[DAO:2f2c36c] Decentraland DAO Treasury Diversification ( Phase A )

Governance
1

by 0xd6c957f9a6411f35d01baae2658758f277408878 (Rizk)

Linked Draft Proposal

Decentraland DAO Treasury Diversification ( Phase A )

Summary

Proposing strategic diversification by Investing 50% of quarterly unused Grant Program funds into Ethereum, enhancing resilience, liquidity, and long-term stability, Aligning with DAO’s goal of stability in the decentralized virtual world.

Abstract

Comparing our Decentraland DAO to other entities, organisations, or treasure boxes, we can observe that most of them always have a diversification of assets and investments to enhance their stability, reduce risks, and increase the overall value of their investments in the long run. In contrast, our DAO’s value is closely tied to the assets we currently hold, which is primarily MANA.

After analysing and understanding the importance of these assets to Decentraland and the DAO, as discussed in my article Metaverse Triangle:DAO & Decentraland & MANA , where I explained the value of MANA in our treasury and its impact on the DAO’s overall value. The article highlights how a robust MANA treasury can positively influence the DAO’s value, and vice versa. But a crucial piece should come into play: Ethereum. Which is worth considering the role of Ethereum in our strategy.

Motivation

Decentraland runs on Ethereum, serving as the infrastructure for our virtual world. It ensures secure ownership, smooth transactions, and the intelligence behind smart contracts. Given our close connection to Ethereum and its impact on our assets and infrastructure—such as land transactions, MANA, and most of our contracts that is built on Ethereum—I believe that expanding our ETH holdings in the coming years will not only diversify our assets in the DAO but also provide long-term support to the chain we are built upon.

This strategic move can offer several benefits. It can enhance the DAO’s resilience, and present opportunities to establish a liquidity pool in the future. Accumulating a substantial amount of ETH over time can make MANA more liquid and stable. Additionally, considering the increasing strength and deflationary nature of Ethereum, will contribute to long-term stability, and offers opportunities for liquidity pool establishment and staking income when we have enough eth at some point.

Specification

To strategically boost our Ethereum holdings, I propose using 50% of the unused funds from the Grant Program’s quarterly structure . The program operates across four quarters with the formula,

5,500,000 * 0.7 = 3,850,000 mana/Q

And after I observed the unused amount of fund for the 2023 I found that we had the following approx unused fund for each quarter of 2023.

    *  Q1: Grant program paused.
    *  Q2: $880,000
    *  Q3: Nearly zero (over budget)
    *  Q4: $400,000

Impacts

Starting the allocation and scaling of funds into Ethereum represents a definite positive impact on Decentraland DAO. This strategy brings benefits such as enhanced resilience, increased liquidity, long-term stability, and the potential to generate stable income through the establishment of a liquidity pool when the time comes.

Implementation Pathways

Based on the fluctuations and community poll results, I suggest utilizing 50% of each quarter’s unused budget to gradually invest in ETH. DAO Committee members should:

1- Take responsibility for implementing this proposal alongside their daily tasks and operations.

2- Monitor quarterly unused budgets.

3- Incrementally invest steadily and strategically in ETH each quarter, following this approach:

           *   In Q2: Use 50% of Q1's unused fund 
           *   In Q3: Use 50% of Q2's unused fund 
           *   In Q4: Use 50% of Q3's unused fund 
           *   In Q1 (for the following year): Use 50% of Q4's unused fund

For those quarters that the Grant program get paused: 30% of the total quarter budget (3,850,000 * 0.3 = 1,155,000 mana) will be allocated to buy ETH.

For revoked Grant funds: Grants that receive a final decision from the revocation committee to be revoked will be added entirely to the 50% of the unused budget in the quarter of revocation, regardless of the original quarter of creation and vesting of that grant.

For example, if the total unused fund for Q3 was $500,000, So $250,000 will be used to buy ETH within that quarter, at that point, if a grant that got vested on Q1 and got revoked on Q3 with an amount of $50,000. Then, The total amount allocated for buying ETH in that quarter (Q3) will be $250,000 + $50,000 = $300,000.

Conclusion

In conclusion, this analysis highlights the need for diversification in Decentraland DAO’s asset portfolio, especially considering the close tie to MANA. The proposed strategy emphasises the importance of Ethereum in enhancing the DAO’s resilience and long-term stability. The specified approach of utilising 50% of unused funds for ETH investments, alongside careful monitoring, and quarterly scaling, aims to ensure a steady and strategic growth. This well-considered plan.

This initiative marks our first step towards diversifying the DAO, opening doors for further expansion and adaptability. It’s crucial to note that these Ethereum investments are intended for long-term growth and not for short-term trading or profit-taking. This commitment aligns with our overarching goal of fostering stability and adaptability in the ever-evolving landscape of decentralised virtual worlds, reinforcing the DAO’s position for sustained success.

Vote on this proposal on the Decentraland DAO

View this proposal on Snapshot

1 Like
2

Although I agree that the DAO Treasury needs to be diversified, I voted no because of the following reasons:

  • First, more planning has to be made in advance of this proposal passing. How will the investment be tracked (please don’t say “its on the blockchain” because there is more financial responsibility required than that), how can the 50% be adjusted based on the market in the most efficient way? Is it a restricted asset (I.e. cant be touched for DAO operations for X period of time)?
    Update 1/27: More planning on the % allotment & budgeting how much ETH will be purchased in the future. I’m just nervous to certify 50%.

SIMPLY PUT, the DAO committee is not competent enough to make these decisions
AND

  • CONFLICT OF INTEREST: The DAO signers, from a segregation of duties perspective, SHOULD NOT have the single power to safeguard the treasury assets, make the financial investments decisions, record on the financial decisions, and sign the transactions. This is a major ACCOUNTING red flag.
    Update 1/27: Technically the community is the one certifying this proposal, not the DAO Committee.

Additionally, 50% in just Ethereum is not smart. Diversify it with other stable coins. The % itself shouldn’t be the benchmark investment either.
Update 1/27: I think ETH should only represent about 25%. 25% won’t be too aggressive when MANA value is down.

Again, I’d like to see the Treasury be diversified, but not by the DAO signers. Great idea, wrong team. I’d recommend a treasury team to advise the DAO commitee/governance squad with these decisions.
Update 1/27: I realize this won’t happen anytime soon.

3 Likes
4

lol accounting red flag. Have you seen a lot of those? Do you think a legislator should ever be the recipient or benefit from a grant? To me the setup was wrong the whole time.

5

I vote no - don’t gamble with the funds fulfill the duty to lift and hold MANA never sell. We’re also on polygon too. Sounds like selling mana for eth to me. So that’s why saying no to grants for gambling money?

6

Keeping everything has MANA is a gamble, and one of the worst we can do. (Because keeping all eggs in the same basket, even in a good basket, is not a good idea.)

1 Like
7

Yeah I see what’s going on here. The more grants cut, the more RICO DAO has to work with in manipulating the price of Mana causing large swings putting the short positions on. You best believe they going 100x short before the sale. Zero loyalty to DCL & Mana - is this because Nifty Island came out now we just throw Mana in the gutter and jump platforms? So every grant that is cut is going to function as selling pressure on Mana wow. It’s like the opposite of fiduciary responsibility - purposely lower mana. Well the good thing if I want more it should be getting really cheap with this policy of selling huge amounts Mana for Eth.

8

We are already selling MANA to pay for grants in DAI anyways, cmon man, DYOR a bit before speaking…

1 Like
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That could be generally true the difference is work got done that can lift the value of the ecosystem by the same amount on grants. If it’s just traded for eth without that work to lift the ecosystem that will hurt mana and DCL. I don’t think we’re out of projects right?? If we’re out of projects I have the streaming idea that already passed poll, plus the large in-world projects agile assembly line initiative. Eth is in no danger of going out of business I don’t think from what I’ve been hearing it will be next to get ETF. I mean MAYBE if there was some threat of ETH going under…?? This is a proposal to hurt mana, crash it and damage ecosystem. Selling is up to the grantee, but the key is that the grants must boost the value of the ecosystem by equal or greater amount.

10

Hi @maryana… Another phase should come after this, because we have the opportunity to accumulate stable coins (USD) during the bull run. This chance comes once every four years. If we miss the opportunity to make a small profit for the DAO in stable coins during this cycle, the next opportunity won’t come until four years later.

  • Management and accounting are essential. I am aware of that, but It’s worth mentioning that I’ve observed @web3nit doing great work by contacting many companies and agencies to handle these issues, But as we both witnessed in the last session, the DAO mechanism is not conducive to efficient decision-making due to the numbers of proposals needed for each decision.

  • Regarding the 25:% or 50 % i responded here before where you can check back :

  • Technically, over the next few months, if we wish to stop this process for any reason, we can simply submit a proposal to do it, just as we did in the DAO when we used to buy land on a monthly basis, or when any ‘Professional Team’ were to come in, although we both doubts about that possibility.

  • I would like to mention that I have already discussed with the Governance Squad @ginoct the possibility of adding a quarterly budget filter to the DAO page, which would enhance transparency for everyone. Additionally, all quarterly grants are recorded and documented with the GSS @zino, as I have also discussed this with them too.

  • Finally, if you believe that an accountant is necessary to record all DAO financial matters, we can always consider planning for it, especially given your experience and vision in this area.

2 Likes
11

I’ve reconsidered my vote and agree that diversifying is essential. We aren’t locked into a single strategy; we can always adapt/stop by submitting new proposals. IMO we also need to recruit specialists to streamline the DAO’s financial management.

To bring more efficient decision-making process considering DAO nature, we could establish financial framework, defining the scope of work and approved strategies for financial experts to implement and execute. This approach has been adopted by ENS for their endowment fund.

12

Mana should be the only coin held for the benefit of investors. What’s next how about we just sell all Mana and buy Nifty Island? Zero faith, zero loyalty, zero integrity. This will be a vector for insider trading too. Do we get to know the day before the big sell? Why not? When mana is the only holding we will get people working their hardest to protect its value.

13

Decided to change my vote to Yes. I look forward to the results and careful monitoring of these funds. The materiality of the unused funds being converted to ETH should not impact MANA. Although 50% is more than what I would do, it is not as substantial as a 20M Mana sell off.

I’d recommend some documentation on when these transactions occur and careful accounting of the cost basis.

1 Like