Shutter DAO 0x36 Discussion Regarding Treasury Management

Shutter DAO
1

Discussion Regarding Treasury Management

Introduction

I’m opening a discussion regarding Shutter DAO 0x36 treasury management.

In this context: “treasury management” refers to investing Shutter DAO 0x36’s non-SHU assets. It does not refer to treasury diversification activities like selling SHU, treasury swaps, etc.

As of 10 April 2024, Shutter DAO 0x36’s non-SHU assets include:

  • 6,538,086.22 USDC

  • 3 ETH

  • Uniswap v2 LP tokens (not relevant here)

Treasury management could allow Shutter DAO 0x36 to earn yield and generate additional resources /runway for the project until these assets are needed for grants, liquidity or other purposes.

Considerations

Trust & Custody

Should Shutter DAO 0x36 insist on trustless non-custodial treasury management solutions? Or should Shutter DAO 0x36 be open to some forms of trusted custodial solutions?

Scope (Short Term / Long Term)

What amount (or percentage) of non-SHU assets should Shutter DAO 0x36 hold in the treasury for immediate use? What amount (or percentage) of non-SHU assets should Shutter DAO 0x36 invest?

Risk / Reward Appetite

What level or risk and reward does Shutter DAO 0x36 desire? Does Shutter DAO 0x36 seek a “risk free” rate of return? Or does Shutter DAO 0x36 want to maximize earned yield with potentially higher risk?

Management / Optimization

How “hands on” does Shutter DAO 0x36 wish to be? Does Shutter DAO 0x36 want to actively manage its investments in order to ensure they are highly optimized? Or does Shutter DAO 0x36 prefer a “set it and forget it” solution?

Compensation

Should Shutter DAO 0x36 insist that all service providers / platforms submit bids in response to a Request For Proposals with an identical compensation model? Or should Shutter DAO 0x36 allow service providers / platforms to submit bids with their preferred compensation model.

If Shutter DAO 0x36 insists on the identical compensation model, then which model - percentage of performance (profit), monthly service fee, other?

Chain

Does Shutter DAO 0x36 have a strong preference regarding which chain(s) treasury management takes place on?

Responsibility

Who should be given responsibility for making decisions regarding treasury management? Should every decision be put to a full vote by the Shutter DAO 0x36 members? Or should there be a sub-DAO to make certain decisions - i.e, changes in investment strategies, responding to emergencies, etc.?

Next Steps

  • Discussion & signaling
  • Proposal to create an RFP for treasury management services
  • RFP for treasury management services
  • Temperature check to select service provider / platform
  • Negotiation of final terms of service
  • Fractal vote to implement

Discussion

Please comment below if you …

  • Have comments, suggestions and/or questions
  • Are interested in working on this topic
8 Likes
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Hey @franklivid, Thank you for starting this discourse; managing the treasury for the perpetuity of the DAO is really underrated, and we need to start thinking about this ASAP.

IMO, the first thing we have to do is set a goal.

What is our aim with the funds?

We are having similar conversions on other props; here are some common themes

  1. fund short to medium-term expenses of the DAO @Loring (1), @Cotabe [1]
  2. use for the sustainability and predictability of the DAO @Ricosworksa; you and @0xAlex vibed on the same.

For me, as long as the dao does not have revenue streams, we need to use what we have to generate more.

For risk, I would divide the treasury into multiple buckets, allocate a solid percentage for the DAO’s operations, and secure about a runway of over 12 to 14 months; the rest can be assigned to buckets with low to medium risk, and less than 1% can be allocated to high-risk strategies. The risk spectrum is debatable. For someone, lending markets like Aave might provide a higher risk ratio than a Degen like me.

The DAO actively managing and voting on proposals might be an absolute nightmare; depending on how it’s set up, you need to approve the strategy through governance and deploy funds, which will take a lot of energy and effort for the DAO and the strategy creator.

We are internally working on a proposal to allocate a minimal amount for yield hunting and give the token holder direct access to veto any funky strategies that the manager might propose.

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Heya folks! Just saw this pass by and for treasury management, I believe it should be a clear YES!

In my opinion, there is no other option than a trustless, non-custodial solution that guarantees full control and risk mitigation. A flexible system caters to immediate needs and future yields. An adjustable risk framework lets us tailor our strategy, offering the ability to adapt as our risk appetite evolves.

You should aim for a management system that’s both easy to handle and precise in strategy optimization.

When it comes to compensation models, versatility is key, and these shoud be tailored to the relevant financial strategy.

As for chain preference, with these numbers Ethereum Mainnet can be the main focus. Obviously, the recent voting on L2 for Optimism is one to take into account.

4 Likes
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All in for quality treasury management but I’d like to remind the DAO that we shouldn’t look only at our market cap at the moment, but rather the FDV of the SHU token. As things stand, the FDV is 63M and our USDC treasury is about 10% of that. 10% of USD liquidity is actually a pretty good number - no reason not to put these USDC to work though!

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Hey @franklivid, thanks for bringing up this for discussion.

I have already expressed my ideas with a longer post on this topic here, but some quick answers to the points you raised here:

— I do think that a risk adjusted framework could be the way to go (basically setting up a subjective benchmark where X strategy involves Y risk and B strategy involves Risk Y * 1.2, and then comparing actual APRs of both + sustainability of the APRs, etc).

— Community need to understand that with actual base rates (of 5% on US tbills to 15% on Maker approx…this latter depends on the chain you use), we can aim to cover some expenses and extend some months/years the runway by getting between 300k and 700k a year maybe (that should enable affording some payrolls from core contributors, or covering certain grants programs, etc), but is not a magical solution in which the treasury strategies should create an infinite runway (I think is pretty obvious, but clarifying just in case).

Obviously, there are multiple strategies that could take us to reach higher APRs but with way more layering and smart contract risk; As you mention this depends on the Risk Appetite the DAO wants to face…and my perception is that it’s a more risk-averse profile than a yield seeking portfolio.

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I agree with most of the answers here. We should definitely put these funds to work for the DAO. The risk appetite is a spectrum, but I lean heavily toward minimizing risk. I consider that Treasury Management’s goal should be a sustainable and low-risk growth of the treasury, rather than any kind of high-yield strategy. DAO funding should mostly come from the technology developed eventually.

I would suggest making a DAO committee with several roles for checks and balances than have an RFP for third parties.

Therefore my answers would be:

  1. Trustless non-custodial treasury management. This reduces the risk and safe strategies that include blue-chip assets usually outperform many VCs and experts.

  2. Long-term treasury management.

  3. Low risk. 70%+ USDC, maybe some funds in bluechips up to 30%. I would stay away of degen strategies, but maybe up to 10%. (My low risk is not low risk for many hahaha)

  4. Responsibility: The DAO should definitely not be voting on every move. It’s a nightmare and makes for very slow management. This is terrible for emergencies. I think we should vote for a committee that manages a multisig. It would be good to have check and balances in the committee and different terms.

  5. Management and Optimization. I would leave this to the committee, but I would prefer low touch strategies.

  6. Compensation. Have the DAO choose the committee members and a compensation scheme.

  7. Chain. I would leave this to the committee.

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I agree with everything @Cotabe says directly above.

From my perspective, any of the temp checks we have on this subject right now are difficult to judge because the structure of this potential committee and how it interacts with a treasury manager haven’t been refined yet.

From my experience, it’s best to try to avoid creating committees or sub-groups wherever possible, because of many complications they create, but…

Since we’re seeing more consensus forming around this idea in the 0x36 DAO, I’m comfortable suggesting a format for feedback:

There should be two clear “entities” involved:

  1. A Treasury Manager - This should be a single role or individual. Not necessarily an active DAO member, but someone with domain expertise. We’ll find this through an open RFP process. This role should be paid a flat fee monthly as a DAO service provider. They should be intimately familiar with DeFi and DAO treasuries. This person would recommend researched strategies and report back to the DAO on a regular basis. This role would not have access to sign transactions in the sub-safe.
  2. A DAO Member Committee - This three (or five) person group would be the signers on the sub-safe. This should be a very low time commitment role. Most of the work would be done by the treasury manager role, and these people would simply serve as the “checks and balances” on signing suggested strategies that found positive social signal in the forum. This is not a full-time, or even part-time, job. Any stipend should be very low. These individuals should rotate in through a DAO selection process to ensure these signers are known quantities that wouldn’t collude. These people would also need to commit to be generally available to quickly sign transactions in emergencies.

The intent would be that the Treasury Manager’s employment would need to be renewed every 6 months by the DAO based on performance, but we’d expect to have the same person/entity in this role for a while. This could also be a 1-year cycle later when stability is achieved.

The profile for the committee participants would be that any 0x36 participants or stakeholders who are active and have relevant DAO context would be sufficient. Most of the treasury management conversations would happen in the open on the forum via the Treasury Manager’s posts. These signers would only be enacting the DAO’s will in their actions. They don’t define policy; they just serve as trusted signers for a temporary period to alleviate the need for full DAO votes on all transactions. These individuals would be rotated in via social selection through a snapshot vote.

Of course, either hats, Zodiac, or native safe permissions will be used to ensure assets can only move to pre-approved types of positions and with certain signing requirements that limit potential egress, etc.

~~ These are just draft thoughts, but I believe that if we’re going to go down this path, we need to contemplate and establish these structures and responsibilities before we begin voting on the temp checks.

Thoughts or feedback?

4 Likes
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I totally agree with what u said, combin with the answer from @5pence and @Juan . Definitlly need a treasury manager to take responsibilty on this. And I think it will be good to publicly disccuss the big strategy but not every small step. And it is also necessary to publich the treasure value change monthly to the community.

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i have a temp check on this very topic pls have a look at it

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I’d like to suggest another simpler, but temporary, option to gauge interest.

While the treasury management conversation can be complicated when contemplating managers and signers, there might be a better short term solution that 0x36 could take advantage of.

The current DSR is over 4%. The treasury currently holds 6.5 million USDC. We could utilize a simple and safe swap of 3 million to DAI to deposit in the contract as a single Fractal transaction. The DAO would yield roughly 120k USDC a year on that DAI (likely more temporarily) and we would avoid having to make complicated choices about managers and signers.

The DSR is accepted to be safe, and the liquidity makes it simple to redeem.

This would be a temporary solution as Shutter 0x36 grows. The expectation is that we would codify a more permanent treasury manager and committee sometime in the next 6 - 12 months.

Would this be a temporary solution that you would support?

@0xAlex @0xjakub @franklivid @Cornelis @Juan @miohtama @Loring

  • Yes, deposit 3 million in the Maker DSR Contract
  • No, Continue to evaluate the full treasury management strategies
0 voters
11

Perhaps it’s helpful to add a bit more info. The ENS DAO uses Karpatkey to perform active management of a tranche of the funds that we refer to as “The Endowment”. The Endowment contains roughly 100 million USD value in ETH/stables. Karpatkey provides us with an excellent monthly report on the endowment progress, and Steakhouse financial provides us with a monthly protocol economics report that describes the financial makeup of the ENS DAO’s assets as a whole. Here are examples of the two most recent versions of these reports (notice no mention of $ENS tokens):

Monthly Endowment Report from Karpatkey https://reports.karpatkey.com/?dao=4&month=3&year=2024&currency=USD

Monthly Protocol Economics Report from Steakhouse

In return, the ENS DAO pays Karpatkey/Steakhouse .5% of AUM and a 10% performance fee. We actually just restructured this payment system last month so that we can pay the fees directly out of the Endowment itself to evolve it into a self funding entity. We leverage Zodiac roles modifiers and native Safe permissions to control specific asset operation permissions.

While I have nothing but wonderful things to say about both Karpatkey’s and Steakhouse’s support, this arrangement works for the ENS DAO because we have revenues in excess of our expenditures.

The 0x36 DAO could certainly pursue an arrangement like this, or perhaps a similar arrangement with a consultant that charges a fixed fee instead of performance + AUM if that’s the consensus. To undertake that open selection we’d need to establish how much of the USDC we’d like managed, and perhaps what yield we’d expect so that we can determine the general fee structure to guide the vendor selection process.

The alternative I suggested in the post above this could be a simpler option. And by that I mean delaying active management but still seeking minimal yield on the 0x36 USDC through something like the DSR, which will likely continue to yield over 4% in a fairly low maintenance way that wouldn’t require active management. (The DAI in DSR has continually been the best risk/reward asset in the ENS DAO’s Endowment.)

But, I’d really love to hear voices from individuals or teams that have experience in these areas and specialize in them (I’ll invite the Karpatkey team to share their thoughts here - or also perhaps @Juan or @0xAlex ).

Perhaps we could get some suggested approaches with specifics that we could discuss and smoke test and then build a social proposal?

12

Hey @5pence thanks for the time dedicated to this from your side.

Actually, the DSR do sound like a very reasonable option for good risk adjusted return for 0x36.

I personally think it is a good idea to do so (deposit 3 million in the DSR contract) as a short term option while deciding on the Treasury Manager role.

My opinion on the overall situation is that I perceive that doing so could result in no longer discussing this and focusing on other stuff, and if that’s the case, maybe I would suggest depositing more than 3m in the DSR. Or maybe 3m in the DSR and 1.5 m on both USDM and USDA (won’t explain right now why, but I do think it would be a good strategy overall).

I know the guys from Karpatkey well, will invite them to read the forum!

ps: Sorry for the late response, I haven’t been so active here but will try to be more active on Discord (I am not that used to forum discussions and proposals, etc)

Adding one last comment on my personal thoughts on Treasury Management overall:

If there is a future Treasury Manager, should not be evaluated only by decisions but also by reasoning for those decisions. A bad decision could have a good outcome sometimes and vice versa, but I do think that it is key to focus on the decision-making process. For example: A new Treasury Manager could come in, and maybe later deposit all in Maker DSR and charge a fee, and people will claim that if that’s the case, there should not be Treasury Manager (Karpatkey folks need to deal with this all the time for example)

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@5pence and @Juan -

Thank you for this suggestion. I suggest we do a Snapshot poll to gauge support of members of Shutter DAO 0x36. And in the meantime, I hope we can get comments / feedback from the other people tagged above - and also other members of Shutter DAO 0x36.

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I recognize the importance of this role and the need for a dedicated team to handle treasury management.

As @5pence mentioned, Karpatkey is a highly reputable provider of treasury management services. At Blockful, we closely follow ENS Governance and Karpatkey’s involvement. Their team is exceptionally skilled and professional, making them well-suited for this significant responsibility. If needed, we can facilitate a discussion by connecting the Karpatkey team with this forum too.

2 Likes
15

Hey everyone, great discussion going on here.

If we’re already discussing treasury solutions, we should consider Spool. It’s a trustless, non-custodial platform that aligns with our autonomy and security goals. With Spool, the DAO keeps full control over our assets without intermediaries.

Setting up a vault on Spool is simple. We can choose our preferred strategies, set our risk levels, and once it’s set up, we own the vault’s smart contract. Also, Spool continuously evaluates the performance and risk of each strategy (all audited) and rebalances our funds, across the chosen strategies, to maximize risk-adjusted returns, all of this without charging gas fees.

If anyone wants to check it: https://spool.fi

I think it should all be a little bit less cumbersome and diversified at the same time. Just my two cents

1 Like
16

Hey all!

I’m George (aka hiringdevs.eth) from Gauntlet.

Gauntlet helped incubat Aera as a non-custodial, autonomous, and data-driven treasury management tool, primarily designed for DAOs.

Aera is a solution for optimizing DAO funds autonomously and on-chain. During vault creation, the DAO decides on:

  • which assets they want to hold over time
  • which strategies they want to use
  • their treasury objective function

The vault Guardian can then execute against the vault assets in accordance with these parameters (without ever custodying funds or having the ability to withdraw funds). This allows for the automated onchain management of funds. Aera vaults are only capable of executing actions the vault owner (DAO) defines in their objective function. The vault owner can also withdraw their funds at any time.

We published a research report for the Arbitrum DAO around the data-driven systems utilized for treasury management on Aera. This report outlines how DAOs are able to benefit from targeted volatility strategies to dynamically rebalance between volatile and stable assets driven by market data. Additionally, Aera offers yield optimization strategies which can help balance the DAO treasury between different yield options.

Aera currently offers 0% fee vaults and Guardians even cover the gas costs of portfolio rebalancing. Aera is currently utilized by Compound, Questbook, Moonwell, Threshold, and more.

I would be happy to host a call to walk through Aera for the DAO and answer any questions.

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17

Thanks @Loring - I agree.

I went ahead and created a snapshot proposal to gauge interest in this simpler idea.
Here’s a link - Snapshot

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@5pence I agree with ur proposal. Even though we decide to find a manager, it will take quit a long time to go through all the process. In this case, I also agree with @Juan that dao can deploy more than 3m into it as far as the risk is manageable.

2 Likes
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This social proposal has passed:

YES - 38m / 80.66%

No - 5.6m / 12.03%

Abstain - 3.4m / 7.3%

If there’s no objections, I can put together the Fractal proposal for this. I’ll post it in the forum for folks to see and help vet the Txs before submitting.

3 Likes
20

Hi all, we would like to also help in the treasury management, free of charge of course and suggest that the management should actually promote yield that will allow the shutter dao treasury to only grow, rather than shrink, as we have seen that this is a major problem on all other treasury. Also the SHU token allocated to projects should have a floor price for sale, meaning SHU grantees shouldn’t be able to sell below a given price, $3 for example. Thanks and looking forward to be contact on this topic.