There are a few important things that have been indicated by both the board members & contributors. One of the most pressing would be the need for treasury management.
Diversifying a percentage of the treasury into currencies like Ethereum & Stablecoins
Management by an international team of 3-6 experienced crypto-traders
Smaller percentage of treasury for liquidity pools & yield farming too?
To accomplish this, we’ll need a general consensus on how the team is nominated & operates, the need for reporting & transparency, and the amount of treasury allotted to be diversified into other forms.
One of the problems we encountered with staking proposals is that people were drafting proposals independently. I’d like to avoid that trouble by creating early conversations here. I’ve also found some reading resources about treasury diversifying that I’ll share in this thread. Share ideas below!
I think treasury management is a pretty important function that the DAO should be looking at. I have been wondering for a while as to the best way to perform treasury management in a DAO. Ultimately the treasury should serve as a Reserve and be able to undertake actions to manage the liquidity of the DAO/Apecoin and provide protection/reserves to support cashflow and financial/operational risks. The treasury would likely need to generate sufficient returns to cover annual cashflow requirements for the DAO operations and use of Ecosystem Fund. The second thing I wonder about is if there will ever be a need to establish and execute some sort of monetary policy once there is a full circulating supply (I know this is years away but still bears thinking about early.
For the first point, I think that from the Foundation/Board perspective it is simply a matter of determining if this is outsourced advice and/or operations. I would assume that it is mostly advice and that a capability will be developed inhouse to execute the advice. For the advice, it is then a matter of developing an investment mandate that has a return profile to cover the operational costs of the DAO and generate returns to maintain the reserve. I would then ask firms or the community at large to provide pitches as to how they would satisfy that mandate in terms of strategic asset allocation and including hedging (given that a lot of real world costs are likely in US$) their fees and reporting. The community could then vote on the proposals to appoint one or more advisors for an agreed term. If the Foundation/Board don’t want to have the capability to execute the advice then it is a different matter!
Cool, thanks for joining in the convo @StoicDegen. Okay, you’ve brought up some great points so lets expand on them. We’ve gotten only a small amount of direction from the Apecoin Board.
AIP-42 was declined because they want a treasury management firm before diversifying out of APE. In this post below, the author rebukes, stating there are a lack of trustworthy firms.
I feel the Boards stance indicates they want to outsource these operations. Which is fine, the board serves in different capacities as they desire or are mandated by the DAOs needs. In this case we’ll need to either A) find a firm, B) create an in-house solution, C) keep the treasury in ApeCoin. I get the feeling it would be preferred by the Board if the treasury management firm directly handled the funds. Though maybe advice & investment mandates for an inhouse team would work.
I want to see an in-house team built & given the ability to diversify & trade a percentage of the treasury. This is all pretty complicated…any way to simplify would be a good thing provided its safe for funds.
Putting a treasury management firm in place is the anthesis of having a DAO. So we just give a treasury management firm full autonmy to do whatever they want with the APE Treasury. Makes zero sense. The lack of decision make to diversify has cost the APE treasury hundreds of millions of dollars. In reality treasury diversification is pretty simple there should we like 15%USDC 15%ETH 15%BTC and 55%APE. In my proposal I recommeded stETH over ETH as the trasury would earn 4%+ on that ETH which compounds over time. I kind of gave up though due to the lack of visiblity into how the “special council” makes decisions. Kinda of a waste of time putting together a very nice proposal for the council to shut it down without refining the proposal or asking questions.
I followed your proposal idea closely. Using Lido as a place to stake eth seems like a good idea. I think ultimately first we need a team who decides whether to do that, instead of using the proposal process.
There were other people who chimed in on your thread that wanted to see an Apecoin team who did a range of DeFi activities for the benefit of the DAO. I think we could keep it simple like you said & mandate %s to be held. If we can avoid using an outside firm, I’m all for that.
After reading some articles on treasury management, adding too many tokens to the market at once is definetly a real problem that could occur. I think a smaller percentage of the treasury could be diversified to start with, maybe 3-5% of the total treasury dedicated to diversity & defi activities?
I’m a firm believer that Ethereum is going to do very well over the next ~12 months. If we held a good amount of Ethereum in our treasury, it’d probably be of great benefit for the DAO. I also read about awarding creator grants & funding in stablecoins instead of tokens, which is worth exploring.
I tend to agree with @Chiefer that we should be looking for a way that supports decentralisation, trustless systems and promotes ApeCoin. I would think that there are enough finance professionals lurking in the DAO to help work on how to reimagine treasury management for DAOs. I think getting clear on the goal of the treasury is critical there are two main goals here (1) covering operational expenses and (2) capital allocation to grow the ApeCoin ecosystem. The mandate at a minimum should be break even considering the costs of (1) and the investments required plus returns from (2). This would then need to be stress tested for market downturn scenarios to develop the risk management strategy including reserves.
The appointment of external treasury managers for execution AND advice needs a bit of thought because there are inherent risks and conflicts. ApeCoin DAO’s size likely warrants the establishment of a treasury team which would be paid for out of (1) with the community voting on (2). It is important to have a professional team because the trading strategy to achieve the desired asset allocation is complex - executing them in DeFI has a bunch of risks because DeFi is really a retail tool and big trades move prices - which needs to be managed carefully. Similarly you don’t necessarily want to do it all on CeFI exchanges - we have seen and likely experienced some of the issues that some CeFI exchanges have experienced recently!
I want to put forth once more Babylon.Finance as a candidate for on-chain asset management. Babylon has all the tools available to support these investments (stETH, BTC, USDC, ETH) discussed above, in a transparent and community inclusive way. Babylon funds have the ability to facilitate voting by members to implement strategies, so there is no confusion on “who” is allocating assets towards an investment objective. If 2 or 3 elected individuals join the Babylon fund alongside the Treasury wallet address, those 2-3 users will be the ones responsible for asset allocation and voting. Additionally, Babylon allows Gnosis multisig wallets to interact with their funds, so security standards remain high at all times, and no one will ever have to take custody of ApeCoin DAO funds for any reason.
There are many beneficial reasons to use a tailor built on-chain asset management protocol for treasury allocation vs. trying to find a competent treasury management firm, namely costs and transparency.
Okay, we can look closer at this. Creating a treasury management team along with a few other working groups is something that would really be beneficial for our DAO. Having the right tools for the job is important, so lets look closer at this & how it could simplify the creation of an in-house team.
Why our treasury should not consist only of $APE tokens? We are not an investment DAO, we are DAO of the token holders, and our target should be not increasing of the DAO holdings, but increasing of $APE value.
I think there’s interest in having an investment arm of the DAO. It could be a small percentage of the treasury allocated for use. Having different groups working within the DAO on things like this seems like a positive thing. We’re not an investment DAO, but a subgroup within the DAO could do investments.
My latest thinking on increasing $APE value is for the DAO to have things like an investment working group, another group that focuses on media, another that pushes for game integrations.
I like the idea of treasury management.
I’ve seen many ideas/proposals where they would like to give a percentage of profits back, but are unable to do so. That is one of the problems with merch too, there is nowhere for profits to go. Do you think this could be a possible solution or would that need to be looked into separately?
This is a good point. You are right the Treasury should hold a lot of $APE but because the price is volatile, it is prudent to diversify and hold other assets as a hedge against that volatility to ensure that you can cover operational expenses. The second reason to hold other assets is that you want to be able to generate returns to allocate capital to the growth of the APE Ecosystem. Different assets e.g. BTC, ETH, Stable coins have different risk and return profiles either through DeFI staking or trading activities. We should be aiming to generate sufficient returns to fund growth of the ecosystem without depleting $APE holdings at a lower risk profile than just holding $APE.
Thanks for sharing the links. I probably should have been, but was not familiar with Babylon! It is a really interesting solution and I want to keep reading through everything you sent.
One thing for this is that given there are fee’s involved, the DAO should probably think about how it wants this to operate. I think we have similar assumptions e.g. active management over passive but the potentially differ on manager driven vs trust minimised. We probably need a level of debate on the pro’s and cons of each and some level of tender type process to compare fee models and performance history’s of the different models to ensure that the DAO is going to get something competitive managed in a way that the community is comfortable with
Yes you are right building out the $APE ecosystem is the best way to build value. However, I would suggest we need to do both e.g. Treasury operations should allow us to build value and manage risk. As an example the DAO has 117,500,000 APE at launch which at ATH was worth nearly $3.1B, at today’s price that is worth $0.73B. By diversifying some of the funds into stablecoins (and other coins) we could have derisked a % of the assets and protected that value, whilst staking for passive returns. Whilst 1 APE = 1 APE, the reality at this point of adoption is many real world expenses need to be paid in $/stablecoins and therefore we have 1/3rd the buying power when it comes to covering the cost of the DAO.
Hi @0xSword
How do you think we get this type of proposal moving. My sense is that there needs to be a fe committees made up of committed, engaged and experienced holders who are voted in by the community for a term with some form of incentive/compensation for their time. There are 3 areas (maybe more) where a committee of empowered members could be helpful:
Treasury: generate returns to cover operational expenses and deploy capital to promote ecosystem.
Comms: promote ApeCoin and related projects/collections/events etc
Ventures: foster and incubate creators and builders to add value to ApeCoin
I feel like without this level of empowerment and commitment, it is hard to get from discourse to action. What are everbody’s thoughts?
@StoicDegen
I apologize for my delayed response. I completely agree w/ the points you listed above. There are steps we can take to get this moving, so lets get started & make something happen.
We need to create a model for working teams. I have a sample proposal we can look at, and will add you to a group chat to look it over & help make changes. Let’s start w/ one team.
The most difficult part of this is finding committed BAYC/MAYC & DAO people who want to work part-time or full-time on behalf of the DAO. Compensation is a hot topic as well.
Its a big win if we can create a network of teams, the DAO becomes less centralized, and we acquire full-time talent for DAO. Essentially we need to know who is available and wants to work!
@adventurousape brings up a brilliant point earlier in the thread too. Her idea needs explored more.
We need to create a model for working teams - let’s start w/ one team.
The most difficult part of this is finding committed BAYC/MAYC & DAO people who want to work part-time or full-time on behalf of the DAO. Compensation is a hot topic as well
It’s a big win if we can create a network of teams - the DAO becomes less centralized
I think these observations should serve as a foundational model and be shared across most all AIPs - I know I will borrow parts of it for the IRL events ideas and proposals. Thanks
My general take is that a treasury should be a relatively risk-off pool of capital. In an ideal situation we hold a large portion in USD or stablecoins.
Logic is fairly simply, unless you have a professional investment team that is managing this like a hedge fund you probably won’t get top tier investment management.
Even if you do have a great team, the treasury will be needed most in bear markets so USD holds the most value in the worst times because that is when the rest of the project/business will struggle.
We actually had a couple of proposal ideas about Treasury Management
There are also several active members putting their skills together to create “working groups” across several verticals – perhaps you’d be interested in joining?