fund = Up to 60,000,000 ApeCoin + $5,000 USD.

20% of treasury estimated to be 60,000,000 APE
OTC/DEX/CEX fees estimated to be $5,000

1 Like

I actually don’t hate this idea.

But the areas I would push back are as follows

  1. Converting 20% of the treasury to btc would absolutely obliterate the price of apecoin rn

2 Likes

Would love to see a scheduled diversification plan for the treasury if we’re looking to derisk.

Helps derisk while not tanking / spiking any one coin in the process.

2 Likes

Hi @Sasha ,

The community feedback period for your proposal would be ending in roughly 24 hours.

  • If you’re content with the feedback received, your next steps are to finalize your proposal using the AIP Draft Template.

  • A moderator will reach out to the author to finalize the AIP Draft. Upon receipt of the final Draft, we will review and provide instructions on the next steps.

  • Are you ready to proceed to the next phase or do you wish to extend community discussion for another 7 days?

We look forward to hearing from you.

-@Facilitators

Do you mean “100k” here?

I’d add in a clause to ensure that the sale will happen OTC, to prevent negative price impacts.

2 Likes

High level, the diversification of the treasury has legs, but to swap a % straight for BTC will not only have a negative impact on price in the short term, it would also tie us to the price of Bitcoin and the impact that has across the different phases of a market’s cycle.

The onus should be on diversifying assets of other builders / DAOs to also act as a user acquisition strategy. Something I will go into deeper outside of this thread.

1 Like

Hi @Sasha

Thank you for your ideas [and the ApeCoin DAO community for the insightful discussions].

A moderator will reach out to the author to finalize the AIP Draft using the appropriate template.

  • Once the AIP Draft is confirmed by the author and meets all DAO-approved guidelines, it will receive an AIP ID number and move forward for Draft Analysis Review.
  • @Sasha please see your messages for the next steps.

Follow this Topic as further updates will be posted here in the comments. In accordance with DAO-approved guidelines, if the author does not respond within 30 days, the proposal will be automatically transferred to the Withdrawn category, and the author can re-submit the idea.

-@Facilitators

Hi ApeCoin DAO Community,

The AIP Draft submitted is currently incomplete and feedback has been provided to the author.

Follow this Topic as further updates will be posted here in the comments.

Thank you,

-@Facilitators

Hi ApeCoin DAO Community,

@Sasha has completed editing their AIP Idea to be their AIP Draft.

This proposal has been assigned the AIP ID Number 441.

Follow this Topic as further updates will be posted here in the comments.

Kind Regards,

-@Facilitators

Hi ApeCoin DAO Community,

Our team has reviewed and discussed @Sasha 's AIP Draft and have sent a list of initial questions. We await answers.

Follow this Topic as further updates will be posted here in the comments.

Kind Regards,

-@Facilitators

Hi ApeCoin DAO Community,

@Sasha has responded to our questions and they are in our review once again.

Edits have been made to this Topic by the author’s request.

You can click the Pencil icon at the top of the post to see these edits.

Follow this Topic as further updates will be posted here in the comments.

Kind Regards,

-@Facilitators

Hi ApeCoin DAO Community,

We have no further questions for @Sasha . This AIP is now under Administrative Review.

Follow this Topic as further updates will be posted here in the comments.

Kind Regards,

-@Facilitators

Very interested to discuss this more. Either here on via DM.

2 Likes

@bigbull @mo_ezz14 love the acquisition strategy that you both are mentioning, here are some current (April 2024) numbers of DAO’s, members using governance tokens all based on Ethereum.

Just want to say I agree with @mo_ezz14 on this one. If we are putting sell pressure on APE by swapping tokens in the DAO treasury, I’d rather it be more strategic towards acquiring new users from other communities. If this is instead to protect the treasury during cyclical price movements in the markets, I think it would make more sense to swap into non-correlated tokens like T-Bill backed tokens. And if that is the route to go, I would wait until the bull market takes hold so that there is less opportunity cost in doing so.

1 Like

This proposal is just like Bitcoin - it doesn’t care. Not about other communities. Not about bull market. It exists to offer a historically-sound solution for an ever-decreasing treasury. I don’t have a magic 8-ball, but I can zoom out and check the graphs.

Sell pressure: there will be little to none if we sell OTC, the preferred (and first advised) method - APE will just change hands from DAO to whoever sells us BTC. The retail sale, if we can’t find some degen betting on APE outperforming BTC in the short-term and willing to sell OTC, would also be split up into several chunks across a few months, so the impact will be cushioned decently well. But frankly long-term it’s all inconsequential. If someone has short-term concerns, they’re not seeing the entire point of this proposal, which is to detach a chunk of treasury from any and all short-term concerns of which there will always be some. That’s the whole point - we do this once and we don’t have to care as much about APE going up or down on a weekly basis.

T-Bills suck, they don’t grow in value faster than inflation. Bitcoin does.

With that said, cheers! Vote your heart. As the author, I really don’t care if this passes or not as I benefit zero from this. It just seemed like a good idea so I sent it in. I’d like to see the DAO be around and thrive in 5 years. 20% leaves us with 80% to lose our minds over while giving some peace of mind, too. Hell, if it were up to me, I’d lock up 50% in BTC long time ago.

Thanks for the response and that’s reasonable in terms of OTC sales. My point with T-Bills are that generally speaking BTC is correlated with ApeCoin, they both move with the crypto market. T-Bills or could be a basket of corp bonds or some other fiat based investment is non-correlated. That gives downside protection when crypto crashes. However, with a potential bull market coming, that swap makes more sense towards the top of the market.

Timing the market with DAO funds is about the dumbest and most irresponsible thing one can do. Might as well throw it all on black.

You’re objectively wrong that BTC is correlated to APE on any timeline long enough to be worth talking about. This proposal locks funds for 3 years. Look at 3-year graph of Ape re: BTC and show me any correlation whatsoever. APE is down to the right, BTC is up to the right. Literally opposite directions.

ApeChain should help, but that’s speculation. The point of this proposal is to hedge against speculation.