CIP 9: Treasury Management Strategy

Here we can discuss various options to protect and grow the DAO’s holdings for the next (6?) months:

  1. NFT: blue chip NFT would be a good option as they are at very low prices right now. Some of them are Curio Cards, VeeFriends, Lost Poets by Pak.
  2. DEFI - yield farming, liquidity providing with a perp position (shorting the coin for which we provide liquidity so that if the coin decreases in value, we are protected)
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Thanks for setting this up. CityDAO’s treasury is around $3 million. I would like to propose diversifying our assets and bringing in key members from the community to receive regular compensation help us build at a faster piece.

Proposed treasury division
70% - ETH
15% - USDC Yield Farming
10% - USDC
5% - NFTs, protocol tokens, riskier assets

Key links:

CityDAO assets - Gnosis Safe

New proposed roles:

Community Lead Role
Up to 7.5k per month, 2 citizen NFTs monthly

Software Engineer (contract)
Up to 8k per month, 2 citizen NFTs monthly

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I think that range for riskier positions (~5% of treasury) is overall a good strategy. As these are riskier assets, and our time horizon is 3-6 months, I disagree that the strategy should be to acquire “blue chip” nfts. First, our budget probably will not allow to us to be competitive for blue chips, and second given our time horizon, we likely will not see a huge amount of appreciation in these assets.

I rather think we should research and leverage our existing network to identify projects earlier, likely at mint, in order to capture as much upside as cheaply as possible.

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What is the current compensation for DAO contributors? Is this up to date? Notion – The all-in-one workspace for your notes, tasks, wikis, and databases.

I think we ought to bias towards holding USDC because land costs and contributor pay are denominated in USD, with low beta to ETH. Additionally, I advocate for a relatively passively managed treasury. The point of the treasury is not to make the highest risk-adjusted returns, it is to assure that the DAO can continue to operate in all market conditions. DAO contributors shouldn’t be always thinking about how to rotate between yield farms or NFT speculation with the DAO money.

DAO assets also include the bank account, any land the DAO has purchased but not yet resold, and unsold Citizen NFTs. We should consider all of that part of the treasury too.

By the way, have we considered selling the remaining Citizen NFTs with a bonding curve? There is less risk for future buyers, so the fair price for the NFTs should be higher.

Proposed treasury division (rebalanced once per quarter)
50% - ETH
50% - USD (USDC + bank account)
x% - Land
0% - yield farming
0% - speculative NFTs

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Here’s a rundown:

2% of treasury is allocated to acquiring NFTs.

Acquire projects that fit the following criteria:

1.) High chance to appreciate at least 10x -20x over the next 3 - 6 months
2.) Align with values of the CityDAO community and mission
3.) Encourage partnerships between communities (nft projects/daos) and drive brand awareness and member (new citizens) acquisition

There are a lot of really interesting synergies with land use ideas and digital art galleries/exhibits. If we think about it that way, I could easily see us creating a virtual and real world display of our digital art on parcel 0 or 1 that could serve as a “place” to go see the collection. This is could be done cheaply and potentially autonomously (see Prada Marfa - Wikipedia).

I’m confident I’ve demonstrated a successful track record unofficially managing CityDAO’s NFT collection, and I’d be happy to take it to the next level. To spearhead this effort, I believe a 2 percent fee structure for total portfolio value seems fair and in line with what I’ve seen at other collections.

Thoughts?

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  • Maybe deciding on compensations in general should be independent of the CIP 9. There we could decide on could be multiple levels of compensation
  • I would be highly in favour that this investment is passive and low risk
  • I see that NFTs could be valuable, but more like for PR/brand awareness if we combine this later with expositions. I don’t this this should be seen as an investment, rather than cultural/PR but can be allocated as % of our GDP. Since I would not see this as investment, this money for PR and such should maybe come from tax of incomes such as generated with CIP-10
  • due to inflation risk I would be in favour of allocating more to ETH/BTC than USD if possible
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Whatever ETH allocation we land on, I would suggest that some portion of that (25%?) be in the form of a decentralized staking derivative (stETH or rETH), preferably Rocket Pool.

Signals our long-term support of the decentralization ethos and staking infrastructure on the Ethereum network. Also provides a guaranteed return on those assets.

3 Likes

Also, I’m somewhat against allocating NFTs to compensation, which kind of implicitly encourages accrual of these things by individuals.

We don’t have an unlimited supply of these. We don’t know the future value of them. Seems a bit arbitrary IMHO. These are tasks we can easily price in other denominations.

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How about some BTC ?
25% - ETH
25% - BTC
40% - USDC\USDC Yield Farming
10% - Investment in other projects (like coinbase ventures, a16z investment)

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I’d consider operations - what’s our operating budget, and how long can we afford to hold ETH (or anything else) for a bear market to return.

Given we are on a bull run, I’d suggest taking our operating budget, multiplying by what we consider a reasonable bear market to last, and keep that in stablecoin. (ie. bear market = 2 years, operating budget = 20k/mo, stablecoin allocation = 480k)

Remainder in ETH is a strong show of support for the community we are building on. Speculative and/or blue-chip feels like a distraction from this specific DAO. I’d vote to stay specialized.

2 Likes

Based on feedback from this thread, how about:

Proposed treasury division (rebalanced once per quarter)
50% - ETH
20% - USDC
10% - wBTC (wrapped bitcoin)
15% - USDC Yield Farming
5% - Other project tokens, NFTs

3 Likes

I’d suggest removing wBTC and other project tokens, NFTs, unless the other projects are a direct strategy/hedge in relationship to CityDAO. Since CityDAO depends on ETH tech, it feels like a better hedge than wBTC might be an L2 or alternative L1.

@scottfits I pinged you in discord for updated budget forecasts, would love to be calculated on the % of fiat based on burn (I’m guessing you’ve done that, but might be helpful for others to see the logic)

Quarterly rebalance feels :+1:

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Considering the future updates of ETH and the burn system, with the transition to PoS, ETH will become scarce like never before in history.
According to calculations and statistics, there will be deflation until 34.6M - 61.5M ETH remains in circulation.

My proposed treasury division
60% - ETH
25% - USDC Yield Farming
10% - USDC for opportunities
5% - Riskier Assets

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I think it’s hard to know how to propose a portfolio of assets without knowing the overall budget.

What is CityDAO’s operating budget per year?
How many months of reserve do we want on hand?
What percentage of the treasure would then be available for growth opportunities instead of operating reserves?
How does the DAO plan on handling capital gains taxes?

Until those things are known it is probably safest to stick to stable coins.

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Before roadmap, Treasury Management Strategy is needed. After get the roadmap, do the roadmap

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And before this the overall project strategy?!

Something like

Constitution
Strategy (1 - 3 - 10 year plan)
Treasury management strategy
Roadmap
Action

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I like this. Would also specify that the 5% is only towards projects that directly align with our values / help us establish partnerships to move forward, etc, no pure speculation.

I would remind ourselves that we are not running a hedge fund, don’t have a high enough budget to create a meaningfully spread portfolio of high-risk projects with that 5%, neither it is our core competency to do so.

Also, 95% of our revenues should be coming from whatever we are doing to the land (development, fractionalisation & resale, rent, etc). If this is not the case, we are no longer a DAO focused on land but something else. In my mind the only reason to diversify slightly is to make sure we don’t die if ETH goes into a bear market and we have to keep paying salaries in USD, etc.

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Hey Scott, have we considered an All-Weather Portfolio for CityDAO’s treasury? Sid suggested dropping my proposal here: Notion – The all-in-one workspace for your notes, tasks, wikis, and databases.

Btw, I’m taking a gap year from university (I’m from Canada, currently living in HK but mobile) to explore - I love CityDAO’s mission and I’m excited to build the future with it - would love to get involved with other projects too!

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would like to suggest minting $BED index for this ETH/wBTC part - 60% (it is consisted BTC/ETH/DPI - Index
it is easier to handle, since treasury management should be separate role in the DAO, if handled by DAO

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We should consider allocating part of the treasury specifically to $OHM or OHM-like staking given the tokenomics and growth potential.

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